Conversations about what role, if any, investors should play in stemming gun violence are heating up following the Feb. 14 shooting at Marjory Stoneman Douglas High School in Parkland, Fla., that left 17 dead.
BlackRock Inc., the world's largest money manager, on Feb. 22 said it planned to speak with weapons manufacturers and distributors in which it invests "to understand" their response to the Florida high school shooting. A few days later, State Street Corp. announced it would engage with weapons-makers and sellers to learn more about how they will ensure the safe use of their products.
BlackRock and State Street's initial announcements lacked specifics on their future or previous engagement efforts about gun safety. But industry experts said the firms' comments were still significant and not something they recalled hearing in the wake of other mass shootings.
BlackRock followed up on March 2 by disclosing on its website some of the questions it is asking gun-makers and distributors, including what their strategies are for managing "the reputational, financial and litigation risk" associated with making and selling civilian firearms; whether they are investing in research and development to ensure the safe use of their products; and what their policies are for determining who can buy the products.
Part of what is driving managers to be more vocal about their engagement efforts now, sources surmised, is growing investor attention to environmental, social and governance issues. One sign of this has been commitments from managers like BlackRock and State Street over the past year or two to increase their engagements with companies on ESG issues, said Jon Hale, Chicago-based director of sustainable investing research at Morningstar Inc.
With the growth in index investing, passive managers also are holding larger stakes in portfolio companies now than in the past, noted Patrick McGurn, special counsel, head of strategic research and analysis at proxy-advisory voting firm Institutional Shareholder Services Inc. in Rockville, Md.
BlackRock and State Street Global Advisors, State Street Corp.'s money management arm, are largely passive investors. As large shareholders, they have "a certain responsibility to be responsible shareholders" and engage with companies on issues that could affect the companies' bottom lines as well as society or the environment, Mr. Hale said.
In letters last week, Sen. Elizabeth Warren, D-Mass., urged BlackRock, Fidelity Investments, Vanguard Group Inc. and six other large gun-company investors to use their financial leverage to ensure gun-makers are taking steps to reduce gun violence.
BlackRock is the largest shareholder in firearms manufacturers American Outdoor Brands Corp. and Sturm Ruger & Co., Bloomberg LP data show.
BlackRock's most recent 13F filing shows the firm held a total of 8.9 million AOB and Sturm Ruger shares, for an estimated combined valued of $202.3 million as of Feb. 26, according to Bloomberg data. The rifle used in the Florida shooting is made by Smith & Wesson, a subsidiary of AOB.