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Investor coalition issues principles to improve firearms industry

A coalition of 13 institutional investors, coordinated by the $229.2 billion California State Teachers' Retirement System, West Sacramento, issued Wednesday a set of investor principles to improve the safety and responsibility of the firearms industry.

The five principles provide a framework for investors as they engage with companies that manufacture, distribute and sell firearms, with the goals of improving business practices surrounding gun safety and reducing investment risks.

The principles call for making firearms safer, universal background checks, and training for gun retailers.

"As a fiduciary of a large, diversified investment portfolio, we frequently engage companies and encourage them to operate in ways that increase the odds of strong long-term returns and to reduce future investment risks," said Oregon Treasurer Tobias Read, in a news release announcing the $76.2 billion Oregon Public Employees Retirement Fund's participation in the coalition. "These principles are a significant step forward because without them we do not believe the current path is sustainable."

Mr. Read is member of the Oregon Investment Council, Tigard, which oversees the retirement fund.

Denise L. Nappier, Connecticut state treasurer and principal fiduciary of the $34 billion Connecticut Retirement Plans & Trust Funds, Hartford, said in a separate release announcing the Connecticut funds' involvement: "The proliferation of gun violence is not only a public health issue but also a business risk issue, both of which are central to our fiduciary role as long-term institutional shareholders."

The coalition's Principles for a Responsible Civilian Firearms Industry are:

  • Manufacturers should support, advance and integrate the development of technology designed to make civilian firearms safer, more secure and easier to trace.
  • Manufacturers should adopt and follow responsible business practices that establish and enforce responsible dealer standards and promote training and education programs for owners designed around firearms safety.
  • Civilian firearms distributors, dealers and retailers should establish, promote and follow best practices to ensure that no firearm is sold without a completed background check in order to prevent sales to persons prohibited from buying firearms or those too dangerous to possess firearms.
  • Civilian firearms distributors, dealers and retailers should educate and train their employees to better recognize and effectively monitor irregularities at the point of sale, to record all firearm sales, to audit firearms inventory on a regular basis and to proactively assist law enforcement.
  • Participants in the civilian firearms industry should work collaboratively, communicate and engage with the signatories of these principles to design, adopt and disclose measures and metrics demonstrating both best practices and their commitment to promoting these principles.

The genesis of the principles was a May decision by the CalSTRS investment committee to make engagement with companies that manufacture and sell firearms that are illegal in California a top corporate governance priority, said CIO Christopher Ailman in an interview.

California Treasurer John Chiang, a member of boards of both CalSTRS and the $346.6 billion California Public Employees' Retirement System, had asked both plans to divest from wholesale and retail sellers of military-style assault rifles and bump stocks, but neither plan divested in favor of engagement with the industry.

Some 193 days after the investment committee placed firearms as a top priority for its corporate governance efforts, Mr. Ailman helped to draft and pull together a coalition of asset owners and money managers to support the principles, he said.

"It's a strong mix of states ... from California to Florida," Mr. Ailman said. Asset owners include defined benefit and defined contribution plan sponsors and money managers.

"We're calling on investors to engage the industry from manufacture, finance and sales, the entire production chain, to be more responsible," Mr. Ailman said. "It's a call to do it better. ... The technology is already there."

CalSTRS is not done. Mr. Ailman had to "twist arms" to get more investors to sign onto the principles. What's more, CalSTRS will soon launch a search for an official to head the pension plan's firearms engagement efforts. It will also dedicate a member of its communications team to get the word out, he said.

In addition to CalSTRS, OPERF and CRPTF, members of the coalition include Sacramento-based CalPERS, the $194.1 billion Florida State Board of Administration, Tallahassee; the $52.6 billion Maryland State Retirement & Pension System, Baltimore; the $24.5 billion San Francisco Employees' Retirement System; the $14.2 billion Maine Public Employees Retirement System, Augusta; as well as money managers Nuveen, Rockefeller Asset Management and State Street Global Advisors.

The coalition members represent investors with combined assets of more than $4.8 trillion.