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Responsible Investing and the Gun Industry
By Tyler Collins

In the wake of the devastating shooting at Sandy Hook Elementary School in Connecticut, the private equity firm Cerberus Capital Management announced that it would be selling its investment in the Freedom Group to remove its involvement in Bushmaster Firearms, the manufacturer of the semi-automatic assault rifle used at Sandy Hook.

That horrific event, which claimed 27 lives, mostly small children, as well as the many other shootings in recent months, has motivated many investors to rethink their investment strategies, to take a hard look at their holdings, and to divest of firearms manufacturers. The Cerberus decision to divest of the Freedom Group was in response to pressure from a major investor, CalSTRS, the California State Teachers Retirement System.

In a recent press statement, a CalSTRS spokesperson noted that CalSTRS assesses potential investments on the basis of both financial potential, as well as environmental, social, and governance (ESG) factors. The sale of Freedom Group demonstrates how investors can use their clout. There is also a growing likelihood that tighter regulations on guns may make gun manufactures less profitable in the future.

As noted by Robert Zevin, Chairman and Chief Investment Officer of Zevin Asset Management, in a recent radio interview, investors have a strong role to play in affecting social change. First Affirmative agrees. We proved during South African Apartheid divestment movement that divestment can be a powerful tool for positive policy change.

“If there’s anything we’ve learned from the financial crisis, it is that even the most arcane financial decisions can have real-world impacts,” said Adam Kanzer, Managing Director and General Counsel of Domini Social Investments in a recent opinion piece. “Such is the case when you allocate billions of dollars to companies that make military-style assault weapons. We can no longer pretend that these decisions are morally neutral—they are not.”

First Affirmative believes that every investment decision has impact—positive or negative. We work with clients who choose to make investments that contribute a clean, healthy environment, treat people fairly, embrace equal opportunity, produce safe and useful products, and support efforts to promote world peace. Investors can make money and at the same time, they can have a positive impact with their money.

Mention of specific companies or securities should not be considered a recommendation to buy or sell that security.  Past performance is never a guarantee of future results.

Posted: January 14, 2013