In the days following the Parkland school shooting, many investors following the national gun control debate found themselves asking: Do I own any gun stocks?
And there’s some evidence that female investors aren’t just asking themselves this question, but taking it to the people they’ve put in charge of their finances. Earlier this month, Ellevest, the female investment platform run by Sallie Krawcheck, sent a letter to investors addressing the topic head on.
“With the gun issue, there’s validity to the idea that millennials — and women broadly — care very much about these issues. They care about good investment returns, but they also care about how they're making them,” says Krawcheck in an email interview with Refinery29. “There's a growing recognition of the power their money has to influence the issues that that matter to them —beyond their own lives. They want to understand this better, they want to know what we're doing about it — and they want to know what their choices are.”
For Krawcheck and her team at Ellevest, they’ve found their female clientele are interested in options to invest in companies they find “good” and ethical, and ways to opt out of what they deem as bad. “They want to do it without having to sacrifice potential returns — and research suggests they can,” says Krawcheck.
With the issue of guns and your stock portfolio (or just your 401(k) for that matter), the question is a conscionable one, but there's not a simple fix for most investors. The reason has to do with the way index funds and ETFs (exchange-traded funds, a subset of index funds) work: These two types of investments, which are extremely popular for retirement savings due to their low cost and good long-term returns, buy every stock in a certain index, sector, or market. Since gun manufacturers are part of some of those indexes and industries, they become a small part of these funds.
The bottom line is that for Americans who have a 401(k) retirement savings account, they likely have a small percentage invested in a gun manufacturer as part of an index fund.
How small is small though? For Ellevest investors, Krawcheck’s letter explained that while the exposure is different for users across the platform, gun stocks don’t make up a large portion of their holdings, and the maximum exposure in any Ellevest investment portfolio is about 0.02%.
“In general — in percentage terms — it's a very small part of most client portfolios,” explains Krawcheck. “But we respect and understand that, for some folks, that's still too much — and for others it's a non-issue. Still, we want to be responsive and solve for that in whatever ways make sense. Maybe that's by raising client concerns with our fund partners or by integrating new options into our investment platform. We have to open to a variety of possible solutions.”
Divesting (or selling off individual stocks because a company doesn't reflect your values) isn’t really an option for investors with ETFs or index funds. Still, investment platforms are trying to find easy ways their customers can stay informed about their holdings, and then, have access to tools to change the kinds of funds they’re holding should they want to. Vanguard, a popular investment firm, pointed investors to a search function on its website where they could see if they’re portfolios included gun stocks and then use that information to make their own decisions.
For investors who feel uncomfortable with the idea of profiting from gun manufacturers, Bloomberg reports that gun-free ETFs are out there, there aren’t as many buyers because fees for socially-conscious ETFs tend to be higher. There’s also not as many offerings when it comes to gun-free index funds.
Notably though, the firm Blackrock is taking a different approach. Blackrock has more than $6 trillion in assets and is the largest shareholder in both Sturm Ruger and American Outdoor Brands — two top U.S. gun manufacturers. The firm has floated the idea of using its voting power to influence gun manufacturers.
Krawcheck wrote that Ellevest is pleased that Blackrock is engaging with gun manufacturers and retailers about “ensuring safe and responsible sale and use of firearms.” She says they've had mixed response to Ellevest’s newsletter. Most of the community expressed some degree of concern, says Krawcheck, while some didn’t care. Primarily, she thinks the community was happy about the transparency. When it comes to stocks and investments that could have a negative impact on society, banks and financial institutions are starting to learn that they have to answer some hard questions from the communities that they serve.