Fresh from persuading a $5 billion pension fund in Chicago to divest from companies that make firearms, the city’s mayor, Rahm Emanuel, on Thursday urged the chief executives of two major banks to stop financing companies “that profit from gun violence.”
Mr. Emanuel sent letters to TD Bank, which provides a $60 million credit line to Smith & Wesson, and to Bank of America, which provides a $25 million line to Sturm, Ruger & Company, asking the C.E.O.’s to push the companies to “find common ground with the vast majority of Americans who support a military weapons and ammunition ban.”
Mr. Emanuel’s effort to enlist banks in the gun control campaign is just one example of a new willingness by a public official, galvanized by last month’s carnage in Newtown, Conn., to wield the power of the purse.
New York State’s big public pension fund and California’s fund for teachers have already frozen or divested their gun holdings, and California’s fund for other public workers, known as Calpers, is expected to take up the issue in February. New York City’s public advocate has put pressure on banks and investment firms by ranking their gun holdings by size and calling those with the 12 biggest stakes the Dirty Dozen.
“Elected leaders understand that this is a tool of government with huge ramifications,” said the public advocate, Bill de Blasio, who is a trustee of the city’s $45 billion pension fund. “What happened in Newtown sort of crystallized this.”
In Philadelphia, Mayor Michael A. Nutter has prepared a wide-ranging set of principles that companies would have to adopt before receiving city pension money. He calls them the Sandy Hook Principles, after the Newtown elementary school where a gunman killed 20 children and six adults with an assault-style weapon on Dec. 14. They are modeled on the approach the city took more than a decade ago to put pressure on companies doing business in South Africa under apartheid.
Mr. Nutter, who is also the president of the United States Conference of Mayors, said he hoped the approach would spread to other cities. First, however, he must persuade Philadelphia’s pension trustees to adopt the principles. That may be a struggle. Several unions have representatives on the city’s pension board, and they are already battling with the mayor over concessionary contract negotiations.
How successful Mr. Emanuel, himself a one-time investment banker, will be with bank executives is also uncertain. He cannot make them sever business relationships. He told the Bank of America chief, Brian T. Moynihan, and the TD Bank chief, Bharat B. Masrani, that the trustees of Chicago’s main pension fund had just voted to unload more than $1 million worth of gun stocks, and said it was time for the bankers to get on board. “We can no longer wait,” he wrote.
A spokesman for Bank of America declined to comment on Mr. Emanuel’s letter. A spokeswoman for TD Bank said she had not yet seen the letter and could not comment on it.
Mr. de Blasio said he had already seen results from his Dirty Dozen list, a ranking of the New York-based financial services companies with the biggest holdings of firearms manufacturers. Compiled from filings with the Securities and Exchange Commission, the list includes hedge funds, banks, investment firms and an insurance company.
The day after he unveiled the list at a news conference, he said, he received a phone call from Laurence D. Fink, chief executive of BlackRock, which Mr. de Blasio ranked second with gun holdings of about $346 million.
“Obviously, he was concerned about how the public saw the firm,” said Mr. de Blasio, who is running to succeed Mayor Michael R. Bloomberg, an outspoken gun control advocate. He said Mr. Fink told him that BlackRock would start offering its clients funds with no exposure to firearms.
BlackRock does not actively pick weapons manufacturers as an investment strategy, a spokesman said. Rather, it offers index funds to its clients and buys the stakes as it duplicates the makeup of stock indexes that include gun manufacturers. The spokesman confirmed that BlackRock could offer its institutional clients the same index funds as before, with the gun assets stripped out. He did not say whether the offering had been made in response to Mr. de Blasio’s list.
The biggest gun investor on the list, with at least $706 million in gun holdings, was Cerberus Capital Management, a private equity firm that created a small conglomerate called the Freedom Group out of a number of smaller makers of guns, ammunition and shooting accessories.
The Freedom Group is the manufacturer of the Bushmaster semiautomatic rifle that the Newtown gunman, Adam Lanza, used before taking his own life. Cerberus said last month that it would sell the group, and Mr. de Blasio said he would remove Cerberus from his list when the sale was closed.
The third biggest institution, with $140 million in gun holdings, was State Street Corporation, a large provider of custodial banking services.
On Tuesday, the board of New York City’s pension fund considered a resolution from Mr. de Blasio to divest from all weapons makers, given that the massacre in Newtown stirred nationwide revulsion that could erode the value of their stocks.
Instead, the trustees voted in favor of another resolution, introduced by the Bronx borough president, Rubén Díaz Jr., to divest only from makers of assault weapons and high-capacity ammunition magazines.
Mr. Díaz’s resolution also called for the New York City comptroller to prepare a report for the board on what the investments consisted of and how to minimize any losses from the divestment process.
Although pension trustees have a fiduciary duty to be prudent stewards of the money they control, they are often unaware of exactly what is in their investment portfolios. They rely on staff and outside consultants to track specific investments and make recommendations. Outside investment firms are typically told to invest large blocks of money according to general principles, and to strive for certain benchmarks, rather than picking specific assets.
The pension funds that elected to place millions of dollars with Cerberus, for example, were not told beforehand that it was going to buy gun companies and put them together under a common name with a new marketing plan.
Many public pension trustees remain unconvinced that divesting from weapons manufacturers is consistent with their duty to protect the interests of their current and future retirees. Union representatives in particular often say that their job is to get maximum benefits for their members.
“It’s understandable why the trustees of public funds might want to shy away from this sort of thing,” said Amer Ahmad, the Chicago comptroller, who pushed that city’s main pension board to divest on Wednesday. “People understandably fear that there are constraints or limits to their fiduciary responsibility. But to the contrary, the mayor and I have made a long and, I feel, persuasive case that if we don’t act, we are actually failing in our fiduciary duty.”
City Officials Push Pension Funds to Divest From Gun Makers
This article
City Officials Push Pension Funds to Divest From Gun Makers
can be opened in url
http://refreshnewster.blogspot.com/2013/01/city-officials-push-pension-funds-to.html
City Officials Push Pension Funds to Divest From Gun Makers
