The world’s largest money manager is stripping retailers that sell guns out of some current and planned exchange-traded funds, the latest sign that weapons sellers are facing the same scrutiny from investors as producers.
Walmart Inc.,
WMT 0.68% Dick’s Sporting Goods Inc.
DKS 1.22% and
Kroger Co. are among the retailers that will be ruled out of new environmental social and governance-focused funds
BlackRock Inc.
BLK 0.39% is planning, a spokeswoman for the world’s largest asset manager said Thursday. The retailers were among those who said they would no longer sell guns to anyone under 21 in the wake of the school shooting in Parkland, Fla.
A notice of the decision was posted on BlackRock’s website on Thursday.
After the Parkland shooting, the New York firm went public with questions it is asking gun manufacturers and distributors and businesses. Investors
and businesses alike have put renewed pressureon gun makers and sellers, spurred in part by student advocacy efforts nationwide.
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BlackRock plans to strip all gun sellers and retailers including Kroger from its current lineup of seven so-called ESG funds, which have some $2.2 billion in assets. Those products had minimal exposure to such firms.
It is also planning to offer new ETFs and pooled funds to 401(k) retirement savings plans that exclude gun makers and retailers. One of those ETFs will track the performance of a new bond index that is similar to the Bloomberg Barclays US Aggregate Bond Index, but excludes issuers that make 5% or more or $20 million in revenue from gun-related products.
A spokesman for Dick’s declined to comment. A spokesman for Walmart said the firm doesn’t comment on individual or group decisions to buy or sell shares.
A spokeswoman for Kroger said its Fred Meyer division is “quickly working to responsibly phase out sales of firearms and ammunition,” a decision announced last month. Such products were only sold at Fred Meyer stores in Alaska, Idaho, Oregon and Washington, she added, “and represented $7 million in annual revenue—about 0.006% of Kroger’s annual sales.”
BlackRock’s new plans impact a tiny portion of its $6.3 trillion in assets. Still, the plans are an example of the steps investors large and small have increasingly taken to steer clear of companies some of their customers want to avoid.
As one of the three largest shareholders in Dick’s, Walmart and Kroger across its massive money-management business, BlackRock has the muscle to press management for changes and use its vote to express dismay if they are not made. It said earlier this year that it is asking gun distributors questions such as what steps they are taking to ensure firearm laws are followed and that felons or domestic abuse offenders are kept from purchasing guns.
Other money managers have taken a more muted approach.
The Vanguard Group has said it is engaging with those firms to “understand how they will mitigate the risks that their products pose”, a spokeswoman said. Ultimately, however, “policy-making is the best avenue to address gun violence”, she added.
The firm, which is another massive manager of index-tracking funds and a large shareholder in gun makers and sellers, has thus far stopped short of launching new products that exclude companies for ESG-related reasons. It manages one ESG fund that started in 2000.
“We believe it would be exceedingly difficult to manage our funds effectively and efficiently while seeking to address the many social, political, and environmental concerns of 20 million clients,” the spokeswoman said in a statement.
Money managers and index providers have raced to offer ESG products to investors in recent years. While those products have provided a new source of revenue for Wall Street, it is unclear whether their popularity will last and if the performance of those products will be comparable to traditional investment strategies long term.
The total sum of money invested in ESG funds is difficult to quantify because the universe of companies that meet such criteria is somewhat subjective. Fund-research firm Morningstar has said assets invested in “sustainable funds”—which doesn’t include funds that simply refrain from investing in companies that an investor might find objectionable—grew to $95 billion in 2017, up nearly 60% from the prior year.
Write to Sarah Krouse at
[email protected]
