Connecticut Considers Gun Divestment

State treasurer says she may ‘divest or not make further investments in gun companies.’

Connecticut Treasurer Denise Nappier said she is considering divesting the state’s investment holdings in gun and ammunition manufacturers in response to the February school shooting in Parkland, Florida.

“So many of us in Connecticut and beyond have seen firsthand the destruction wrought by assault rifles and the wave of gun violence that has plagued our schools and communities across the nation,” said Nappier in a release. “It is high time to prevent access to dangerous weapons and ammunition by those who would misuse them.”

However, Nappier was vague about what would trigger such a decision, or when it might happen, saying only that she would proceed with divestment in gun makers if “a period of stepped up shareholder activism” fails to stem the proliferation of gun violence.

As of Feb. 26, the assets of the Connecticut Retirement Plans and Trust Funds are invested in five companies that manufacture guns, with a total investment in equities and fixed income worth approximately $16.5 million, or .05% of the state’s overall portfolio.

The relevant investments owned by Connecticut include 79,501 shares of CIE Financiere Richemont SA, valued at $7.19 million; 221,261 shares of Vista Outdoor, Inc., valued at $4.04 million; 146,400 shares in Daicel Corp., worth $1.65 million; 26,550 shares of Olin Corp. valued at $879,071, and fixed income valued at $915,255; 7,700 shares of Orbital ATK, Inc., worth $1.02 million, and fixed income valued at $784,437.

Nappier has the authority to divest following a period of engagement with the state’s portfolio companies, per Connecticut’s divestment laws. However, her fiduciary duty may stand in the way of divesture depending on the performance of these companies’ stocks. For example, Orbital ATK’s stock has risen 33% over the past year, while Vista Outdoor’s stock has dropped 19% during that same time.

“In the meantime,” said Nappier in a letter to Connecticut State Sen. Gayle Slossberg, “I am in the process of fortifying our efforts in the corporate boardrooms of our portfolio companies that manufacture guns, and pursuing aggressively their adoption of the Sandy Hook Principles.”

The so-called “Sandy Hook Principles” are a set of measures aimed at curbing gun violence, keeping children away from guns, supporting background checks, and preventing those with mental health problems from possessing guns.

“I am charged with making investment decisions in the best interests of the beneficiaries that depend on these assets for retirement,” said Nappier in the letter. “Fiduciary duty requires that I take into account not only the appropriate balance between risk and return, but also the long-term viability of the investment itself,” she said, adding that “I believe that companies whose shares we hold have an obligation to address public issues that have potential effects on the business operations of the company.”

Nappier said gun violence is a financial issue as well as a public health issue, and that companies with sound governance lead to better, more consistent performance for shareholders over time.

“When companies in which we are invested fail to manage potential business risks, legal and/or regulatory actions, or reputational harm arising from the misuse of firearms, it also puts at risk our long-term shareholder value,” she said, adding that divestment is only one among a range of tools that can be used by investors to reflect their priorities.

“By selling an ownership stake, shareholders walk away from the proverbial table, no longer able to negotiate directly as an owner of the company with the board and management,” she said. “However, it represents the last of a series of options that shareholders can employ to effect change.”

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