As President Joe Biden readies legislation to ban assault weapons, ESG activists are making another push for gun safety in the U.S. through the shareholder franchise.
Another Push For Gun Safety In The U.S.
This week, New York City Comptroller Brad Lander – alongside political grandees at the city and state levels, the California State Teachers’ Retirement System (CalSTRS), and Amalgamated Bank, among others – launched a new campaign.
The new campaign asked credit card companies Mastercard, Visa, and American Express to create a new merchant category code for gun and ammunition stores, allowing these institutions to better track suspicious activity by identifying purchases linked to firearms.
Q2 2022 hedge fund letters, conferences and more
And on September 12, shareholders of Smith & Wesson, one of two major listed gun manufacturers, will vote on a shareholder proposal requesting a human rights policy.
Whether it passes will likely be a close call – human rights reporting proposals at the company received 36% support in 2019, were withdrawn in 2020, and received 44% last September.
While a report on the company's impact on gun violence received 52% support following the Parkland school shooting of February 2018, according to Insightia's Voting module.
The goal, says Judy Byron of the Intercommunity Peace & Justice Center, which filed the Smith & Wesson proposal, is "to move the companies to play a role in reducing gun violence by taking responsibility to assess the safety of their products and their marketing practices; and to track and monitor the adverse impacts of their products."
She can draw confidence from CommonSpirit's efforts at Sturm-Ruger, where proposals asking for greater disclosure received almost 69% support in 2018 and earlier this year.
The focus on manufacturers is partly due to the investor movement's success in other sectors. Members of the Interfaith Center on Corporate Responsibility (ICCR) celebrated engagements with retailers.
Dick's Sporting Goods and Walmart, which led the pair to take some guns off their shelves between 2018 and 2019.
"Dick's Sporting Goods and Walmart have taken bold steps to do their part in implementing gun violence prevention and gun safety strategies," CommonSpirit's Laura Krausa told me by email. "Their commitments set examples for other firearm retailers, distributors and manufacturers."
"We definitely need an Ed Stack of Dick's Sporting Goods in the firearm manufacturing industry to take a positive stand on the need for the sector to offer solutions to increasing gun violence," added Byron, referencing the former CEO who made big changes to the retailer's gun policies in 2018 and subsequently lobbied politicians.
ICCR also wrote to logistics companies FedEx and UPS to identify measures to prevent the sales of "ghost guns" – firearms that can be assembled at home. Earlier this year, the Biden administration launched a handful of rules to make ghost guns more traceable and criminalize unlicensed manufacturers.
ICCR members have also engaged with banks and credit card companies but this past week's campaign – involving shareholder proposals at American Express and Mastercard and letters to both those companies and Visa – is seeking to break new ground.
A shareholder proposal on ghost gun measures at Mastercard received just 10% support in June and calls for new merchant category codes may also be considered "overly prescriptive," a term shareholders have used to describe some ESG proposals this proxy season.
However, the NYC-led campaign may hope to draw on other recent successes social activists have had at credit card providers. Over the last year, Pershing Square Capital Management's Bill Ackman has pressed Visa and Mastercard to ban pornography companies with lax controls on illegal content from their networks, even offering to help fund lawsuits against the companies.
The activist investor does not own shares in either company, however, and the main leverage has been through public pressure and reporting, rather than through the shareholder franchise.
That distinction may not bother the leaders of this campaign. The combination of public pressure, regulation, and winning over substantial chunks of a company's owners is a deliberate strategy and one that public pension funds are uniquely well-suited to.
With New York State losing a Supreme Court case over its concealed carry laws earlier this summer, there is renewed political urgency to tackle gun safety through other means. And if it leads to results through negotiations with the credit card companies rather than a shareholder vote, politicians and fund managers won't sweat the difference.
-- Josh Black, Editor-In-Chief, Diligent, Formerly Insightia
A Record Year For Human Capital
Human rights proposals are proving popular among investors, a trend that will continue as shareholders strengthen their policies for the coming season.
Human capital gained significant attention at the onset of COVID-19, with several issuers facing backlash for failing to properly care for their workers during the pandemic.
Such controversies resulted in companies across the board being pressed to demonstrate how they are taking proper precautions to ensure worker safety.
So far this year, a record 15 shareholder proposals concerning human capital have been subject to a vote at U.S.-listed companies, winning 33.7% average support.
This is a significant increase compared to 2018, when only three proposals of this kind won a measly 15.6% average support.
2022 was also a record year for human capital majority wins. Three proposals seeking reporting on human rights won upwards of 50% support, while one proposal asking Sturm Ruger to conduct a third-party human rights impact assessment won 68.5% support, the highest level for any proposal of its kind in history.
"There is increasing recognition of the role that businesses can and should play to respect human rights," Kimberley Lewis, Schroders' head of active ownership, said in a recent interview.
"Businesses involved in human rights controversies could face higher operational and financial risks and could suffer damage to their reputation."
Now, three years on from the onset of the pandemic, investors remain just as focused on human capital management. In response to what Norges Bank described as the "rapid" evolution of these engagements, the $1.4-trillion fund manager unveiled new expectations recently concerning workers' rights.
Going forward, issuers will be expected to publicly report on human capital in line with international best standards, such as recommendations from the Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI).
Norges also expects issuers to disclose "core information" about their workforces, such as the number of workers, employee turnover, diversity data, and relevant industry-specific metrics. Companies that fall short of these expectations may face voting action or further engagement.
Norges isn't the only investor to step up its efforts on human capital. Lord Abbett & Co. and Vanguard Australia have also refined their human capital policies, ahead of the 2023 proxy season.
Companies are taking notice of the growing pressure and taking action. In July, Meta released its inaugural human rights report after years of pressure from investors to enhance its human rights reporting.
Nvidia and Thomson Reuters also agreed to publish human right policies and assessments, following engagement with members of the Interfaith Center for Corporate Responsibility (ICCR).
"In a highly interconnected global economy, companies face increasing scrutiny regarding how they address human rights issues that may arise from their business practices," said BlackRock Investment Stewardship (BIS) in a paper outlining its approach toward human capital.
"We appreciate when companies implement processes to identify, manage, and prevent adverse human rights impacts that could expose them to material risks, and provide robust disclosures on these practices."
-- Rebecca Sherratt, Publications Editor, Diligent, Formerly Insightia
