World's Largest Investment Firm Creates Gun-Free Funds in Response to Parkland
One of the world’s leading investment management firms announced this week its plans to follow through on earlier promises to exclude gun-related products from certain funds offered to investors.
As Reuters reported, BlackRock Inc. was among numerous companies to respond to February’s school shooting in Parkland, Florida, with policy changes meant to de-emphasize firearms.
In March, the New York-based firm released a broad overview of the direction it planned to take. The announcement this week offered additional details.
BlackRock investors reportedly received an email advising them that the latest line of exchange-traded funds will exclude both manufacturers of firearms and retailers with a significant percentage of revenue coming from gun sales.
Such criteria are also expected to appear in certain pension plans, according to Bloomberg.
The first of the two new funds will become active later this month. The iShares MSCI USA Small-Cap ESG Optimized ETF is set to begin trading as early as Monday with an emphasis on companies with a small market cap.
A company statement indicates BlackRock also filed paperwork to launch an aggregate bond fund with similar gun-related exclusions.
While these funds will ban applicable manufacturers and retailers from inception, some existing products currently offered to investors will also be retrofitted to the new parameters.
These include funds created with social factors in mind, the company explained, so they generally avoided gun-related investments already. Restrictions on retailers, however, could have a significant impact.
BlackRock’s new requirements for the gun-free funds call for the exclusion of any retailer with revenue from gun sales topping $20 million per year. This means major chains including Walmart and Dick’s Sporting Goods would be banned.
Both of those retailers announced their own policy shifts in response to the shooting at Marjory Stoneman Douglas High School that left 17 people dead. After raising the age required to purchase a rifle to 21, a 20-year-old Oregon man sued both companies for discrimination, according to CBS News.
The BlackRock announcement hits the retailers from the other side of the debate, leaving analysts uncertain about the potential impact on the larger stock market.
With roughly $6 trillion in investors’ money currently locked into one of its products, BlackRock is commonly referred to as the world’s largest investment management company. Therefore, if enough clients are sufficiently interested in investing in these new products, stocks in certain companies could suffer.
This is especially feasible among companies that already have significant exposure in BlackRock funds, including American Outdoor Brands Corp. and Sturm Ruger & Co.
Aegis Capital’s managing director of equity research explained the possible impact on such companies.
Rommel T. Dionisio acknowledged that it “remains to be seen how significant these firearm-free instruments grow in size,” but noted that if the trend catches on, it could have a measurable effect.
“But given the recent rhetoric from various state pension funds to divest firearm companies from their portfolios, there could certainly be some selling pressure if these funds were to divest BlackRock’s existing funds in favor of these new instruments which contain no firearm-related stocks,” he said.
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