Impact Blog
Gun retailers take positive action

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Calvert disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Calvert are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Calvert fund. References to individual companies for Engagement or Research purposes are provided for illustrative purposes only and may not be representative of the results of all of Calvert’s engagement efforts. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. Past performance is no guarantee of future results.

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      By John Streur, President and CEO, Calvert Research and Management

      Washington - Last week I was interviewed by Barron's reporter Reshma Kapadia. In her February 23 article, "We're All Gun Owners, and Here's Why," she captured the essence of our conversation:

      "[R]esponsible investing veteran John Streur, who heads Calvert Research & Management, says divesting may not work in curbing gun violence. 'It has to involve more than just not owning—obviously, that's not working,' he says. He's mulling new ways to tackle the problem, but says it requires a broad swath of Corporate America, potentially encouraging other companies to use their lobbying power to weigh in on gun safety."1

      Calvert's investment approach includes research and engagement in an effort to be part of the forces that create positive change, as opposed to applying only negative screening or a divestment/avoidance approach. While we do not own gun manufacturers or retailers for whom gun sales are known to be a material portion of their revenue, we do own Dick's Sporting Goods and Kroger. Both companies took positive action this week to responsibly sell firearms - examples of how pressure from consumers and investors, in cooperation with other stakeholders, can encourage change.

      Companies have a stake in and responsibility for the safety and well-being of Americans, and especially of the young people in this country. Calvert and other firms in the investment industry have the opportunity to get companies to change their practices as well as to participate in facilitating stronger rules designed to immediately improve gun safety in the United States. Today, companies in a position to help solve these problems that do not act risk damaging their brands and diminishing the long-term value of their companies.

      How Calvert tackles companies in the gun business

      At Calvert, we use a combination of business involvement indicators and company-by-company factors to evaluate the risk companies pose to society and the risk they create for their investors resulting from any position they have in the gun industry. Gun manufacturers score very poorly, because of their high risk to society and high risk for investors. Moreover, there is little ability to engage with such companies to get them to change their business model. We don't own US gun manufacturers as a result.2

      Companies in the retail business are in a different position. Gun sales are usually a small percentage of their overall business, and they have choices as to what they make available for purchase. This increases the potential of a positive outcome as the result of Calvert's shareholder engagement, because these companies can change their risk profile without altering their business model.

      Calvert is in the process of adjusting our business involvement risk factor for retailers to reflect the elevated risks we are seeing, When the adjustments are finalized, we expect that any retail distribution of assault rifles would have a severe negative impact on a company's score in our research models. Companies held by Calvert could be impacted by this move.

      Dick's takes a stand

      We applaud the decisive action by Edward Stack, Dick's chairman and CEO, to permanently eliminate the sale of assault rifles and high capacity magazines, and raise the age to buy firearms to 21. In reporting on this, the Financial Times stated:

      Dick's cited the Stoneman students who have spoken out on television and social media to campaign for gun reform, and called on businesses to side against the NRA. "We have heard you. The nation has heard you," said Mr Stack. Dick's supported the Second Amendment, which enshrines Americans' right to bear arms, he said. "But we have to help solve the problem that's in front of us. Gun violence is an epidemic that's taking the lives of too many people."3

      We couldn't agree more with his statement that "we have to help solve the problem." That is exactly why Calvert pursues a company by company decision-making process and uses corporate engagement as a tool to create positive change. We want to help solve problems.

      Kroger follows suit

      The day that Dick's announced its decision, we began to directly engage with Kroger, which sells guns in a limited number of Fred Meyer stores. The stores sell guns per existing laws to people age 18 and up and also sell assault rifles in Alaska.

      Calvert called Kroger to urge the company to take swift action to establish policies that would eliminate the sale of all assault rifles and high capacity magazines, and move the age to purchase to 21. We were told that Calvert was the first investor to make that specific request, but that the company was already taking a hard look at its policies and procedures for firearms sales and moving in a positive direction.

      From an investor's perspective, we believe the Kroger and Fred Meyer brands will be much better served in the long run by taking action to help solve this problem than by continuing current practice. On Thursday, the company announced that it would indeed stop selling guns to buyers under 21.

      This week, Walmart (which Calvert does not own) took similar action to Dick's and Kroger, and President Trump stated that he wants to increase the age to purchase to 21. These actions were unimaginable two weeks ago, and the students at Parkland High School deserve a lot of credit for driving positive change.

      The Bottom Line: All of us need to urge powerful leaders throughout the United States to join the effort to foster responsible gun sales and ownership in order to restore the safety to our schools and across the general population. Anyone who is in position to make a contribution to this effort should step up now and help build momentum. If enough CEOs and companies join this movement, legislative change could be possible.