The California State Teachers’ Retirement System’s investment committee on Wednesday unanimously approved a motion to divest from manufacturers that produce firearms deemed illegal by the state of California.
The system is a limited partner in a Cerberus Capital Management fund that owns Freedom Group, whose affiliate makes the Bushmaster AR-15, the gun used in the December shooting massacre at a Connecticut elementary school. That specific version of the AR-15 is illegal in the state of California. Cerberus is in the process of selling Freedom Group.
CalSTRS also has exposure to Smith & Wesson and Sturm, Ruger & Co., also gun makers.
And then it dawned on me, and I got a message from staff, that I – and we on this board – are not powerless
Several board members appeared visibly emotional as they discussed the motion, which was made by State Treasurer Bill Lockyer following the December massacre at Sandy Hook Elementary School in Newtown, Connecticut, a tragedy that left 27 – including 20 children between the ages of 6 and 7 – dead.
“Like so many of us I felt very powerless over what happened and what occurred, and I remember sitting in my office by myself when President Obama spoke to the country that Friday, that afternoon. And he spoke as a dad … And I sat there with all of my thoughts, and felt that I was very powerless,” investment committee chairman Harry Keiley said prior to the vote.
“And then it dawned on me, and I got a message from staff, that I – and we on this board – are not powerless.”
Following the shooting, CalSTRS – a longtime Cerberus limited partner – released a statement indicating that it would review the firm’s investment in the gun manufacturer. Shortly after CalSTRS’ announcement, Cerberus responded by announcing it would exit Freedom Group.
Cerberus has since found an investment bank and counsel to facilitate the sale, CalSTRS chief investment officer Christopher Ailman said at the meeting.
Following Ailman’s update on Freedom Group’s sale, investment committee vice chair Dana Dillon tearfully asked
It's always clear in hindsight
Ailman to communicate the board’s gratitude for the firm’s speedy response to the tragedy.
A spokesperson for Cerberus did not respond to a request for comment.
The decision to divest from firearms manufacturers was inspired, at least in part, by CalSTRS’ existing policy for mitigating environmental, social and geopolitical risks. The policy includes 21 risk factors, including one labeled “Human Health” that requests managers to consider “long-term profitability from business exposure to an industry or company that makes a product which is highly detrimental to human health”.
“The managers are always trying to measure the social benefit of a product versus the social harm of a product,” Ailman said at the meeting. “It’s always clear in hindsight.”
The divestiture process will involve face to face meetings between CalSTRS staff and management teams of the relevant manufacturers. If the manufacturers refuse to cease production of weapons illegal in the state of California, the retirement system will move forward with divestment.
Lockyer has reportedly urged the California Public Employees' Retirement System to take similar action.