Legislation that would compel New Jersey’s public-worker pension funds to shed investments in companies that manufacture guns or ammunition is getting a new look in the wake of the recent wave of mass shootings across the country.
Senate President Steve Sweeney (D-Gloucester) yesterday endorsed a firearms-divestment measure that was introduced in the Legislature last year just days after a horrific gun massacre at a Florida high school; the measure has been stalled.
“I don’t think we should be investing in guns or ammunition,” Sweeney said during an interview with NJ Spotlight staffers in Newark yesterday.
The state pension system has an estimated $25 million in pension-fund investments that the Department of Treasury has labeled as related to the gun industry. Treasury officials have stressed that none of those investments are in companies that manufacture automatic or semi-automatic weapons for civilian use. But the divestment bill would go a step further by barring investment of any pension funds in companies that manufacture guns and ammunition of any kind.
In all, New Jersey’s $76 billion public-worker pension system is made up of seven different funds, covering the retirements of roughly 770,000 current and retired employees, ranging from teachers to police officers to judges. Pension funds are managed by Treasury’s Division of Investment, with oversight provided by the State Investment Council, a board that meets in public on a regular basis in Trenton.
Last year, in the wake of the Parkland, Florida, mass shooting, Gov. Phil Murphy’s administration announced that the pension system had sold a $1.9 million investment in Vista Outdoor, a company that manufactures semi-automatic rifles for civilian use. Treasury also announced at the time that other gun-industry holdings were being put under review.
The legislation introduced by Sen. Vin Gopal (D-Monmouth) would require the public-worker pension plans to shed all investments in companies that manufacture guns or ammunition within two years. It would also require pension officials to submit annual reports detailing compliance with the investment prohibition.
Public workers complained
Gopal said yesterday that he decided to introduce the divestment bill last year after hearing complaints from public workers about pension funds invested in companies with ties to the gun industry. He also stressed the need to make the divestment of gun-industry holdings a matter of law to ensure it applies to future administrations.
“It’s not just about the current governor,” Gopal said. “We need to make sure public workers are comfortable with how the pension funds are being invested.”
While pension-fund managers have a general fiduciary duty to maximize returns for beneficiaries, lawmakers have at times prohibited specific investments to prevent public-worker funds from being used to support certain activities.
They include a 2005 law that forced the pension system to cut financial ties with companies doing business with Sudan’s Khartoum regime in response to its brutal treatment of people in the Darfur region. A 2008 policy prohibited investing pension-system assets in foreign companies that did business with Iran as it sought to establish a nuclear program. More recently, the state started banning pension-system investments in companies that have decided to boycott Israel to protest its treatment of Palestinians.
Sweeney pointed to those laws yesterday while discussing the need to ban all investments in gun and ammunition manufacturers. He also said New Jersey’s strong gun laws only go so far since people can purchase firearms in other states and bring them into New Jersey to commit crimes.
“We have the second strongest gun laws in the nation, but the reality is, it wouldn’t have stopped what happened in Dayton, Ohio or Texas,” Sweeney said. “It’s scary. You think you go to a Walmart for back-to-school (shopping) or go out to party with your friends and you don’t expect that to happen.”
Going beyond divestment
Murphy, a first-term Democrat, highlighted the Vista Outdoor divestment last April in a speech that detailed his first 100 days in office. But several months later, Murphy discounted the effectiveness of pension divestments in some cases in a conditional veto of a separate bill that sought to ban the state pension system from investing in companies that shirk their legal responsibility to remediate contaminated Superfund sites in New Jersey.
“I do not believe that (divestment) should be the only available response when companies in which the State has invested pension funds behave poorly,” he said in the conditional veto.
Instead, Murphy encouraged lawmakers to vote to establish a formal state investment-evaluation policy known as “ESG” that takes into account other factors in addition to the bottom line. (ESG stands for environmental, social and governance.) He said the adoption of ESG policies in states like California and New York has “positively changed business practices and allowed for more robust engagement between the state and the investment community.”
Murphy’s conditional veto has yet to be considered in either house of the Legislature, but the New Jersey SIC eventually adopted a formal ESG policy in September 2018. And members of an ESG subcommittee of the SIC were originally tasked with reviewing “investments in firearm and ammunition manufacturing and retail companies” after the Florida school shooting, according to the SIC’s meeting minutes.
It’s unclear what the outcome of that review was, but it doesn’t appear to have resulted in the shedding of any additional gun-industry investments.