Ian Lanoff, a Washington, D.C.-based lawyer who advises state pension funds on their fiduciary responsibilities, said the divestment of pension funds in the tobacco industry 15 years ago had little impact.
“I didn’t see any evidence that tobacco companies cared at all,” Lanoff said “I’ve heard investment experts say to my boards, other people will just buy the stock if you sell it.”
For investors looking at retirement accounts, divestment may leave them with few (or no) options. Many index funds that track the market don’t leave room for specification. And your company might not provide a 401(k) option that is “gun-free.”
Rather than focus on weeding out certain companies, experts say it can be easier to focus on finding businesses you support via so-called ESG investing — which looks for companies with good track records on environmental, social and governance factors. This opens up more possibilities.
“ESG funds most likely won’t own stocks in gun manufacturers and defense contractors,” said Aaron Pottichen, president of retirement services for CLS Partners in Austin, who has seen more clients looking for such investments.
Indeed, investors now consider “environmental,” “social” and “governance” factors across $8.72 trillion in professionally managed assets — a 33 percent climb from 2014. Rodgers said his research shows that 60 percent of millennials want their investments screened for these factors, compared with just 29 percent of baby boomers.
You can check if your company offers the option for you to self-direct your 401(k) account into an ESG fund. If so, you can veer away form the standard options and move, “into the wild west with hundreds of investment options available to you.”
The downside, Pottichen said, is that you could be taking more risks since you’re not in an investing plan endorsed by the company.
If you can’t self-direct your account, and none of the 401(k) choices are “gun-free,” Rodgers recommends people go to their human resources department and ask who oversees the retirement accounts.
Sometimes it will be an investment committee, and sometimes it will be just one person. Either way, you can ask for them to provide a socially responsible investing option. Usually when a company adds such an option, Rodgers said, it’s because employees have requested it.