CalSTRS Under Pressure to Divest From Gun Manufacturer

In the wake of the Sandy Hook school shooting in 2012, many large pension funds considered divesting from gun manufacturers – or, forcing manufactuers to comply with a set of safety initiatives known as the Sandy Hook Principles.

Pension360 has covered that rising sentiment, and the names attached to the movement are big: the New York State and Local Retirement System, the Connecticut Retirement Plans and Trust Funds, the Philadelphia Board of Pensions, CalPERS, and others.

CalSTRS is one fund that pledged to divest from the company that manufactured the gun used in the Sandy Hook shootings.

But the investment hasn’t yet been sold, and teachers are now putting extra pressure on the pension fund to act.

From the Sacramento Bee:

The California Federation of Teachers plans a protest outside a CalSTRS board meeting in West Sacramento on Thursday, demanding the pension fund follow through on its pledge to unload its investment in Cerberus Capital Management, the private equity firm that owns gun manufacturer Freedom Group. A Bushmaster rifle manufactured by Freedom was tied to the shootings at Sandy Hook Elementary School in December 2012.

The protests, which are being labeled “teach-ins,” are tied to CalSTRS’ investment in Cerberus, valued at $375 million. CalSTRS was one of the most outspoken investors following the Sandy Hook massacre, saying it was reviewing its Cerberus investment and demanding that the firm sell off Freedom Group.

A CalSTRS spokesman said Wednesday that the pension fund can’t force Cerberus to unload the investment, nor can CalSTRS simply walk away from its Cerberus holdings.

“We still are invested in Cerberus, to our chagrin,” said spokesman Mike Sicilia of the California State Teachers’ Retirement System. “We share the frustration of those who ask us to divest.”

There are other barriers to divesting, too, including the contract it signed with Cerberus upon investment.

And, as is the case when any pension fund considers divestment, CalSTRS must decide whether its moral considerations should outweigh financial ones. From the Bee:

Sicilia said “contractual obligations” prevent CalSTRS from selling its investment with Cerberus. He wouldn’t go into details, but added, “We can’t walk; we’re in it.” Private equity firms such as Cerberus invest in companies that aren’t owned by public stockholders.

He said CalSTRS also must respect its obligation to generate as much profit as possible for its current and future retirees. The pension fund shouldn’t unload its Cerberus investment at a loss “without thoroughly exhausting all other options first.”

CalSTRS manages $190 billion in assets for the state’s retired teachers.

Photo by  Jim Wrigley Photography via Flickr CC License