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Impacts of Guns on Corporate Policy and Portfolio Risk

Values-Aligned Investing
March 9, 2018

By Mark Bateman and Shauny Ullman

The last few weeks have been busy for policy changes by retail stores in the U.S. Walmart (WMT), Dick’s Sporting Goods (DKS), and Kroger (KR) all changed policies regarding their sale of firearms. These announcements offer additional insight into the potential nexus between investor portfolios and firearms and gun control.

Aperio understands that unique clients have different perspectives on this controversial issue. While Aperio is agnostic on whether clients should seek to exclude any specific company or issue area from their portfolios, we want clients to understand the potential level of investment risk that may result should they choose to do so.

Publicly available data that is consistently available includes data concerning companies that may serve as gun distributors, such as the three publicly traded companies mentioned above, as well as others that may manufacture/produce these weapons. Given the data availability, these two aspects of public company participation in what we generally may think of as “the gun issue” lend themselves to the kind of data and investment analysis that Aperio can offer to its existing and potential clients with respect to portfolio construction.

Tracking Error*

Aperio uses ISS-Ethix data to identify companies’ involvement with firearms. According to our data vendor, only 29 public companies globally, with a combined market cap of approximately $350 billion,1 are involved in the manufacturing and distribution of firearms and ammunition to civilian markets.

Aperio’s portfolio optimization techniques allow a client to exclude both manufacturers and distributors with very low expected tracking error. The table below presents the resulting hypothetical investment portfolios.

NOTE: We have considered these exclusions across multiple indexes. For this post, we present the S&P 500 and the Russell 3000.

firearms distribution and production


Firearms Producers

Seventeen of these companies, with a combined market capitalization of approximately $49 billion,2 are identified as being involved in the manufacturing of firearms. These companies may have distribution activities as well. As you will note, there are no civilian firearm manufacturers in the S&P 500.

firearms production


Firearms Distributors

Our data vendor also identifies 12 companies involved in the distribution/retail sale of firearms to civilians that are not also manufacturing weapons. These companies have a combined market cap of approximately $301 billion.3


Changes in Corporate Policy

For many investors with ESG (environmental, social, and governance) concerns, the goal is to effect change in the world through revisions in how companies operate. In the case of the macro gun conversation going on now, companies are obviously feeling pressure from many directions. The three retailers named above have announced changes to their policies regarding the sale of firearms, and in some cases are calling on lawmakers to enact “common sense” gun reform.

Walmart, having ceased the sale of “modern sporting rifles” (including the AR-15, a semiautomatic civilian version of the military’s M-16) in 2015, announced it would raise to 21 the minimum age to purchase firearms or ammunition.4 Dick’s Sporting Goods, which previously removed modern sporting rifles from its Dick’s stores, announced that it would remove them from its Field & Stream stores and raise the minimum purchase age to 21 across its corporate holdings.5 Kroger, the US’s largest supermarket chain, also announced raising the age of firearm and ammunition purchases to 21 in all of its Fred Meyer stores (a ubiquitous chain in Alaska, Idaho, Oregon, and Washington). Kroger previously stopped selling assault-style rifles in all locations except Alaska.6

Notably, none announced that they would stop selling firearms altogether, highlighting the role of retail stores as major distributors of civilian weaponry.

UPDATE: News reports citing an email from Kroger’s indicate that it will phase out the selling of all firearms. As of March 18, the company website does not have any material related to this new announcement. According to the reports, the company did not specify a timeline.

Additionally, several prominent public and private companies across banking, airlines, automobile transportation, health, insurance, technology, information, and security, have severed ties with the National Rifle Association (NRA), the primary proponent for unfettered gun ownership.7

BlackRock, the world’s largest asset manager, released a statement that it has reached out to the major firearms retailers and manufacturers to discuss their business practices. In addition, BlackRock indicated its proxy voting may be affected by this issue and the responses it receives from companies.8

Recreational Equipment International (REI) has placed a hold on all future orders of non-firearms products from Vista Outdoor, a company with a significant presence in gun manufacturing.9

According to statements made by the companies, all of these changes and announcements appear to be a direct response to the Parkland, Florida, school shooting.10

Shareholder Engagement

CNBC reported that Mercy Investment Services (the money manager for the Sisters of Mercy) engaged Dick’s Sporting Goods in a dialogue in January of this year, in part based on a shareholder resolution they filed regarding gun safety. Based on the dialogue, Mercy Investment Services withdrew the resolution. They were then pleasantly surprised that the company went further in responding to the Parkland shooting. Shareholders have also filed resolutions at gun manufacturers Sturm Ruger & Co. and American Outdoor Brands.11

Given the new momentum surrounding this issue, more shareholder dialogues and proposals are likely in the coming months.

Official statements can be found below.


Send questions or comments to blog@aperiogroup.com.


*Aperio limits the size of its portfolios in order to minimize transaction costs. As a result, the tracking error presented is almost entirely from limiting the number of companies within the hypothetical portfolio. The firearms exclusions themselves play a de minimis, if not irrelevant, part.
The S&P 500® Index is an equity benchmark for US stock performance. It is a capitalization-weighted index covering 500 large US companies chosen by Standard & Poor’s for market size, liquidity, and industry group representation.
The Russell 3000® Index is an equity benchmark for US stock performance. It is a capitalization-weighted index covering the largest 3,000 publicly traded US stocks. The index represents approximately 98% of the total market capitalization of the US stock market.
Aperio’s strategies are not in any way connected to or sponsored, endorsed, sold, or promoted by the London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). All rights in the Russell indexes vest in the relevant LSE Group company. The LSE Group does not accept any liability whatsoever to any person arising out of the use of the strategies or the underlying data.
You cannot invest directly in an index.

1 Data as of March 8, 2018.
2 Ibid.
3 Ibid.
4 Walmart Statement on Firearms Policy
5 Dick's Sporting Goods - Media Statements
6 Kroger News
7 "A List of the Companies Cutting Ties With the N.R.A." (New York Times)
8 BlackRock’s Approach to Companies that Manufacture and Distribute Civilian Firearms
9 REI statement on relationship with Vista Outdoor
10 "How Parkland Students Changed the Gun Debate" (The Atlantic)
11 "Dick's Sporting Goods decided on assault-rifle ban after student protests and a meeting with nuns" (CNBC)

This article is provided for informational purposes only. The information contained within this article was carefully compiled from sources Aperio believes to be reliable, and it is accurate to the best of our knowledge and belief. However, Aperio cannot guarantee its accuracy, completeness, and validity, and cannot be held liable for any errors or omissions. All information contained herein should be independently verified and confirmed. Aperio does not accept any liability for any loss or damage whatsoever caused in reliance upon such information. Aperio provides this information with the understanding that it is not engaged in rendering legal, accounting, or tax services. In particular, none of the examples should be considered advice tailored to the needs of any specific investor. Aperio recommends that all investors seek out the services of competent professionals in any of the aforementioned areas. With respect to the description of any investment strategies, simulations, or investment recommendations, Aperio cannot provide any assurances that they will perform as expected and as described in this article. Past performance is not indicative of future results. Every investment program has the potential for loss as well as gain.