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Do you passively invest in assault weapons?

If you own an index fund, you may profit from the gun industry. Here’s why you shouldn’t.

As they were grieving the tragic loss of life in the Parkland shooting, Florida teachers learned that they had been financially supporting the firearms industry through their state pensions.

According to Bloomberg, at the end of last year the Florida Retirement System Pension Plan held 41,129 shares of American Outdoor Brands (formerly Smith & Wesson Holding Corporation), the manufacturer of the semiautomatic AR-15 assault rifle used in the February 14 attack at Marjory Stoneman Douglas High School. According to the report, the pension plan also invested in Sturm & Ruger, Vista Outdoor, and Olin, other major firearms and ammunition makers.

In a statement attempting to explain why it owned the stock of an assault weapons maker, a representative of the Florida State Board of Administration (SBA), which manages the teacher pension fund, said that–as fiduciaries–the group “must act solely in the interest of the participants and beneficiaries.” The spokesperson implied that since they engage in indexing, or passive investing, the SBA must own all of the companies listed in a particular index, including American Outdoor.

There are a couple of problems with that statement.

First of all, being a fiduciary does not require an institution to own all investments, including socially irresponsible ones. Incorporating actively selected, ethical criteria into investment analysis is consistent with fiduciary responsibilities. In fact, according to the United Nations Global Compact, failing to consider long-term investment value drivers, which include environmental, social and governance issues, in investment practice is a failure of fiduciary duty. In October 2015, the U.S. Department of Labor decided that fiduciaries may treat socially responsible investments as they treat conventional options.

Second, the SBA press statement shows that it and many other investors are missing a larger point: investing is not just about financial well-being. Acting in the interest of participants and beneficiaries–in this case, teachers and their families–should mean not supporting companies that make weapons.

Approximately 15% of American Outdoor stock is owned by mutual fund investors of all stripes, not just the SBA. Retirement platforms Vanguard and Fidelity offer the company’s stock through their retail mutual funds, with the total value of those holdings estimated at $60 million and $54 million, respectively. This means that many people saving for retirement currently own and profit from weapons manufacturers, most likely without their knowledge.

Investors have the ability to enact social change if they understand the power they hold in their retirement and other investment accounts. We have hopeful examples in recent history of asset owners leveraging their financial clout and using ownership to push for social change. The divestment movement opposing apartheid in South Africa is probably the most potent example.

But it starts with knowledge. All people of conscience, not just Florida’s teachers, should be aware that their investments can either allow the status quo to continue or be part of the solution. As investors, we all have the ability to contribute–even in small ways–to changing the culture. By refusing to support weapons manufacturers, we minimize our complicity in the tragic phenomenon of gun violence.

Joshua Brockwell is investment communications director at Azzad Asset Management, a socially responsible registered investment advisor based in Falls Church, Virginia. As a matter of policy, Azzad does not own the stock of companies that manufacture assault weapons or ammunition.

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