Divesting from firearms smart, but is it enough?

State treasurer Shawn T. Wooden’s move to divest state pension funds from investments in ammunition manufacturers makes sense. The firearms market is an increasingly risky place for investors. But divesting also puts pressure on firearms and ammunition manufacturers to accept sensible gun safety legislation, and that could be the biggest benefit of all.

Mr. Wooden says his top responsibility is ensuring returns on the state’s investments, but he acknowledges that those investments can be made in ways that have positive social impact without risking the pension funds. He’s right — the world is full of investment opportunities, and if they can be chosen in socially responsible ways, they should.

Mr. Wooden intends to divest $30 million of the state’s $37 billion pension fund from equity investments in five companies that make ammunition for the civilian market. It’s a relatively small amount — and it raises the question of whether divesting from the firearms market is enough. Cities, states and universities across the country are reassessing the social implications of their investment portfolios, and Connecticut should be part of the conversation.

While the state should leverage the financial muscle of its pension fund to safely and responsibly to pressure corporations to be more socially responsible, the office of the State Treasurer should not become an instrument of political causes du jour. It would be foolhardy to put the state’s pension fund in jeopardy for faddish political gain. The Investment Advisory Council, which approves investment policy, must monitor that closely.

But is divesting the best strategy? The question of whether divestment works at all has been debated, and the answer isn’t clear. The direct financial effects are likely to be small, but divestment can have a formidable impact on the way certain companies or industries are perceived by the public, experts say. Think South Africa’s apartheid. On the other hand, in some situations, divesting could be counterproductive — if it removes the voice of a group of investors from corporate governance.

It can cost money to divest. California years ago stopped investing its pension funds in tobacco, a move that one report says cost it about $3.6 billion in unrealized gains since 2001. It’s worth noting that California’s pension fund is some $360 billion.

In states that pursue so-called “social investments,” average annual returns have been slightly lower, by about 0.4 percent, according to a Boston College study. The same study also showed that some of these social investment funds — known as “ESG” funds (environmental, social and governance) — outperformed comparable Vanguard mutual funds in many situations.

Both New York and Massachusetts are debating whether to divest from fossil fuels. In Massachusetts, legislators are trying to pass a bill that would allow counties and municipalities to control their own pension funds as they see fit. In New York, a new bill could lead the state to divest up to $13 billion from fossil fuel companies.

Colleges and universities are also divesting. The University of California system recently decided to divest from fossil fuel companies. So did Smith College. And a few weeks ago, activists from Yale and Harvard interrupted their football game in New Haven with divestment demands.

Time will tell if those moves have any impact. The fossil fuel industry is under pressure from many directions as concerns about the environment grow. The energy economy is in flux, and if Connecticut’s investment strategy can help encourage renewable sources, it should — because they could be safer investments, and because the environment would benefit.

As Mr. Wooden told The Courant’s editorial board: “There is a correlation between producing dangerous products that kill people and the value of a company over the long term. And [the firearms industry] is a prime example.”

The world is full of investment opportunities that don’t involve propping up corporations that put profits over the environment or public health or public safety. Even if the outcomes of divesting — from fossil fuels, from ammunition manufacturers, from Big Pharma or other industries — aren’t immediately apparent, the public and financial pressure it puts on corporations can be effective in the long term.