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An exhibit booth for firearms manufacturer Smith & Wesson is seen on display at the International Association of Chiefs of Police conference in Chicago, Ill., October 26, 2015.Jim Young

John Streur leads one of the oldest firms devoted to socially responsible investing. He's heard the drumbeat for investors to sell gun stocks following last month's shooting at a Florida high school that left 17 people dead.

But after years of advocating for aligning investor portfolios with their values, the chief executive officer of Calvert Research & Management has come to a sobering conclusion: divesting gun makers is a flawed strategy. More funds than ever shun the companies yet school shootings have only increased.

"This isn't working -- it hasn't solved the problem," said Streur, whose Washington-based firm, now a part of Eaton Vance Corp., manages more than $11 billion. Instead, he favors addressing gun safety through engagement with companies beyond the firearms industry, such as technology giants.

The Parkland, Fla., tragedy brings into focus a question that has long vexed investors interested in effecting change: What's the best way to get results? Some sell stock and walk away while others stay invested with the goal of getting companies to alter their ways.

Streur isn't the only one who has concluded that engagement is the better route.

"If you sell your shares, you are giving up any modicum of influence you may have," said Michael Rosen, chief investment officer of Santa Monica, California-based Angeles Investment Advisors, which helps oversee about $28 billion mainly from endowments and foundations.

Interfaith Effort

There's evidence engagement can pay off. Several religious orders affiliated with the Interfaith Center on Corporate Responsibility bought stakes in Dick's Sporting Goods Inc. for the purpose of pressuring the retailer to adopt and report on gun-safety standards.

The investors withdrew their Dick's proposal last month after productive talks with the company, said Susana McDermott, a spokeswoman for the Interfaith Center. On Feb. 28, Dick's said it would extend a ban on selling assault rifles to its Field & Stream stores and require gun buyers to be at least 21.

Calvert owns shares in the largest U.S. supermarket chain, Kroger Co., which sells guns at its Fred Meyer locations. After meeting with Calvert executives, Streur says, Kroger said it too would stop selling arms and ammunition to anyone under 21.

Shifts like that one are why Streur now sees shedding stocks as a last resort.

"Divestment is just avoidance and is less likely to result in a system change than engagement," Streur said. Even if investors sell their gun stocks, the weapons will still exist, he says. That's why after the Florida shootings in particular, he began thinking that investors like Calvert should take a broader approach to guns, and engage big companies in the battle for better gun regulation.

Indexing Factor

The question of investor influence is complicated by the massive growth of strategies tracking indexes. Passive players can't easily walk away because they're obligated to be exposed to stocks in an index.

BlackRock Inc., the world's biggest money manager and an indexing power, owns 11 percent of American Outdoor Brands Corp., parent of the maker of the AR-15 rifle, which was used in the Florida shooting. Vanguard Group and State Street Corp. also rank among the top 10 holders.

Following the massacre, BlackRock said it would explore ideas for new funds excluding gun makers and retailers. It also said it opened discussions with firearms companies on steps they could take to support responsible use of their products. State Street also said it would engage with weapons makers.

"You can't tell someone who makes firearms to stop making them," said Angeles's Rosen, "but you can encourage them to use smarter technology."

American Outdoor Brands, formerly Smith & Wesson, cautioned BlackRock last week that one of its greatest investment risks was to take political positions unpopular with its pro-Second Amendment customers.

'Lip Service'

Not everyone is convinced dialogue will produce much. Indexers are paying "lip service" to the gun issue to appease critics, said Daniel Wiener, editor of the Independent Adviser for Vanguard Investors newsletter.

"Working behind the scenes to change things is likely to go nowhere," Wiener said.

Engagement is "a long-standing practice" at Vanguard aimed at maximizing value for investors, said John Woerth, a spokesman for the $5.1 trillion fund company. "We regularly encourage boards of directors to focus on societal risks and the disclosures of these risks on a range of issues."

State Street declined to comment.

Some social-investing specialists say divestment still has a key role.

Amy Domini, a pioneer of the movement, recalls that in the 1980s divestment helped end apartheid in South Africa. Domini, whose Domini Impact Investments manages $2.4 billion, sees parallels today.

"It is morally wrong to invest in guns just as it was morally wrong to invest in South Africa," she said. By ostracizing gun makers investors are changing the conversation about what is appropriate, according to Domini. As evidence that investors are being heard, she cites the roster of companies that have ended affiliations with the National Rifle Association since Parkland.

'Healthy Society'

While Calvert's Streur is convinced engagement is the best approach, he said investors may need to focus on stakes in companies that seemingly have nothing to do with guns, such as Apple Inc. or Facebook Inc., to maximize their clout.

Such companies, he said, have the expertise to tackle issues such as tracking gun and ammunition purchases, and the influence to change how gun violence is portrayed.

"Large companies have a stake in a healthy society in the U.S.," Streur said. "We think it is within reason -- and good for their brands -- if they use their voices to chip in and help solve the problem."

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