An exhibit by firearms manufacturer Sig Sauer at the International Association of Chiefs of Police conference in Chicago in October, 2015. Jim Young/Reuters

It’s hard for cities to fund public pensions without supporting weapons and ammo manufacturers, even when they want to.

Gun sales in the U.S. are on track to reach a record high in 2016. After each new mass shooting comes a surge in share prices for gun manufacturers. With mass shootings now more reliable than the weather in the U.S., managers of mutual funds, hedge funds, and public pensions have invested heavily in companies that make weapons and ammunition. Soaring gun sales since 2009 make weapons companies a sound investment.

The wisdom of markets notwithstanding, many leaders have questioned the morality of investing in these companies in light of recent, severe mass shootings. Some leaders have called specifically for public and private divestment in guns and ammo manufacturers. Private funds aren’t listening: Since President Obama’s inauguration in 2009, mutual-fund investments in the top two publicly traded gun companies have grown from $30 million to more than $500 million. More than 150 mutual funds own shares in Smith & Wesson Holding Corp., according to Reuters: up three-fold since the end of 2008.

The efforts by Campaign to Unload and other organizations to get these funds to drop weapons companies (or to get consumers to drop these funds) haven’t yet found much traction. On the other hand, divestment in public funds—namely massive city and state pension funds—ought to be a simpler matter for the law. Yet public divestment in guns and ammo companies has proven to be a lengthy, opaque, and not-at-all-uncertain process, even in places where divestment is popular.

In December, just after the mass shooting in San Bernardino, California, New York Mayor Bill de Blasio called for government pensions in New York City to divest from guns and ammo manufacturers. At that time, three of the five funds that constitute the New York City Retirement Systems—which in its entirety was then valued at $162.9 billion—still invested in weapons companies.

One month later, Mayor de Blasio moved to push these three remaining pension funds toward divestment. In January, the mayor submitted a resolution to the New York City Police Pension Fund (PPF). His office then extended the same resolution—a pledge to analyze divestment in weapons manufacturers—to the New York City Board of Education Retirement System (BERS) and the New York City Fire Department Pension Fund.

Since then, PPF has agreed to study the prospect of jettisoning its roughly $10 million investment in gun and ammo companies. BERS agreed to take this step, too. But the FDNY pension fund has declined to study divestment, New York City’s Office of the Comptroller confirmed to CityLab.

Divestment initiatives popped up across the country after the harrowing mass shooting in Newtown, Connecticut, in which 20 small children were slain at Sandy Hook Elementary School, in 2012. So far, though, these efforts have been slow to yield results.

The California State Teachers’ Retirement System (CalSTRS), for example, voted for divestment in January 2013. While CalSTRS quickly jettisoned $3 million in investments in public shares of gun manufacturers such as Smith & Wesson and Sturm, Ruger & Co., as Forbes reported, it took far longer to resolve a $375 million index fund that owns Remington. The entire process took CalSTRS more than 2 years to complete. Remington sold more than $1 billion in guns and ammo in 2014.

The country’s largest pension fund, the California Public Employees’ Retirement System (known as CalPERS), voted to divest some $5 million in investments in Smith & Wesson and Sturm Ruger in February 2013. Yet in April of the same year, CalPERS opposed a state ban on investments in guns and ammo manufacturers. A spokesperson confirmed to CityLab that CalPERS is now totally divested from firearms, but declined to say how long the process took or whether CalPERS invests in any index funds with investments in firearms companies.

Divestment has not been easy for CalPERS. While its direct holdings in weapons and ammo manufacturers were small, the board’s efforts to steer toward ethical investments have come at some cost. Divestment in tobacco has cost the system a staggering $3 billion since 2001; CalPERS is now considering a reversal on its ban on tobacco investments.  

"Divestment as an investment strategy presents a challenging conflict for CalPERS, as it often pits social responsibility against our fiduciary duty as outlined in the California Constitution," said CalPERS board vice president Henry Jones in an April statement.

The same may be true with other investment funds, both public and private. In fact, some ethics-minded fund managers have moved against divestment as a strategy, adopting environmental, social, and governance (ESG) investments instead. Think of ESG as a way of prioritizing positive investments rather than absolutely prohibiting negative investments.  

In light of the slaughter of 49 attendees at an LGBT dance club in Orlando, Florida, early Sunday, virtuous portfolio strategies may not be enough. Calls for divestment in weapons manufacturers are bound to get louder, no matter if The Financial Times says that divestment isn’t working. But in California and New York, calls for divestment were not enough.

The direct investments in question are small in the scheme of things, and few are the publicly traded companies that manufacture weapons and ammo. But as long as there’s more money to be made in vice than virtue, divestment will be a long shot, even for public pension funds. The mass shootings that make the case for divestment make divestment that much more difficult.

“Fund managers are drawn to the stocks by surging sales,” reads a February analysis from Reuters on rising gun share values since President Barack Obama’s inauguration. “Buyers are arming themselves, analysts said, in response to mass shootings and calls for tougher gun laws.”

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