The Importance of Divestment

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The opposite of investing, divesting is the act of selling stocks, bonds, investment funds, and even companies, whether by an individual or a larger enterprise. This is often meant to protest immoral activity and pressure companies or governments to change their wrongful policies. Many larger institutions (such as U.S. universities and colleges) will invest billions of dollars in different businesses in an effort to boost finances. However, many of these organizations put their money into corporations that have unconscionable practices, such as fossil fuel companies. Later disassociating from these partnerships due to their unsustainable conduct is called social divesting (financial or political divesting are also common forms of divestment).

A major goal of social divesting (in the environmental aspect) is to end fossil fuel investments. These fossil fuel companies use sponsorships as their “social license to operate” so they can continue to expand in the era of climate change and ignore those demanding justice for destruction and pollution. There are numerous campaigns pushing to end investment in fossil fuel companies, with the majority of them asking institutions to avoid making any new investments, divest from any funds with fossil fuel public equities or corporate bonds, and end any fossil fuel sponsorships they may have. There are even websites, such as the Fossil Free Indexes and Fossil Free Funds, that research and list fossil fuel companies for easy reference.

Besides being socially conscious, additional incentives for educated divestiture may include protection against bankruptcy, financial loss, and political or legal issues, thus leading to stability and future growth.

An additional movement is Socially Responsible Investing (SRI), which is investing in companies that are “lowering their carbon footprint, improving energy and natural-resource use efficiency, treating their workers well, protecting their customers’ privacy, making safe and useful products, respecting the communities in which they operate, and governing themselves ethically” (Morningstar). Modern SRI began in the 1960s with matters like the Vietnam War and Civil Rights Movement, and in 1988 First Affirmative Financial Network (First Affirmative) was formed to support the growing interest in social investing. The SRI movement has only gained momentum since, with The SRI Conference founded by First Affirmative in 1990 (the conference is now part of Folio Financial, which is “an online brokerage offering financial resources and investment products such as stocks, mutual funds, and ETFs”).

Along with the drive for divestiture needs to come the promotion of SRI. While divesting can be a powerful push towards a greener future, it is only truly effective in creating change when on a greater scale. Moreover, SRI encourages advancements in renewable energy and human rights, among other important social issues, and can be more direct in improving communal and environmental welfare. That being said, both social divestiture and socially responsible investing are incredibly important, and as the world becomes more environmentally conscious, it is good to be educated on the pros of both.

Featured Image via Action Network

About the author

Sky Davis is a 16-year-old V former from Hopkinton, MA. Kitchens don’t tend to like her, but she’s a strong believer that food can fix almost anything, and a mutual love of pizza is a great way to start a friendship. In her free time, she can be found writing, taking photos (of anything and everything), or hanging out with her dogs (who are better than most people). Or eating pizza with friends.

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