Divestment, the opposite of investment, is the act of selling shares or assets in the interest of achieving a specific goal.
The Good and Bad
Divestment is traditionally used by shareholders to reduce costs, repay debt, or generate cash flow with the aim of increasing market value – the monetary value of a company. However, it has recently been used by investors to make a statement regarding environmental and social issues. Divestment now has the connotation of being an ethical act, whilst this can be true, the impact of such an act can be disputed. Research has shown that financially, divesting from harmful industries, such as oil and coal, has very little financial effect, this is because for there to be a seller, there must be a buyer. It’s important to be aware of investors greenwashing their portfolios with the easy move of divesting to appear to be responsible but without actually engaging in socially responsible investment. Therefore, it is suggested that keeping hold of shares in such companies can have a larger impact as shareholders can use their influence to steer company values and goals to align with sustainable development. It is common for business people to treat markets as if they last forever, however, being flexible and open to change keeps an organisation relevant.
Many countries’ economies rely on exporting oil and other natural gasses, also known as petrostates, so even though there is an urgent need to stop the extraction of non-renewable and polluting resources, we must also think of the consequences this has on an economy and in turn communities. Transitioning to other, more sustainable forms of economic growth now removes the risk of sudden economic shock (even though that would imply we were unaware of the event) when resources eventually deplete. International aid may be necessary to help low-income countries make this change.
The Ugly
Divesting funds will not reverse the damage that is already done, including atmospheric pollution, habitat and wildlife destruction, displacement, and resource depletion. Investors do not suffer the consequences of these actions, paired with the lack of legal accountability means shareholders do not experience the liabilities of their actions and are protected by the ‘carbon shield’.
On average, there is a large oil spill every year, which has long-lasting effects on local communities. Oil spills often reach water sources, polluting the water and making it unlivable for most marine life. On land, if we are exposed to these toxins we become susceptible to oil toxicity which causes symptoms such as skin irritation, immune system defects, heart damage or death. Unsurprisingly, societies are affected by the ‘safe’ extraction of such resources too, most notably Indigenous communities who suffer the consequences of land grabs as they are unrepresented in political decision-making. If we continue consuming non-renewable and polluting resources at this rate, we will deplete our resources in the next 50 years and create irreversible environmental consequences. As we enter a new period of humans impacting the environment, we are on the road to surpassing the 1.5-degree Celsius climate threshold (where the atmosphere is 1.5 degrees warmer than pre-industrial levels) which is considered safe.
Not My Monkey 