What is Divestment?
Divestment refers to the act of selling off assets, investments, or business units for ethical, financial, or strategic reasons. It is a deliberate decision to remove capital from certain assets or industries. Divesting can be done for a variety of reasons, including environmental concerns, social responsibility, risk management, or financial performance.
Strategies of Divestment
There are several strategies of divestment that companies can employ:
- Asset Sale: Selling off physical assets, such as real estate, equipment, or inventory.
- Financial Investment: Liquidating investments in stocks, bonds, or other financial instruments.
- Business Unit Sale: Divesting a specific business unit or division within a company.
Examples of Divestment
One of the most well-known examples of divestment is the movement to divest from fossil fuels. Many organizations, universities, and governments have committed to divesting their assets from companies involved in fossil fuel extraction or production. This is done in an effort to combat climate change and promote sustainable investing.
Case Study: The Rockefeller Brothers Fund
In 2014, the Rockefeller Brothers Fund, a philanthropic foundation founded by the descendants of John D. Rockefeller, announced its decision to divest from fossil fuels. The foundation committed to phasing out investments in coal, tar sands, and oil companies, citing the need to align their investments with their values and address climate change.
Benefits of Divestment
There are several benefits to divestment, including:
- Alignment with values and mission
- Risk mitigation
- Positive impact on society and the environment
Statistics on Divestment
According to a report by Arabesque Partners, a sustainable investment firm, divestment campaigns have grown significantly in recent years. The report found that over 1,110 institutional investors representing $11.5 trillion in assets have committed to divesting from fossil fuels.
