THINK
Divest or Engage?
A side-by-side look at the two oldest strategies in sustainable investing, and what the evidence suggests about each.
- Type
- Explainer
- Difficulty
- Beginner
- Length
- 7 min read
When an investor objects to what a company does, it has two basic choices. It can leave, by selling its shares, or it can stay and push for change from the inside. The conversation with Cary comes down firmly against relying on moral divestment alone. This page lays both options out so you can weigh them yourself.
TWO STRATEGIES
- What you do
DIVEST
Sell your shares and stop investing in the company.
ENGAGE
Stay a shareholder and use your votes and voice to push for change.
- Main strength
DIVEST
A clear moral signal; your money is no longer tied to the activity.
ENGAGE
Keeps influence over the company's decisions.
- Main weakness
DIVEST
Another buyer takes your place, often one less concerned about climate.
ENGAGE
Can be slow, and easy to use as cover for doing nothing.
- Best evidence of success
DIVEST
Can shift public debate and stigmatise an industry over time.
ENGAGE
Company commitments that are met, with measurable change.
- When it makes most sense
DIVEST
When engagement has clearly failed, or the business has no realistic path to change.
ENGAGE
When the company can realistically transition and listens to its owners.
Many large investors now combine the two: engage first, with a clear deadline, and divest if the company does not move. Cary's further point is that the strongest lever may be neither, but rather actively funding the solutions.
DECIDE FOR YOURSELF
- Which strategy would you choose for a coal company? For a car maker? Why might the answer differ?
- How long should an investor engage before giving up and selling?
- Can divestment work if only a few investors do it? What if almost all of them did?
- Where does 'investing in solutions' fit alongside divest and engage?