Can we harness market mechanisms to reduce risk? When companies favor short-term gains at the expense of long-term safety, divestment offers concerned citizens a tool of action. Beyond their direct effects, divestment campaigns can impact corporate behaviour through media pressure. Aside from ethical considerations, divestment can also make good business sense. Companies that take sustainability seriously tend to do better in the long-term, as reflected in the success of recent divestment initiatives by Swedish pension funds.
The greatest risks facing the world today are almost entirely manmade. In fact, when it comes to two of the greatest threats – climate change and nuclear weapons – some companies are actively and even intentionally exacerbating the problem, simply because it improves their short-term bottom line and share-holder value. This near-sighted approach is dangerous for humankind. But it also allows more ethically-inclined individuals and institutions to take meaningful action in defense of our future: they can divest.
Divestment for social good gained popularity in the 1980s, as people and companies divested from South Africa to fight apartheid. Tobacco companies suffered a similar fate. More recently divestment campaigns have cropped up against child labor, fossil fuels, and nuclear weapons. While there is little evidence that divestment hurts a company’s share price, there is broad agreement that stigmatization can draw greater media attention to a company’s role in a problem, damaging their public image.
In response to a divestment campaign against them, Lockheed Martin announced in 2013 that they would cease all involvement in the creation of cluster munitions. Investors are hoping for a similar response to campaigns dedicated to sustainability and decreasing the risks of nuclear weapons.
“Only a few large organisations or institutions need to divest from companies with questionable priorities, and the resulting media attention can have a snowball effect”
This year, the Future of Life Institute (FLI) launched its own US-based nuclear weapons divestment campaign, based off of the successful European campaign, Don’t Bank on the Bomb. FLI worked with the City of Cambridge in Massachusetts to help the city divest their $1 billion pension fund from companies that create nuclear weapons or parts for nuclear weapons. As part of their effort to bring public attention to the idea of nuclear divestment, they also worked with MinutePhysics to create a humorous video about the dangers of nuclear weapons, and they’ve built version 1.0 of a nuclear divestment web app.
In a Huffington Post article, Susi Snyder, who led the Don’t Bank on the Bomb campaign, said, “Public exclusions by investors have a stigmatizing effect on companies associated with illegitimate activities. […] While it is unlikely that divestment by a single financial institution or government would be enough for a company to cancel its nuclear weapons associated contracts, divestment by even a few institutions, or countries, for the same reason can affect a company’s strategic direction.”
Mats Andersson, new vice-chairman of the Global Challenges Foundation, also has a strong history of divestment for social good. As CEO of Swedish pension fund AP4, Andersson pursued sustainable and socially conscious investments, while nearly doubling the size of the company’s funds. He’s argued that carbon divestment doesn’t just make sense from an environmental perspective, but it also makes good business sense. Companies that take long-term issues like sustainability seriously are more likely to take their business seriously. Such companies will likely prove better investments over time.
As Andersson said in the Chief Investment Officer, “Climate change investing is not about charity or good public relations, it’s about dealing with risks. If you do that properly you will enhance your returns in the long term.”
The world is financially driven, and divestment offers socially-conscious shareholders a means of influencing a company’s actions for the good of humankind. Only a few large organisations or institutions need to divest from companies with questionable priorities, and the resulting media attention can have a snowball effect, influencing more and more organisations to follow suit. Divestment is a great tool for individuals and organisations to fight for social good.
