Controversial, or better, counter-intuitive perspective from the Financial Times: investors should stay and actively engage with management because #divestment can lead to opportunistic buying by investors who are not socially/environmentally conscious. This counteracts price declines and weakens the incentive for companies to prioritize social responsibility. By staying invested and actively participating in shareholder votes or dialogue with companies, investors can influence decision-making and push for environmentally friendly practices.
My take: divestment is still the way to go. This article presents solid data on why and how divestment can lead to adverse effects. However, to me this seems a short-term view. Over a longer time period, and with sufficient pressure on institutional investors in particular, divestment is one of the most powerful tools we have to turn the screws on the fossil fuel industry.
❓What do you think? Should investors divest from companies associated with social or environmental issues?
Read the article by Eleonora Broccardo, Oliver Hart, and Luigi Zingales here.
And the original paper here.
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