What is divestment?

Divestment is the removal of assets from an entity for either financial, ethical, or political objectives; it is by definition the opposite of an investment. In addition to the direct economic impact, divestment is effective at putting in motion legislation that address the social harm targeted. A recent Oxford study studied each major divestment campaign from the last century and found that in every case examined, divestment led to legislation.

Divestment in the public realm

Divestment has been invoked as a tactic on a wide range of issues, including civil rights, public health, political conflict, labor relations, and environmental protection. An international divestment movement was mobilized to condemn apartheid in South Africa during the 1980s. More recently a divestment campaign against the government in Sudan saw many major institutions divest from companies linked to the government as a mean to pressure Sudan into peace. Divestment has also been employed to fight the tobacco and alcohol industry, with the aim of restricting sales to improve public health.

The impacts of divestiture vary according to the specific campaign. The main impact of divestment is a stigmatization of the targeted companies. Depending on the size and location of the industry, this can potentially hurt long-term net cash flows or restrict the firms' ability to secure debt financing.

Divestment from fossil fuels

Over the past few years, a number of environmental groups have begun asking endowments and individuals to divest from the fossil fuel industry, a major source of pollution linked to climate change. The main argument used by fossil fuel divestment is a moral one: "If it is wrong to wreck the planet, then it is wrong to profit from that wreckage." For schools, they also argue that it doesn't make sense to prepare students to be future leaders while simultaneously supporting industries that harm the students' futures.

Fossil fuel divestment has caught on. Student at over 400 colleges nationwide have organized fossil fuel divestment campaigns on their campuses, and a handful of colleges have already divested their endowments from fossil fuel companies. Major religious groups such as United Church of Christ and cities such as San Francisco, CA, Madison, WI, Seattle, WA, and State College, PA, have also joined the divestment movement. While the fossil fuel divestment movement does not expect to significantly impact the financials of fossil fuel industry giants, but they do hope to decrease their "social license to operate" in a way that will cause meaningful changes in legislation and market practices.


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Lord Nicholas Stern, author of the influential Stern Review on the Economics of Climate Change, recently stated, "All parts of the world, must, if future prosperity is to be protected from the threats of a hostile physical environment, turn off a high-carbon economic path that is heavily dependent on oil, coal and gas. It must instead create a new sustainable growth story built on clean sources of energy." HSBC also sounded the alarm warning that the top 200 fossil fuel companies could see a 40-60% decline in their equity value if governments take action to curb climate change. An investment with Mosaic represents a way to start moving away from fossil fuels before the fossil fuel bubble bursts.