disinvestment

Disinvestment is the act of removing investments from a region, company, or sector, typically through selling assets or not renewing investments. It contrasts with investment and is used for ethical, political, financial, or strategic reasons. It can be undertaken by governments, corporations, pension funds, universities, or other institutions.

Motivations include ethical concerns such as human rights abuses, environmental damage, or governance issues; financial risk management by avoiding sectors with high volatility or reputational risk; regulatory compliance like sanctions and export controls; and political statements or leverage.

Mechanisms include selling equity or debt holdings, excluding certain assets from portfolios, withholding new investment, and engaging with target firms to drive change, sometimes culminating in full divestment if demands are unmet.

Historical examples: the anti-apartheid divestment campaigns of the 1980s pressured governments and corporations to withdraw investments from South Africa; more recently fossil fuel divestment seeks to reduce climate risk and support a transition to cleaner energy; universities and funds have adopted ESG-guided divestment.

Effects and criticism: proponents argue it can influence corporate behavior and reallocate capital toward sustainable activities; critics note limited financial impact, liquidity constraints for funds, potential to harm beneficiaries, and that divested assets may be replaced with similar exposures elsewhere.

Relationships to related concepts: disinvestment is often discussed alongside divestment campaigns, ESG investing, ethical investment, and sanctions regimes; it is distinct from privatization or nationalization, though may intersect with public policy and corporate governance.