Divesting
Divesting is the practice of selling shares or bonds in a company due to a fundamental disagreement with its business practices that cannot be resolved by negotiation or engagement. Such divestments have typically involved a view being taken on the unacceptability of the company’s product(s) due to sustainability factors. While divestment removes the company’s capital from an asset manager’s strategies, it is not the same as exclusion, which wholly bars the company from investment.
Divestment is often practiced as a means of exiting holdings in fossil fuel companies to meet net zero emissions targets that are increasingly becoming part of asset managers’ strategies. The problem here is that divestment does not resolve the core problem – it simply transfers ownership of the fossil fuel assets from one investor to another. Investors including Robeco therefore prefer engagement as a means of decarbonizing energy companies rather than divesting or excluding.