What is it?
Disinvestment is the decision to stop investing in a certain business or company – i.e. encouraging investors to to sell their stakes in a company.
Disinvestment is used to pressure a certain sector (e.g. energy producers), a specific company such as Coca-Cola or Lloyds Bank, or a specific country, to change their policies and practices in the direction of your campaign.
The investment decisions of the government and big institutions such as universities can make a considerable difference for a business. If a government threatens to disinvest in a big company, for example, it can force a company to change its policies or risk losing huge amounts of money and power.
But disinvestment can work on an individual level too. If you don’t like the way a company is behaving, you can disinvest by removing your custom. Once you turn your back on a company, you may encourage others to do the same until there’s a ripple effect that forces the company to change direction.
How do you do it?
As an individual citizen, you can:
- Inform yourself on how your bank is investing your money. If you don’t like what they are doing with your money, switch to an ethical bank.
- Inform yourself on how your pension fund is investing your money and choose one in line with your values.
- Convince family and friends to do the same.
This is a form of individual action that any citizen can take.
A collective of citizens can pressure important institutions to disinvest strategically to trigger change. For example, in the early 1980s, students on college campuses across the U.S. demanded their universities stop investing in companies that conducted business in South Africa, in protest of the apartheid system. Their campaign was hugely successful.
Why and when should you use it?
Disinvestment can target:
- A whole sector:
Example: do not invest in fossil fuel producers so as to push for the adoption of renewable energy.
- A company:
Example: do not invest in a specific clothing brand which does not respect workers’ rights.
- A country:
Example: do not invest in businesses of a specific country or trading with a specific country which does not protect human rights.
Disinvestment uses the power of the personal and public purse to force a sector/company/country to change policies.
It makes sense to use disinvestment as a tactic when:
- You want to protest against the practices of an economic actor.
- You have a clear demand for change.
Works best in combination with:
Even though being mindful of your own choices when it comes to ethical investment choices are important, businesses will only feel the difference only if a huge amount of investors and/or big investor sell their stakes.
Therefore, disinvestment works in combination with other campaigning, including convincing other citizens to disinvest, and/or pressuring institutions and governments to do so.