What is divestment?

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Andrew Goldman

Andrew Goldman has been writing for over 20 years and investing for the past 10 years. He currently writes about personal finance and investing for Wealthsimple. Andrew's past work has been published in The New York Times Magazine, Bloomberg Businessweek, New York Magazine and Wired. Television appearances include NBC's Today show as well as Fox News. Andrew holds a Bachelor of Arts (English) from the University of Texas. He and his wife Robin live in Westport, Connecticut with their two boys and a Bedlington terrier. In his spare time, he hosts “The Originals" podcast.

Divestment — often called “divestiture” by the sorts of folks who can’t resist an extra syllable — is a term that means the opposite of investment. You’ll most often hear the term in the context of companies and corporations seeking to pull out of an investment for one of a variety of reasons. Common justifications for divestment include: a subsidiary business is no longer profitable or central to the firm’s goals; the firm needs to raise some cash to buy or fund something it considers more important; political upheaval in foreign countries is another reason for nervous companies to divest.

An organization may decide that it’s no longer a good idea politically or ethically to continue doing business in certain countries. For instance, back in the eighties 150 American colleges and universities, under pressure from their students, pulled all investments from companies that did business in apartheid-era South Africa. More recently, student protests in America have successfully convinced universities like Stanford to divest their endowments from coal and in 2017, dozens of Catholic institutions divested from fossil fuel holdings in an effort to mitigate climate change.

Divestment is not just for big corporations — individuals can also divest. Before becoming president of the United States, Donald Trump resisted calls for him to divest from own his businesses to prevent conflicts of interest. Environmental groups now provide guides for people who want to ditch any environmentally unfriendly investments, and companies like Wealthsimple proudly offer socially responsible portfolios for those interested in avoiding those investments in the first place.

Last Updated March 6, 2018

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