Divest or engage? Effective paths to net zero from the U.S. perspective

Buks Andrew G. () and Konrad Sobanski
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Buks Andrew G.: Black Hills State University, College of Business and Natural Sciences, Spearfish, SD, U.S.A.

Economics and Business Review, 2023, vol. 9, issue 1, 65-93

Abstract: The aim of this article is to critically review and evaluate two ESG-based investment strategies—divestment and engagement for alignment of investment portfolios with climate change mitigation goals of the United Nations. The article compares both approaches in terms of their effectiveness of decarbonization, using the case study method. First, the case on fossil fuels divestment by Harvard Management Company is analysed. The second case study discusses shareholder engagement endeavors by Engine No. 1 hedge fund and its investment in ExxonMobil. The findings indicate that divestment may have non-immediate impact on corporate behavior and carries political and legal retribution risks. Engagement, on the other hand, presents itself as a more plausible option as it takes less time to deploy and, therefore, can produce more immediate and impactful results. Nevertheless, both divestment and engagement can play mutually supportive roles in addressing climate change by the investment industry.

Keywords: divestment; engagement; ESG; net zero transition; decarbonization (search for similar items in EconPapers)
JEL-codes: G10 G11 G15 G24 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ecobur:v:9:y:2023:i:1:p:65-93:n:5

DOI: 10.18559/ebr.2023.1.3

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