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

Author

Listed:
  • Buks Andrew G.

    (Black Hills State University, College of Business and Natural Sciences, Spearfish, SD, U.S.A.)

  • Sobański Konrad

    (Poznań University of Economics and Business, Institute of International Business and Economics, Department of International Finance, al. Niepodległości 10, 61-875 Poznań, Poland)

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.

Suggested Citation

  • Buks Andrew G. & Sobański Konrad, 2023. "Divest or engage? Effective paths to net zero from the U.S. perspective," Economics and Business Review, Sciendo, vol. 9(1), pages 65-93, April.
    • Handle: 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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    References listed on IDEAS

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    1. Dieter Lüthi & Martine Le Floch & Bernhard Bereiter & Thomas Blunier & Jean-Marc Barnola & Urs Siegenthaler & Dominique Raynaud & Jean Jouzel & Hubertus Fischer & Kenji Kawamura & Thomas F. Stocker, 2008. "High-resolution carbon dioxide concentration record 650,000–800,000 years before present," Nature, Nature, vol. 453(7193), pages 379-382, May.
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    More about this item

    Keywords

    divestment; engagement; ESG; net zero transition; decarbonization;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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