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Divesting from funds seems to be a vogue topic which I am hearing more about. The most prominent stories seem to be related to fossil fuel investments and national pension schemes. These institutions can argue that their investors are also their citizens, and their best interests are served by reducing fossil fuel pollution.

If possible, I'd like to avoid a discussion of whether this is morally right or wrong, and even how it might affect the financial performance of the funds (e.g. the carbon bubble vs reduced returns by limiting fund managers' freedom). My question is whether there is any historical evidence to show that divesting actually works as a way to drive change? Either within a company or on a macroeconomic scale. It makes sense that divestment would reduce the stock price, but this mostly just gives the company a better P/E ratio for other investors, right? A lower stock price might make it harder for the company to raise capital, but I imagine that this would require an extremely high level of divestment.

My question is not limited to divestment from fossil fuels, this is just an specific example to illustrate the general case.

Edit: I should add that I would also welcome contrary evidence of divestment campaigns that were ineffective.

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The disinvestment campaigns in the United States towards South Africa are understood to have contributed to the end of the apartheid system. The mechanism included direct disinvestment by university endowments, the campus campaigns keeping the issue centered in the court of public opinion, leading to laws in the United States that restricted arms sales to and government procurement from SA, before even broader sanctions were imposed by Congress. Capital outflows did lead to the SA government imposing capital controls.

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  • South Africa and apartheid was my first thought. This isn't a criticism (I wasn't aware at the time that the US was involved) but for the record, I would add that this wasn't just "The United States vs. South Africa" ... it was also a "big thing" here in the UK, and I suspect throughout much of Europe. – TripeHound Apr 13 '18 at 7:13
  • I like this answer, as I knew a little bit about the financial pressures on South Africa, but didn't grasp the connection between divestment and sanctions. The Wikipedia page was interesting reading, and linked through to a more general page with a discussion of divestment from a whole range of issues, and some discussion on its effectiveness: en.m.wikipedia.org/wiki/Disinvestment – craq Apr 14 '18 at 1:34

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