What is divestment, and how does it affect you?
Earlier this year, when the Australian National University (ANU) announced it would be divesting from seven resources-based companies including Santos and Oil Search, it sparked a national debate regarding whether or not organisations (like educational institutions and superannuation funds) have a moral obligation to invest ethically? And if so, should they divest from “unethical” shares?
Broadly speaking, divestment refers to the process of an organisation getting rid of any investments that it deems unethical or morally ambiguous. A variety of factors generally contribute to an organisation making this sort of decision, from the top to the bottom of the group.
The ANU’s decision was spurred largely by a long running student campaign. This movement was backed by a campus referendum, which found that 82 per cent of students supported divestment from shares related to fossil fuels and ANU promptly removed its investment in such businesses.
The students at ANU called for a divestment in fossil fuels stocks because they felt as though it was inappropriate for a modern educational institution to have invested in companies that generated their income from fossil fuels. For the main part companies like Santos weren’t really doing anything wrong, but their source of business conflicted with the student’s anti-fossil fuel ideology.
And it’s not just companies that are related to fossil fuels that are feeling the pinch. At the start of November two of Australia’s biggest superannuation funds divested shares in the company Transfield Services, citing concerns about the organisation’s record in regards to the offshore asylum seeker camps that the company currently runs for the Australian government.
The big message from the divestment movement is that in some cases it’s not just enough for investments to make money. Often what’s just important is the way they’re making money.
So what does this mean for you? Well, in some cases it might not mean anything. If you’re happy with your portfolio and feel no need to change anything there is absolutely no compulsion to do so. By the same token though if you feel as though a company you have shares in is acting unethically you may be compelled to remove your investment in the company. Similar if your superannuation fund has invested in companies that are facing similar issues at this point in time.
In the end of the day it’s a matter of personal preference. Some people want to invest to make money, others prefer to invest ethically. Divesting in those seven companies ended up saving ANU a whole lot of money. But that doesn’t mean it’s the right decision for you and your money.
It’s your money and you should be comfortable with where it’s going and what it’s doing when it gets there. If not, then maybe it might be time to become part of the growing trend of investors who are feeling as though now is the right time to be putting their money to use elsewhere.
Related links:
How will the weak Aussie dollar affect your finances?
5 rules for safe banking via mobile phones
How to avoid being scammed online