Acting Divest or Engage?

There are 3 main actions you can take as a shareholder, although their respective efficiency is subject of much debate and research.

• Divestment
• Engagement
• Resolutions and Voting

Divesting

Divesting, also referred to as allocation of funds, is the most obvious way to have your money reflect your personal values. It simply consists in taking your money out of one fund and reinvesting it into another that suits you better.

It's not always possible or easy to divest, for instance when considering your 401k (your provider may not offer any option that suits you), or your tax situation (divesting might substantially increase your income from the perspective of the IRS). While it has been the focus of many campaigns, such as those run by universities, some research suggests that it might not always be the most effective way to act.

Engaging

Engaging with the companies you invest in is typically only possible for major investors, who can sit together with company executives and convey their expectations of the company. This is often a long term task.

As an individual, it is always possible to write to your fund manager, your 401k provider or equivalent, and let them know how you feel about their investment practices. Most likely you will receive a polite template response.

Resolutions and Voting

Each year, companies hold a shareholder meeting, the Annual General Meeting (AGM), during which shareholders can ask questions to the board of directors. Under certain conditions, shareholders can also submit proposals (also known as resolutions) which are then voted on by all shareholders, along with the company's board resolutions. When resolutions are approved by a majority of shareholders, they become constraining for the company, and are therefore a very powerful tool to make companies change.

Combining tools

Each of these tools have benefits and limitations, but used in combination they can bring substantial changes to companies.