Certain institutional investors are showing a reluctance to divest from portfolio holdings as part of an ESG-focused strategy. While divestment can be a powerful tool to influence corporate behaviour, exiting stocks means these investors no longer have influence over companies. Additionally, divestment can hurt returns. An investment consultant to the California State Teachers' Retirement System, for example, said its portfolio has underperformed by nearly $5.8bn since January 2000, mainly attributable to divestment from tobacco. Additionally, the investment direct of the California Public Employees Retirement System said engagement, rather than divestment, is the plan's preferred strategy. Japan's Government Pension Investment Fund also hasn't cut tobacco or alcohol stocks over concerns doing so would eliminate the plan from discussions with these companies.
Certain institutional investors are showing a reluctance to divest from portfolio holdings as part of an ESG-focused strategy. While divestment can be a powerful tool to influence corporate behaviour, exiting stocks means these investors no longer have influence over companies. Additionally, divestment can hurt returns. An investment consultant to the California State Teachers' Retirement System, for example, said its portfolio has underperformed by nearly $5.8bn since 2000, mainly attributable to divestment from tobacco. Additionally, the investment direct of the California Public Employees Retirement System said engagement, rather than divestment, is the plan's preferred strategy. Japan's Government Pension Investment Fund also hasn't cut tobacco or alcohol stocks over concerns doing so would eliminate the plan from discussions with these companies.