Engagement 'Much More Effective' Than Divestment

Engaging with businesses over ESG decisions is a “much more effective strategy” when influencing their behaviours than divesting from the companies altogether, Harvard Management Company’s Michael Cappucci says in a podcast hosted by Jason Mitchell, Co-Head of Responsible Investment at Man Group.


Engaging with businesses over their environmental, social and governance (‘ESG’) decisions is a “much more effective strategy” when influencing their behaviours than divesting from the companies altogether, according to Michael Cappucci, Senior Vice President of Sustainable Investing at Harvard Management Company.

“There is (a lot) of evidence that engagement can be very effective in improving the incentives and performance of companies on a number of different factors, including things like ESG,” Cappucci said in a podcast with Jason Mitchell, Co-Head of Responsible Investment at Man Group. “We found that those are much more productive conversations when you come at it from a much more neutrally conducive perspective than as somebody who has declared a whole industry evil and off-limits.”

Indeed, corporate engagement and shareholder action is the third-largest sustainable investment strategy globally as of 2016, according to the Global Sustainable Investment Alliance (‘GSIA’). Between 2014 and 2016, GSIA estimates that the volume of assets managed with explicit commitments to engage or vote on ESG issues grew by 41% to USD8.4 trillion. Expectations are changing such that even non-dedicated shareholder strategies are increasingly under pressure to demonstrate their engagement activities.

Figure 1. The Growth of Sustainable Investment Strategies, 2014-2016

Source: 2016 Global Sustainable Investment Review: 2014-2016.

“When you make a public decision to divest from either a company or an industry, that’s kind of the end of the conversation in a lot of ways,” Cappucci said. “You’ve chosen not to pursue something and the flipside to that is that those companies are not going to talk to you about improving their practices.”

To listen to the full podcast go to man.com/ri-podcast

Cappucci’s article on the ESG Integration Paradox can be found here.

Download Full Article

Important information

Opinions expressed are those of the author and may not be shared by all personnel of Man Group plc (‘Man’). These opinions are subject to change without notice, are for information purposes only and do not constitute an offer or invitation to make an investment in any financial instrument or in any product to which the Company and/or its affiliates provides investment advisory or any other financial services. Any organisations, financial instrument or products described in this material are mentioned for reference purposes only which should not be considered a recommendation for their purchase or sale. Neither the Company nor the authors shall be liable to any person for any action taken on the basis of the information provided. Some statements contained in this material concerning goals, strategies, outlook or other non-historical matters may be forward-looking statements and are based on current indicators and expectations. These forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update or revise any forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those contained in the statements. The Company and/or its affiliates may or may not have a position in any financial instrument mentioned and may or may not be actively trading in any such securities. This material is proprietary information of the Company and its affiliates and may not be reproduced or otherwise disseminated in whole or in part without prior written consent from the Company. The Company believes the content to be accurate. However accuracy is not warranted or guaranteed. The Company does not assume any liability in the case of incorrectly reported or incomplete information. Unless stated otherwise all information is provided by the Company. Past performance is not indicative of future results.


Please update your browser

Unfortunately we no longer support Internet Explorer 8, 7 and older for security reasons.

Please update your browser to a later version and try to access our site again.

Many thanks.