Business, Legal & Accounting Glossary

Definition: Divestment

Quick Summary of Divestment

The sale or other disposal of some kind of asset.

What is the dictionary definition of Divestment?

Dictionary Definition

Divestment (divestiture) is a term in finance and economics. It refers to the reduction of some kind of asset, for either financial or social goals. A divestment is the opposite of an investment.

Full Definition of Divestment

In finance and economics, divestment or divestiture is the reduction of some kind of asset for financial, ethical, or political objectives or sale of an existing business by a firm.

Divestment For Financial Goals

Often the term is used as a corporate strategy, in which a company sells off a business unit in order to focus their resources on a market it judges to be more profitable, or promising. Sometimes, such an action can be a spin-off.

Divestment For Social Goals

The term also refers to the reduction of investment in firms, industries or countries for reasons of political or social policy.

Examples of divestment for social reasons have included:

  • the withdrawal of American firms from South Africa during the 1980s due to Apartheid
  • discussion over whether it is ethical to invest in companies that sell tobacco

Discussion of divestment for social, environmental and political reasons has arisen frequently on college campuses. For example, taking into account faculty and student opinion, several university boards of trustees voted to divest from South Africa entirely during the 1980s, in some cases after widespread protests occurred.

In 2004, the Presbyterian USA church voted to selectively divest from companies with ties to the Israeli military in order to pressure Israel into ending the occupation of Palestinian land in the West Bank and Gaza. In 2005, the World Council of Churches followed suit.

Such divestment activities have brought the notion of “socially conscious investing” into the public eye. Under such a philosophy, investors intentionally invest in companies whose policies they believe to be specially aligned with their own interests, such as in environmental protection.

By divesting from certain sectors of the economy, and investing in others, such investors may intend to provide a market-based incentive for corporate social responsibility.

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Divestment. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. September 24, 2021 https://payrollheaven.com/define/divestment/.
Chicago Manual of Style (CMS):
Divestment. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/divestment/ (accessed: September 24, 2021).
American Psychological Association (APA):
Divestment. PayrollHeaven.com. Retrieved September 24, 2021, from PayrollHeaven.com website: https://payrollheaven.com/define/divestment/

Definition Sources

Definitions for Divestment are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 4th April, 2020 | 1 Views.