What campus protesters get wrong about divestment

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One-third of Ivy League graduates end up working in finance or consulting. So perhaps it is unsurprising that campus protesters are providing investment advice: they want university endowments to get rid of assets linked to Israel. At Columbia University, for instance, a coalition of more than 100 student organisations is demanding that administrators divest from companies that "publicly or privately fund or invest in the perpetuation of Israeli apartheid and war crimes". Another longer-running campaign by green types hopes to push fossil fuels out of portfolios.

Divesting from something has obvious symbolic value. But many protesters hope to have a real-world impact, too. Divestment campaigns may exert influence by starving their targets of capital. Scare enough investors from an industry or country and, so the argument goes, companies will find it harder to raise or borrow money, which will force them to change their behaviour. If enough Israeli firms begin to suffer, perhaps Binyamin Netanyahu will rethink his campaign in Gaza. How likely is this to work?

This article appeared in the Finance & economics section of the print edition under the headline "Activist investing"

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