The Role of Political Divestiture for Sustainable Development

Abstract

Globalization and socio-economic changes heralded attention to Financial Social Responsibility. In the aftermath of the 2008/09 World Financial downturn, the interest in understanding social responsibility in the interplay of financial markets and the real economy reached unprecedented momentum. In the wake of historical and political events, stakeholder pressure can trigger shareholders to divest from politically incorrect markets with the goal of accomplishing socio-political change. While mainstream development research advocates for more private investor involvement in sustainable development to achieve the Sustainable Development Goals (SDG)s as investments fund infrastructure, health, education and climate change mitigation; the following chapter covers political divestiture as an alternative means to implement sustainable development. While foreign investment can create positive conditions for improving societal conditions, also politically incorrect usage of funds or regulatory lacunae can do harm in the developing world. Political divestiture is portrayed as an innovative investment allocation to maximize positive development impacts of investment whilst minimizing associated risks of politically insecure markets. In an attempt to balance risk and access to capital, political divestiture is proposed as a means to implement sustainable development by removing funds from politically incorrect regimes in order to be channeled to socially responsible and sustainable finance solutions. Future research outlooks on political divestiture as sustainable development driver comprise the antecedents and success factors as well as institutional and international frameworks to foster Financial Social Responsibility in the sustainable development domains.

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