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.
Highlights
We live in the “Age of Responsibility” in the “Era of Re-Orientation” since the 2008 World Financial Crisis (World Investment Report, 2015; Zoellick, 2009)
In the case of political divestiture, investments are withdrawn from politically incorrect markets in the wake of stakeholder pressure and global governance sanctions economically pressuring coercive regimes and governments that depart from international law and human rights standards
Foreign Direct Investment (FDI) inflows to Africa remained flat at USD 54 billion, while the developing Asia saw FDI inflows grew to historically high levels up 9 percent
Summary
We live in the “Age of Responsibility” in the “Era of Re-Orientation” since the 2008 World Financial Crisis (World Investment Report, 2015; Zoellick, 2009). Apart from the traditional political divestiture as the strategic investment capital drain from politically incorrect markets, political divestiture in combination with positive screening techniques can directly contribute to socio-political betterment and close policy gaps This investor statement can direct impact local, national and international policies in various domains such as trade, labor, social issues, taxation, intellectual property, land rights, security, cultural policies, health and environmental protection (World Investment Report, 2015). In the given body of descriptive literature tracing back the emergence of SRI to a combination of historical incidents, legislative compulsion and stakeholder pressure, our insights on socially responsible investors’ impact on political outcomes and our knowledge on the role of financial markets to drive sustainable development by positive investment streams is limited (Puaschunder, 2011b, 2015d). Knowledge about the effectiveness of political divestiture will help in the generation of public policies for institutional assistance in fostering political divestiture as a means of sustainable development
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