Investors’ political participation goes well beyond the traditional model of shareholder activism at AGMs. Yet the diversity of investors’ participation is not well recognised or conceptualised. Erin O’Brien argues for the adoption of ‘political investorism’ to capture diverse forms of investors’ political participation, and to distinguish between consumers and investors as political actors
Expressing political values through investment decisions is not a new phenomenon. Investors have long considered the ethical implications of investments by opting out of investments in arms manufacturing, gambling, and other ‘sin stocks’. Divestment has also been a key protest tactic in surrogate boycotts against state actors. These include the movement to end apartheid in South Africa, and the long-running and somewhat controversial Boycott, Divest and Sanction (BDS) campaign against Israel over policies concerning the Palestinian territories. More recently, we have seen divestment in protest at Russia’s 2022 invasion of Ukraine.
Beyond divestment, individuals can align their investment decisions with their ethical and political values in many other ways. They can sign on to shareholder resolutions on environmental, social and governance (ESG) issues at company AGMs. They can engage in positive and negative screening to select ethical share portfolios. And they can lobby or take legal action against their pension funds, or boycott banks and other financial institutions.
In all these actions, shareholders and other types of investors use their financial stake in a firm, fund, or financial institution to push for change on issues such as climate change, First Nations’ land and cultural rights, modern slavery, and other human rights issues.
Shareholders can use their financial stake in a firm, fund, or financial institution to push for positive change on the most pressing political issues of our time
Akin to political consumerism, politically motivated investment is a form of sub-politics. Investors pursue social change through the market rather than the traditional political arena. Much scholarship exists on political consumerism, but scholars have tended to overlook investors’ political participation. As a result, investors’ politically motivated decisions have not been well conceptualised or recognised as a unique form of political participation. Typically, they are subsumed under the banner of political consumerism, or relegated to business management studies. The cause of this is, in part, a lack of accurate, consistent terminology. There is also a tendency to conflate consumers and investors as equivalent political actors. We can address these problems by embracing the new concept of political investorism to guide future research in this area.
We need new terminology not because we lack terms to describe investors’ political participation. Rather, it is because existing terms are somewhat misleading. They fail to capture the diversity of acts and unique role of investors as political actors.
Shareholder activism is perhaps the term most commonly used. However, in business management, shareholder activism often simply means that a shareholder is ‘active’ rather than ‘passive’. It doesn't necessarily mean that they are pursuing political goals. Shareholder activism also has limited scope. It fails to capture the full range of investors, including pension fund members, who are increasingly active in lobbying their fund managers on social and environmental issues.
‘Political investorism’ captures more effectively than 'ethical investment' the diverse range of actions, actors, and motivations associated with politically motivated investment decisions
We often hear the terms ‘ethical investment’ and ‘socially responsible investment’. However, what is considered ‘ethical’ is highly subjective, and not all politically motivated investment is ‘socially responsible’. This is clearly evident in the boycott and divestment campaign against Disney initiated in the 1990s following the company’s recognition of same-sex relationships. We see it, too, in the recent rise in anti-ESG shareholder resolutions at AGMs.
The term ‘political investorism’ more effectively captures a diverse range of actions, actors, and motivations associated with politically motivated investment decisions. It establishes a common basis for research analysing this form of participation. Political investorism can also serve as a partner concept for political consumerism, to distinguish between investors and consumers as political actors.
Investors and consumers are different political actors for at least two main reasons. First, they occupy a different position and wield a different element of leverage in production processes. Consumers are at the end point, selecting between products and brands. By contrast, investors are able to exert their ownership rights, or use their financial stake as leverage. Investors are more involved in directing capital and shaping elements of the production process. Consumers can consider the human rights abuses and environmental degradation involved in producing an item, and decide not to purchase it. Investors can act to prevent these harms in the production process.
Second, investors have greater reach than consumers. An inherent limitation to political consumerism as a form of activism is that consumption power can only be directed against consumer-facing industries such as fashion and food. Consumers are also often locked into structural arrangements, with limited options to meet basic needs like food, clothing, and energy. By contrast, investors are engaged in a far wider range of industries. Granted, some types of investors, especially pension fund members, may have limited direct decision-making power. Yet despite this, they can still exert discursive pressure on their funds as insiders with membership status.
Unlike consumer boycotts, political investorism campaigns must make the business case first, and the moral case second – and this influences the nature of this type of political participation
Differences between consumers and investors also influence the mobilisation strategies and opportunity structures for activist organisations. Consumer boycotts focus on the ethics of the product or service alone. But shareholders and other investors must work within an ideational structure. In such a structure, maximising profit is not only the priority, but also often a legal obligation. Thus, political investorism campaigns must make the business case first, and the moral case second, influencing the nature of this type of political participation.
Embracing the terminology of ‘political investorism’ establishes a common basis for research on a wider range of political participation by investors. My work with Justine Coneybeer, Martijn Boersma, Ainsley Elbra, and Alice Payne, has analysed the insider and outsider dynamics of this form of market lobbying. We have also developed an initial typology of political investorism. Yet this is only a starting point. More work is needed to investigate the different manifestations of political investorism, to understand the relationship between political investorism and consumerism, and to determine the impact of this unique and growing form of political participation.