Engagement, voting and divestment

An investor who is unhappy with how a company is run has three broad choices. It can talk to the company and push for change (engagement). It can use its votes at shareholder meetings (voting). Or it can sell its shares and walk away (divestment).

Each tool has a different logic. Engagement and voting keep the investor at the table and use its influence. Divestment removes the investor's money and, it is hoped, raises the company's cost of capital or sends a public signal.

The evidence suggests that, for listed companies, staying and pushing usually achieves more than selling. But engagement only works if it is specific, persistent and backed by a credible threat, such as voting against directors.

The three tools

Research findings

• Engagement: a study by Elroy Dimson, Oğuzhan Karakaş and Xi Li of environmental and social engagements with US companies from 1999 to 2009 found that successful engagements were followed by positive abnormal returns, and unsuccessful ones by none. Working together raised the success rate of environmental and social engagements.
• Divestment: Berk and van Binsbergen estimated that, at current levels, ESG divestment changes a target's cost of capital by about 0.44 basis points, too little to affect its decisions. They found that divestment would need responsible investors to hold more than 80% of the market to matter.

Collaborative engagement

Climate Action 100+, launched in 2017, is the largest investor group engaging with high-emitting companies. It works with 170 focus companies and does not give voting recommendations. Since 2024, several large managers have left or reduced their role, including J.P. Morgan Asset Management, State Street Global Advisors and PIMCO, while BlackRock moved its participation to an international affiliate.

The net zero alliances since 2025

• GFANZ announced a restructuring at the start of 2025. Financial institutions no longer join through sector alliances or need a net zero commitment.
• Net Zero Asset Managers (NZAM) suspended its activities in early 2025 after BlackRock left. It relaunched on 25 February 2026 with 253 signatories and a revised commitment that no longer requires net zero by 2050. Before the pause, in October 2024, it had 330 signatories managing $57.5 trillion; US members fell from 44 to 12.
• Net-Zero Banking Alliance members voted in October 2025 to stop operating.

The common cause was political and legal pressure in the United States. For analysts, it means a manager's climate claims now rest more on its own policies and voting record than on alliance membership.

Voting in India

• Mutual funds must vote on resolutions of the companies they hold and publish each vote with reasons, under SEBI's stewardship and voting rules.
• Related-party transactions need approval by a majority of non-related shareholders, which gives institutions real power in those votes.
• At Zee Entertainment in July 2025, shareholders rejected a proposal to issue warrants to promoter entities: it won about 60% support against the 75% needed for a special resolution.

An escalation path that works

1. Raise the issue privately, with a clear request and a timeline.
2. Meet the board or independent directors.
3. Join other investors.
4. Vote against the responsible directors or the relevant resolution, and say why.
5. Go public, file a resolution or call a meeting where the law allows.
6. Sell, as a last step, and explain the decision.