Divestment has long been a contentious issue for institutional investors, often framed as a choice between moral values and financial returns. This debate hinges on the perceived trade-off between adhering to ethical investment principles and the potential financial penalties of avoiding certain assets. Critics argue that this choice overlooks the possibility of integrating divestment into a comprehensive long-term investment strategy. Most current discussions on divestment focus on public equity markets, emphasizing values alignment and the impact on companies’ cost of capital. However, institutional investors have increasingly favored engagement strategies over divestment. The focus on equities neglects the unique considerations of other asset classes, particularly corporate bonds. Bondholders, unlike equity holders, can significantly influence corporate behavior regarding environmental and human rights issues through their interactions before companies issue new debt. After the debt is issued, secondary market trading does not affect the company, similar to secondary equity trading. By analyzing corporate bond holdings in the energy sector, we demonstrate that divesting from oil and gas bonds does not result in a divestment penalty. Because of the high correlation across all corporate bond sectors, eliminating certain sectors does not result in less efficient portfolios. Thus, bondholders are well-positioned to influence the fossil fuel industry by engaging with companies, rather than focusing solely on equity markets. This nuanced approach suggests that bondholders can play a crucial role in shaping corporate practices without sacrificing financial returns.