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ESG fund managers held at least $8.3bn in Russian assets just before Russia launched a military attack against Ukraine, Bloomberg has reported.
The figure is based on an analysis of around 4,800 ESG funds representing over $2.3trn in total assets.
Nearly 300 or more of these funds are expected to have direct exposure to Russia, the report said.
At least 13 of the ESG funds with Russian exposure are said to fall under so-called Article 9, a category under Europe’s Sustainable Finance Disclosure Regulation that signals the highest level of sustainability.
Furthermore, an additional 137 funds are said to be classified as Article 8, which denotes that they ‘promote’ ESG characteristics.
Asset managers are said to track a range of indexes from providers such as MSCI, which offer different degrees of ESG alignment.
MSCI has over $16trn in assets benchmarked to its products overall.
Last week, the firm removed Russian equities from its emerging-markets gauge, after market participants deemed the country’s equity market as ‘currently uninvestable’.
Following the Ukraine invasion, ESG investors with exposure to Russian equities and bonds are being called upon to make their stand clear.
According to Paris-based Mirova’s CEO Philippe Zaouati, Russia’s war on Ukraine shows that ESG funds can no longer afford to ignore the political backdrop against which they’re investing.
Zaouati was quoted as saying by Bloomberg: “Autocratic regimes, democracy, human rights — these are topics that are nowhere today in ESG analysis.
“If you look at what ESG managers do on human rights, they usually try to avoid any political statement.”
Ukraine crisis impact on asset managers
Following Russia’s military invasion of Ukraine and sanctions by the US and its allies, global asset managers were forced to freeze their Russia-linked equity funds.
Several asset managers, including Liontrust, Pictet and Amundi, suspended their funds with Russian exposure and resolved to shed their existing Russian investments as soon as possible.
Swiss private banks Credit Suisse and UBS triggered margin calls to their wealthy clients, who use Russian debt as collateral, after a massive slump in the value of Russian assets.
Banks such as Banque Pictet&Cie were also said to be cutting lending values to limit exposure to Russia.