Jaresko chastises firms that talk ESG while holding on to Russia investments
By The Star Staff
Outgoing Financial Oversight and Management Board Executive Director Natalie Jaresko in a column criticized companies that have “vociferously professed the virtues of environmental, social and governance (ESG) factors” but continue to hold investments in Russia’s government bonds and companies following its invasion of Ukraine.
ESG funds are portfolios of equities and/or bonds for which environmental, social and governance factors have been integrated into the investment process. This means the equities and bonds contained in the fund have passed stringent tests over how sustainable the company or government is regarding its ESG criteria.
Jaresko’s remarks were made after mainland media outlets revealed that so-called ESG funds had at least $8.3 billion allocated to Russian government bonds and companies. There is over $2.7 trillion devoted to ESG-related funds.
“The unprovoked and savage invasion of peaceful and democratic Ukraine by [Russian President] Vladimir Putin’s military highlights a new challenge for the business community,” Jaresko wrote in a column published by the Financial Times. “Given that they have vociferously professed the virtues of environmental, social and governance factors (ESG), will they walk the walk when it comes to the serial social and governance violations that this invasion represents?”
Since the COP26 climate summit in November, Jaresko said, ESG has been one of the main topics discussed in corporate boardrooms, at management meetings and in investors’ pitches. However, since the Russian invasion of Ukraine started, not all chief executives have had the courage to take actions which would be consistent with their ESG policies, Jaresko said.
“Delta Air Lines was one of the first movers when it announced that it would suspend its code-share with Russian airlines, Aeroflot. BP has announced it is exiting its 20 per cent stake in Russian state oil company Rosneft. Norway’s sovereign wealth fund decided to freeze its investments in Russia and intends to fully divest its Russia holding. FedEx and UPS have suspended shipments to Russia. Several US restaurant chains and stores have announced that they will no longer sell Russian liquor. Carnegie Hall in New York City announced the cancellation of pro-Putin musicians’ performances,” Jaresko wrote. “All these courageous initiatives should be praised. But many in the corporate world remain silent.”
“Will McDonald’s keep on operating in Russia? Will Coca-Cola, Mondelez, Unilever and Nestlé continue selling their products there? To put it bluntly, will companies enact courageous ESG policies only when it does not hurt their bottom line?”
Jaresko said that every day, the U.S., the United Kingdom and the European Union buy from Russia more than $700 million in oil, gas, aluminum, nickel, titanium, gold and other commodities, indirectly financing Putin’s ambitions and Russia’s military invasion.
“NordStream 2, which is not carrying any gas, was finally frozen by the German government. But Nordstream 1, which follows the same route, keeps on operating,” she wrote. “The global business community must understand that nurturing, upholding, and protecting freedom and democracy is part of their ESG responsibility. It is not only in their best interests but also in those of their increasingly noisy and numerous stakeholders. Without a strong defense of our democratic system based on rule of law and respect for one another’s international rights, our entire system of business (and profit) could collapse.”
“All too frequently corporations and their executives engage in marketing or obfuscation of what they’re actually doing — what could more accurately be called “ESG-washing.” Will this prove to be another case of looking the other way?” Jaresko asked. “The Ukraine crisis could be the 21st-century equivalent of the late-20th-century anti-apartheid movement, in which business, across many sectors, and societies, banded together to counter the systemic and systematic racism of the white nationalist South African regime. The fastest way to end the war is to stop trading with Russia, divest Russian assets and refuse to finance Putin’s regime.”
“We’ve collectively taken freedom, peace and democracy for granted for way too long both as citizens and as businesspeople. Putin’s war against Ukraine has brought this into stark and alarming view,” she wrote. “Business has a critical role to play if it actually believes in key ESG values like rule of law, good governance and human rights. It’s time to put all that talk into action.”