The Russia/Ukraine conflict: ESG considerations

The Russia/Ukraine conflict: ESG considerations
  • Investment Insights
  • 2 minute read

The Russia/Ukraine conflict is a human tragedy, and with environmental, social and governance (ESG) factors being core to our values, we would like to provide an update on our positioning.

We are deeply saddened by the Russia/Ukraine conflict and express our deepest sympathies to the millions of people who have been affected. The unfolding humanitarian crisis is very concerning and the knock-on effects will likely be felt by the world for many years to come.

From an investment standpoint, we are closely monitoring the situation to take investment decisions that protect our clients’ interests.

The on-going conflict has emphasised ESG risks for investors in Russian assets. We see the potential for businesses in Russia to face legal, compliance, operational, human rights and personnel, and reputational risks due to this conflict. Aligned with our Responsible Investment Policy, we integrate the evaluation of ESG factors within our investment research process, by identifying material ESG factors as part of our bottom-up analysis, and reinforcing the focus on key issues through active engagement.

Our current exposure to Russian securities and debt, including both direct and third party funds, is not material. This is largely a result of our strategic asset allocation, where the geographic exposure to Russia is less than 0.2%. We have systems in place to monitor any direct exposure to sanctioned companies and are following the law so as not to invest in such companies. Also, we have placed a ban on buying Russian securities when exchanges reopen.

Our research team is currently evaluating the ESG risks associated with our investments in non-Russian, multinational companies that may subsequently be involved in Russia through their various business lines. Given the complexities of international companies’ involvement in Russia, we are assessing our global investee companies’ exposure and strategic plans in Russia on a case-by-case basis to aid us in our investment decisions.

We view ESG risks associated with Russian business as potentially material, and are currently engaging with investee companies to encourage their disclosure of this information where there is a lack of sufficient transparency. As the situation continues over the coming days, we will continue to practice responsible investment, considering material ESG factors as part of our investment decisions on behalf of our clients.

Our employees care deeply about the current situation in Ukraine. Close Brothers has been coordinating employee donations to the British Red Cross to help provide immediate support to people who are bereaved, injured, or left homeless by this crisis. This includes working to provide food, medicines and basic medical supplies, shelter and water to people in areas currently affected.

 

Important information

The information contained in this document is believed to be correct but cannot be guaranteed. Past performance is not a reliable indicator of future results. The value of investments and the income from them may fall as well as rise and is not guaranteed. An investor may not get back the original amount invested. Opinions constitute our judgment as at the date shown and are subject to change without notice. This document is not intended as an offer or solicitation to buy or sell securities, nor does it constitute a personal recommendation. Where links to third party websites are provided, Close Brothers Asset Management accepts no responsibility for the content of such websites nor the services, products or items offered through such websites.

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