Rachel Robasciotti, founder of Adasina Social Capital in San Francisco, which runs an $89 million ETF that focuses on social justice issues, said that unless a business is clearly an instrument of a despotic regime, it’s important to differentiate between companies and the countries in which they operate.
“We don’t punish companies for the actions of the country where they are headquartered,” she said.
Boston Common Asset Management, one of the oldest socially responsible investors, owned shares of Russian search engine Yandex NV because it seemed to be “contributing positively to democracy in Russia,” said Kevin Hart, the firm’s head of marketing. The tech company had even adopted a code of conduct that addressed human rights and supply chain issues, he said. But the $6 billion investment firm ended up selling its stake in Yandex last month, partly because of the risk of a U.S. ban on owning Russian assets, he said.
Mirova’s Zaouati said this should be a moment of recalibration for ESG investors. “We have to decide what we do with the Russian government and all companies linked to the Russian government,” he said. “We have to decide what we will do with other autocratic regimes.”
Asking that question has led Mirova to exclude not just Russian, but also Chinese assets.
Felix Boudreault, managing partner at research firm Sustainable Market Strategies in Montreal, said he’s been warning clients to stay out of Russia since 2018, and is now giving the same advice about China.
“As an investor, you have to consider not just the company, but the environment in which they operate,” Boudreault said. “And we are saying the same for China. It’s uninvestable from any ESG perspective. By a strike of a pen, a bureaucrat in Beijing can really kind of wipe out an entire sector like they did with education technologies recently.”
Clements-Hunt, who was among a group of ESG pioneers that included the now-deceased United Nations Secretary General Kofi Annan, said the answer is clear.
“If you don’t factor in autocracy and a malevolent government, then you have failed in your ESG assessment,” he said.
--With assistance from Natasha White.
This article was provided by Bloomberg News.