How a robust ESG strategy can help win the war

by Daphne Biliouri-Grant

The international community has condemned Ukraine’s invasion by Russia and over the past week there has been a furore of actions from governments and international organisations demonstrating solidarity with Ukraine.

While the implementation of economic sanctions has been perceived as the preferred foreign policy tool to apply pressure on Russia and Belarus as its ally, what could prove more effective is a growing disengagement of the corporate world from Russia and Belarus and a move towards divestment in Russian business interests.

This is already demonstrated clearly in the strong stance that the business community is taking in regards to Russia’s aggression. The corporate backlash has witnessed multinationals, such as Nike, Apple, H&M, IKEA, Disney and Warner Bros. suspending the exports and sale of their products, car manufacturers, such as Ford, Jaguar Land Rover, VolksWagen pausing their activities, logistics companies UPS and FedEx, and major energy companies, like BP, Shell, Equinor, Exxon Mobil are all divesting from Russia.

This type of response is very much based on the principles of a robust ESG strategy that spearheads the actions taken by corporates. There is growing interest by corporations that have embraced ESG to clearly demonstrate this in their actions. IKEA’ decisions to suspend its retail and manufacturing operations in Russia was driven by the need to address the ‘huge human impact’ that the conflict is having on people of both sides of the conflict. While the closure of the stores impacts the jobs of 15,000 people, the company will continue to pay them recognising that this is not a statement against the people but against the Russian government’s aggression. In similar fashion, Maersk suspended cargo bookings to and from Russia with the exception of foodstuff, medical and humanitarian supplies to attempt to ensure that the people are not penalised.

Such actions are essential to reinforce the denunciation of the Russia regime’s actions against Ukraine and the need to be reinforced by the positioning of institutional investors. Norway’s sovereign wealth fund, which is the largest in the world, announced its divestment from Russia. The World Bank has already announced the suspension of all activities in Russia and Belarus with immediate effect, while pension funds and other investment institutions are confirming their divestment from Russia and Belarus on a daily basis.

This signifies the increased pressure that all stakeholders – from the average person demanding their pension provider to divest, to local councils, statutory bodies, and academic institutions - can apply pressure on pension funds to divest from Russian interests, not only from a financial perspective but from an ESG perspective.

As Fiona Hill, the renowned Russia expert, highlighted in a recent interview: “This is the epitome of ESG that companies are saying is their priority now – upholding standards of good Environmental, Social and Corporate Governance. Just like people didn’t want their money invested in South Africa during apartheid, do you really want to have your money invested in Russia during Russia’s brutal invasion and subjugation and carving up of Ukraine?”

A similar approach is also reflected on how multinationals with a presence in Ukraine have acted swiftly to safeguard their workforce in the country. The safety of their employees is a top priority and takes precedence especially in a time of crisis, such as this. What is being demonstrated by companies that have integrated ESG principles within their business strategy goes beyond the legal duty of care for their employees.

Several companies are recognising the importance of their social impact and are responding accordingly. There is already evidence of numerous companies taking a principled stance based on the value-system approach that defines ESG considerations. For example, International financial services firm Allianz took measures to support its staff in Ukraine by setting up a free telephone hotline and is providing transport, accommodation and financial assistance for Ukrainian colleagues, in addition to a €12.5m donation to humanitarian aid causes. Revolut, the British fintech company, pledged to match every donation made to the Red Cross Ukraine appeal this week via its services, up to £1.5m. Several other companies have committed to substantial donations towards humanitarian support for Ukraine and its people.

The current crisis reinforces once again the important of global stewardship and the need for a value-driven stance against aggression to minimise the impact of conflict. As Allianz CEO Oliver Bate says: “We are an international organisation, but we are not neutral in our values. We stand firmly with all of our employees and all people whose lives have been affected by these events.”

To find out more about how Sibylline can help support you through your ESG integration journey, please reach out to our ESG Senior Advisor, Daphne Biliouri-Grant daphne.biliouri-grant@sibylline.co.uk

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