ESG-labeled investments helped fund Russia’s war chest

“Responsible investment” funds had over $300M worth of holdings in companies linked to the Russian government in the lead-up to its invasion of Ukraine

ESG-labeled investments were directing large sums to companies directly linked to Russia’s government in the lead-up to its invasion of Ukraine, according to an investigation by Inclusive Development International. A review of financial records in early March revealed that these “socially responsible” funds had at least $319 million worth of holdings in five securities tied to the Kremlin, despite Putin’s long history of repression in Russia, war crimes and attacks on democracy and human rights around the world. The funds remained invested in these securities as Putin prepared for and launched his war of aggression in Ukraine.  

The funds, which include BlackRock iShares ETFs and many others based on ESG indexes created by MSCI, FTSE Russell, and JP Morgan, had holdings totaling:

  • $42,370,189 in Gazprom, a majority state-owned oil and gas company responsible for 90% of Russia’s total gas production. The United States announced sanctions against the company on February 24, 2022.
  • $35,801,568 in Sberbank, Russia’s largest bank, which is majority controlled by the government. The United States announced sanctions against the bank on February 24, 2022. Following sanctions, the bank’s European subsidiaries experienced a liquidity crisis.  
  • $9,332,143 in Rosneft,a Government of Russia affiliated oil company (its main shareholder is ROSNEFTEGAZ JSC, which is 100% owned by the Government of Russia) headquartered in Moscow.
  • $1,555,984 in VTB Bank, Russia’s second largest financial institution, majority owned by the government. The United States announced sanctions and the UK froze its assets in February.
  • $230,141,840 in Russian Government Eurobonds, sovereign bonds the proceeds of which fund the government’s budget. On February 22, 2022, the US sanctioned Russian sovereign debt.   

These holdings, calculated on March 15th, would have been far greater just a few weeks prior to the investigation, given that the five securities lost up to 96% of their value following the invasion. 

“These funds are marketed as a way to do well by doing good, but in this case they did neither, which should tell us a lot about how fundamentally flawed the ESG ratings and investing industry is,” said David Pred, Executive Director of Inclusive Development International. “Asset managers like BlackRock and Vanguard are seriously misleading investors by claiming that these funds represent ‘sustainable’ investments.  I’m sure sustaining Vladimir Putin’s war crimes is not what any would-be responsible investor had in mind.”

The $35 trillion ESG investing industry, which promotes itself as a way for investors to align their money with their values, is the fastest growing sector of financial services. Prior Inclusive Development International investigations have found these funds linked to gross human rights abuses in other parts of the world, including Myanmar.


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