Investors Rush to Dump Russian Assets After Years of Ignoring ESG Red Flags

Russia is the new tobacco. Or forced labor. Or apartheid South Africa.

Russia’s invasion of Ukraine has triggered a sudden withdrawal by global investors from Russian oil companies, banks, airlines and government debt. The abrupt reckoning belies the inconvenient truth that for years Russia’s ‘country risks’ have been clear to analysts of ESG, or environmental, social and governance factors.
Doing business with autocratic regimes can be considered a ‘negative externality,’ Evgueni Ivantsov of European Risk Management Council writes in the Financial Times. Negative externalities are usually associated with environmental issues, such as air and water pollution. “But in this case we are dealing with another form of externality: where a company profits at the expense of negative geopolitical consequences for society.”