Ukraine tragedy highlights need for intermediaries to understand sustainable fund strategies

Posted on: March 14th, 2022

Ukraine tragedy highlights need for intermediaries to understand sustainable fund strategies

Ukraine tragedy highlights need for intermediaries to understand sustainable fund strategies

SRI Services has surveyed the managers of sustainable responsible and ethical investment funds to ask whether they hold – or held – direct investments in Russian companies.

The purpose of this research was to help financial services professionals understand the relationship between Russia and sustainable, responsible and ethical funds as clients will no doubt be asking.    (*For information on specific funds please contact fund managers. See ‘about this information’ below).

Although it is important not to jump to conclusions our findings pointed to some potentially useful information and patterns:

  • 31 out of 36 fund managers said their retail sustainable/ESG funds did NOT invest in Russian listed entities.
  • 5 of the 36 fund had one or more holdings in a Russian listed entity.
  • One fund manager had a (single) direct holding in Belarus.
  • Those with investments in had small, but not necessarily negligible, holdings.
  • Most managers confirmed that their situation had not changed over the previous 12 months. (ie They had not recently sold Russian holdings.)


Most of the managers who responded are active managers and bottom-up stock pickers.  Their strategies typically excluded all or most Russian stocks on multiple grounds.


We offered respondents common exclusion options (that are filterable on Fund EcoMarket) as well the option to comment further, which some did.


Their reasons varied – and some relate more to the structure of the Russian economy than politics.  Commonly cited reasons for not investing directly in Russian or Belarusian companies via sustainable funds were involvement in:


  • Coal, oil and gas
  • Armaments
  • Oppressive regimes
  • Human rights
  • Governance

Not all of the managers who responded gave us permission to use their names, but of those who did, we can list the following:

Managers with funds that have NO holdings in Russian companies included*:

Artemis, BlueBay, Carmignac, EdenTree, Federated Hermes, Fulcrum, Fundsmith, Gravis, Guinness, Impax, Invesco, Janus Henderson, Liontrust, Mirabaud, P1 IM, Quilter, Rathbone, Rize, Ruffer, Stewart Investors, Sarasin & Partners, SVM, Tellsons, Time, Triodos, WHEB, Schroder

Fund managers with sustainable funds which have one or more holdings in Russian companies*:

BNY Mellon, Candriam, JP Morgan, Alquity, Vanguard, 7IM

(*The managers in bold are our Fund EcoMarket fund manager Partners.  These are the companies that enable us to offer our database for free).

Some of the messages that can be drawn from this (and the additional text supplied by managers) may be:

  • Most sustainable funds do (and did) not invest in Russia or Belarus.
    • Whether a fund has a positive stock selection process or negative screens makes little difference. Their deep focus on environmental, social and governance issues directed them away.
  • The funds that held direct investments in Russian stocks, (which should be congratulated for their openness) generally had very limited holdings. None were in particularly controversial companies (eg holdings included the Russian Stock Exchange, a recruitment company and a Belarusian IT company) .  Their reasons appear to fall into three strands:
    • The fund invests specifically in emerging markets – Candriam (0.05%), BNY Mellon (0.56%), JP Morgan (1.3%)
    • The fund is index driven and the index includes (or – included) Russian stocks (eg 7IM held c 0.0015%, Vanguard held c2%).
    • The fund aims to deliver positive impacts. Alquity explained they had two holdings (totalling 0.86%) because they aim to ‘give back’ and ‘help those at the bottom of the economic ladder’. (Similarly to most other surveyed funds they exclude, coal, oil & gas and do not hold state owned or politically sensitive stocks).


What this means for sustainable investment:

This will no doubt continue to evolve, but our initial thoughts are:

  • Most of the fund managers we asked to supply information about any exposure to Russian stocks in their sustainable/ethical or ESG funds made it very clear such stocks would not be considered appropriate. However there were exceptions.
    • This highlights the need for people (intermediaries and end investors) to know what a funds does (its strategy and its ‘ethos’), what it is ‘for’ and where it is likely to invest.
    • It is important to note that opinions and strategies vary and different funds suit different people. Only a client can truly say what suits their personal opinions.
  • The funds that had exposure to Russian companies (with the exception of the Alquity) were all classified on Fund EcoMarket as ‘ESG Plus’ or ‘Sustainability Tilt’.
    • This means that we recognised (often from publicly available sources) that their strategies were likely to invest more widely than funds with stronger, less strict ethical or sustainability / environmental / socially themed – or ‘deeper dive’ strategies.  This points to the benefits of researching and understanding fund strategies and how funds in this area compare with one another.

Commenting on the findings SRI Services founder Julia Dreblow added:

“The situation in Ukraine is simply horrific. Our research was however carried out with the very narrow focus of aiming to help intermediaries who may be dealing with client queries. The information we have gathered shows that most sustainable funds (and similar) do not invest in Russian companies, which is probably what most interested clients would expect.   However there are exceptions.

The expansion of this market over recent years has brought both benefits (mostly relating to scale) and challenges (often related to increasingly diverse and ‘middle ground’ strategies).

The information we gathered about the exposure of sustainable and ESG funds to Russia and Belarus has been an interesting lens through which to explore this shift.

Focusing on delivering carefully targeted positive social impacts in countries where there is a challenging political backdrop, can be very positive – and likely to be welcomed by many, but needs to be explained properly by intermediaries to make sure clients know what they are getting.

The funds that are most likely to cause issues are those in newer ‘middle ground’ of ESG – where screens and themes have often been lightened in favour of poorly understood indices and cost savings.

The fund managers who replied to us appeared to hold carefully chosen, and what I would call relatively ‘ethically neutral’ stocks.  (Prior to the escalation of hostilities, I doubt most pragmatically minded individual investors – without particularly strong views on ESG or sustainability – would have minded whether they were in their funds or not.)

I appreciate this is a busy (and worrying) time, but my sense is that there may be funds labelled ‘sustainable’ or ‘ESG’ that are less confident about their holdings as not all managers have responded to our questions.  I also think ‘interested clients’ views are becoming stronger as risks and fears increase – so it is increasingly important investment professionals ensure clients can make well informed decisions that reflect their own opinions (not those of their adviser!)

The situation in Ukraine highlights the importance of the FCAs work around sustainability labels and disclosures (SDR).

Most fact sheets make it possible for clients to see the countries a fund invests in – if read.  But such materials should go much further.  They should include text – or link to – client friendly, detailed information about where a fund will and will not invest from an environmental, social, governance and sustainability perspective also – as this stuff matters.

Russia’s invasion of Ukraine highlights the importance of social and governance issues.  Environmental risks should also be seen in a similar context. No investors will be immune and it may soon be ‘seller beware’.”

– Ends –


Julia Dreblow is the founder of SRI Services and sits on the FCAs DLAG (Disclosure and Labels Advisory Group)

Published 14 March 2022

*About this information:

Not all managers responded to the brief survey we issued on 1 March.  Managers were asked to focus on ‘retail’ sustainable/ESG/ethical funds.  (We did not request information on other related areas such as institutional funds.)

Although much has changed since we asked for this information, the situation remains highly complex for investors and deeply worrying.   Direct investment in Russian companies, whether listed in the UK or elsewhere is only part of this equation. The interconnectedness of businesses, company subsidiaries and supply chains means the impact will be – and is – far wider.

Further notes:

Donate: The situation in Ukraine has been a shock and distressing for everyone everywhere – but nowhere more so than Ukraine.  We have added a link to the Disasters and Emergency Committee (DEC) Ukraine appeal on the home page of Fund EcoMarket (

Further Reading: SRI Services is collecting and publishing fund manager partner commentary on this topic on the ‘Learn from our Partners’ area of Fund EcoMarket. .  Please visit that area for fund manager specific information.

Thanks: Our thanks to all of the fund managers who responded so swiftly to this survey at such a difficult and busy time.

Our thanks also go to our fund partners who enable us to gather and present fund information on Fund EcoMarket for free.  Their logos are shown below.

About us: SRI Services provides specialist sustainable, responsible, ESG and ethical fund information for financial services professionals.  We are not authorised or regulated and can not offer advice. For further detail on specific funds please contact a financial advisers or fund managers directly.

Registered Company: SRI Consultants Ltd 03904843