In early 2022, Russia invaded Ukraine. The U.S. and EU responded with financial, energy and technology sanctions on Russia. We were concerned that our investments could be indirectly financing Russia’s war (for
example, via tax revenue from businesses operating in Russia to the Russian government).
We reviewed our portfolios to understand where, if any, there could be exposures through our investments to Russia. We found no companies in breach of sanctions and only a limited exposure. One investee company
operating in the oil and gas sector had exposure through a joint venture to Russia. There were overlapping holdings in our equity and fixed income portfolios.
We were concerned about the financial risks to the business model of the relevant company and subsequent impact on both share price, dividend security and risk to earnings because of this exposure. We wanted to understand both the financial impact on the investee company’s business resulting from financial sanctions and its approach to
this project, noting that it would be unacceptable from an ESG perspective to be financing Russia’s war.
A public announcement had not been forthcoming and so we engaged via email.
Shortly afterwards, the relevant investee made public its intention to divest its stake in the joint venture and ultimately wrote down its investment. This is an example of how timing is often key to change. The intense public
and media scrutiny on companies operating in Russia created a favourable environment for this engagement.