The war in Ukraine has shaken ESG values. Sustainable development companies are again not ashamed to buy shares in arms manufacturers
Alina Sokolenko, head of the Association, in an article for Forbes on the change of ESG values and new prospects in wartime.
Companies that continue to operate in Russia after the war in Ukraine have encountered a global ban. This called into question their impeccable reputation and ESG ratings
Many international banks that have credit and market risks in Russia have not yet announced the closure of their offices. And banking staff continues to invest in Russian stocks, bonds and other financial assets.
The issue of values and income is so acute: either to meet the standards of environmental, social and corporate governance (ESG), or not. After all, it is the principles of sustainability and the criteria of the ESG that define a clear policy to prevent war, conflict and human rights violations.
The issue of values and income is so acute: either to meet the standards of environmental, social and corporate governance (ESG), or not. After all, it is the principles of sustainability and the criteria of the ESG that define a clear policy to prevent war, conflict and human rights violations.
The growth of investment in the environmental, social and managerial spheres has changed the way investors think about capital markets.
All businesses that are labeled "green", ESG or sustainable business models are based on the values of democracy and openness. Therefore, among the ESG filters are the exclusion of companies whose activities are aimed at military defense. But the Russian-Ukrainian war shook these values.
The Swedish financial group SEB has changed its decision to invest based on the principles of environmental and social sustainability, which it adopted only a year ago. The company has announced that it will allow some of its funds to buy shares in arms manufacturers and "defense" companies. The war in Ukraine has softened the views of some customers on the sector, SEB reported on March 2.
This bank, one of the largest in the Scandinavian region, was not unique in ignoring "defense" companies. For years, investors and financial institutions have moved away from the defense sector for fear of being tainted by arms disputes and undermining their reputations.
This bank, one of the largest in the Scandinavian region, was not unique in ignoring "defense" companies. For years, investors and financial institutions have moved away from the defense sector for fear of being tainted by arms disputes and undermining their reputations.
Instead, defense companies have warned that an ESG-targeted label could restrict their access to capital, particularly for small and medium-sized supply chain companies.
But views are changing because of the war. Last year's EU proposals to label the defense industry as socially harmful are rejected. Amendments are made to funding and recommendations not to hinder the funding of the "important" defense industry.
New perspectives in the conditions of war
Ukraine has become the epicenter of global financial support. Investments are focused on countering the aggressor, but they must meet the principles of sustainability and ESG criteria.
The European Investment Bank has approved € 668 million in assistance to meet critical infrastructure needs and rebuild the social infrastructure destroyed by the aggressor. At the same time, at the beginning of 2022, this bank tightened the requirements for social and environmental standards for all its projects.
The EBRD has released a € 2 billion aid package in response to the war in Ukraine. Since the bank's inception in Ukraine, lending has reached 16 billion euros and 511 projects, including more than 1 billion euros in 2021. All investment activities are built in accordance with the EBRD's socio-environmental policy and standards. The Bank is a world leader in climate finance. By 2022, he has pledged to synchronize with the Paris Agreement, and by 2025 to become the majority green bank.
The best way to reduce its dependence on Russian energy is to speed up the transition to renewable energy sources
Energy independence from Russia is an important area of investment not only in Ukraine but also in Europe and the United States. The Biden administration insists that the best way to reduce its dependence on Russian energy is to speed up the transition to renewable energy sources, while looking for short-term options for bringing new oil and gas to market. The United States is considering investing more than $ 500 billion in climate spending and tax incentives to increase renewable energy production, deploy electric vehicles and improve energy efficiency.
Radical rethinking within Europe
The current escalation has led to a radical rethinking within Europe. On the one hand, the maximum focus is on the development of renewable energy sources, and on the other - short-term solutions to find alternatives to Russian gas.
For example, Germany is considering extending the life of coal and nuclear power plants and creating a national coal reserve. A similar position in other European countries.
The new geopolitical reality
The new geopolitical and energy market reality calls for a sharp acceleration of the transition to clean energy and an increase in Europe's energy independence from unreliable suppliers and fossil fuels. The EU currently imports 90% of the gas it needs to consume, with Russia providing about 45% of its imports to various member states. Russia also accounts for about 25% of oil imports and 45% of coal imports.
The situation in Ukraine has shown how fragile the world is and that it needs unity and partnership to meet the global challenges of humanity and to ensure the goals of sustainable development, in particular for peace and justice.
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