As Russia’s war on Ukraine rages on, a new analysis reveals that ESG fund managers held at least $8.3 billion in Russian assets just before the invasion—despite marketing themselves as champions of environmental, social, and governance standards.
According to Bloomberg’s review of around 4,800 ESG funds—representing over $2.3 trillion in assets—approximately 300 were directly exposed to Russia. The true number may be even higher. With Western sanctions and market collapses, much of that exposure is now considered nearly worthless.
Some fund managers are questioning how ESG strategies led to such risks. Philippe Zaouati, CEO of Mirova, a $30 billion sustainable-investing firm linked to Natixis Investment Managers, is among those calling for a major rethink: “There is no responsible investment if there is no democracy,” he said.
He argues that ESG funds should avoid autocracies altogether and focus on investments that reflect genuine values—not just follow indexes. “With the Ukraine crisis, we see very clearly that some ESG funds and managers have sincere intentions, and others just apply a technique,” Zaouati added.
The rush into ESG investments—now a $40 trillion industry—has outpaced the availability of truly sustainable assets, pushing many managers toward imperfect options in emerging markets. Bard Bringedal, CIO of Storebrand Asset Management in Norway, said the war has highlighted ESG’s vulnerability to “extraordinary events,” especially in politically volatile regions.
Storebrand, with $110 billion under management, was also exposed to Russia through its index tracking, though it maintains the flexibility to diverge from those benchmarks based on internal assessments.
The crisis has intensified debate about the role of political risk in ESG frameworks. Zaouati insists that issues like democracy and human rights must be brought into sharper focus. He also calls for a broader reassessment of ESG exposure to other autocratic regimes, including China—blacklisted by Mirova.
“Autocratic regimes, democracy, human rights—these are topics that are nowhere today in ESG analysis,” he said. “If you look at what ESG managers do on human rights, they usually try to avoid any political statement.”
The fallout from Russia may mark a turning point, prompting ESG investors to align their strategies more closely with the values they claim to uphold.
