Why do ESG funds buy Russian oil instead of Canadian crude?
According to Bloomberg data, ESG funds held at least US$8.3 billion in Russian assets before Russia invaded Ukraine. These include the financial institutions of the country as well.
Bloomberg News reported that Vanguard Group and Northern Trust increased their interest in Russia’s top bank through their respective index-based ESG funds in January. According to Vlad Tasevsky, chief operating officer and head of product at Objective Investing, these examples demonstrate the need to balance the three ESG priorities.
In an interview with Yahoo Finance, he argued that there is a greater emphasis on environmental “e” in the ESG, because of the increasing difficulty of estimating social and governance variables than actual carbon emissions figures.
“I think we’re going to see a revaluation by both investors and data providers of information for ESG factors,” he said in a phone interview with the news outlet. “Work on the ‘S’ and ‘G’ has been around for a while, but it’s still new. They probably aren’t as straightforward as environmental factors.”
The lack of enthusiasm for Canadian fossil fuel firms among ESG investors doesn’t come as a surprise to Tsevsky. Even though the industry has sought to reduce its carbon footprint and invest in technology such as carbon capture and storage, they claimed that the ESG movement has “hugely negatively impacted” Canadian farmers.