The Russia-Ukraine war has started to bring changes in the ESG investment process and supply chain of commodities. The investment processes in concern with ESG factors and requirements seem to take turns.
This has resulted in a probable dismantling of the Russian economy, with factors aligning mainly against Russia. While this brings speculations over the humanitarian causes, the change in the ESG investment is keen to bring sustainable choices.
ESG Investment of Governance
The geopolitical tensions that the Russian invasion of Ukraine has brought up are not unknown to the countries. The government of different countries has started to cut ties with the Russian government. The banning of Russian banks from SWIFT is a strong example of this.
Read More: Russian Banks Block From SWIFT, Driving Investors To Be Anxious
A good governance framework is now focusing on writing laws that promote a strong set of rules to encourage sustainable development. The imposed sanctions on Russia are also a part of the governance requirements. Nike, Goldman Sachs, and other categories of companies shut down their set-ups in Russia.
Read More: US, UK, And EU Ban The Luxury And Other Goods Exports To Russia
ESG’s Social Investment
The commodity prices rising to their peak is also a big concern to the investors. People around the world were under pressure to revitalise the economy after the pandemic hit in 2020. The commencement of ESG factors coming forward from various investors started.
Read More: Global Trade and Supply Chain Disruption Likely to Continue in H1 of 2022
COVID-19 saw the phase when various investment decisions were being taken from 2021 to 2022. Following global inflation, the prices increase for the commodity started at the beginning of 2022. Investment in various sectors plunged due to the sudden fluctuation in prices.
Read More: COVID-19 Influenced The Biggest Growth Of Global Inflation
On 24 February 2022, Russia invaded Ukraine, creating a stir around the world. The biggest exports from both countries dropped and prices escalated. Russia’s oil and wheat; Ukraine’s cereals, grains, and sunflower oil. The Russia-Ukraine war just added to that pressure.
Read More: Russia-Ukraine Crisis – Global Supply Chain Impact Likely
Social causes never fail to leave an imprint on how the power of people can result in wonders. The social factors in ESG investment also mean considering ‘divestment’ wherever needed. Protests by activists over Harvard’s investment in fossil fuels is another example.
Read More: Harvard ‘Divest’ Fossil-Fuels Endowment To Decarbonize Economy
ESG Investment – Environmental
The concern for the environment and climate change is a long-running matter between governments. Investors have a big part in this too, to provide necessary resources and materials, allowing sustainable development to take place.
Read More: Trade and Environment: Hand-In-Hand For A Sustainable Future
Investments in carbon-free technologies, renewable energy, and initiatives to protect the well-being of future generations go a long way. Environmental factors for African farmers are another required step from investors. Global food security is creeping over countries now.
A threat of food security is lingering over Brazil’s Cerrado for soybean farming and cocoa farming in Côte D’Ivoire and Ghana, along with African countries as a whole. Several measures can be taken to protect the environment of these farming regions by cultivating better methods.
Read More: Rapid Expansion of Soybeans Farming Could Threaten Cerrado Savanna
Reducing carbon emissions is the next big goal by investing in alternative renewable energy and low-carbon technologies such as solar and wind power. Electric vehicles also setting up to become the new transportation medium for people. This will reduce carbon emissions to a far greater extent. Investments in infrastructure and building charging stations is another objective.
Read More: Electric Vehicles Demand Is Going Up And Likely To Grow More
Final Verdict
The Russia-Ukraine war resulted in global food insecurity and added to the inflation that started in January 2022. Since the Russian government has made it clear that it will not bow down to any country, the threat to one of the biggest sources of oil and grain supplies is a threat.
Read More: Russia-Ukraine War – How Reliant is the World on Russian Oil & Gas?
ESG investors are also keeping an eye on the defence and arms sector due to its aggressive nature. The situation that exists right now… It is a prime example of a global economic crisis that can only be solved by government initiatives and investor assistance, especially for ESG investment.
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