2. What are wealth holders uniquely positioned to do?
The CSP team has identified the following actions you can take:
Philanthropy is the tool most able to directly support people in this situation. The larger, well-known IGO’s and NGO’s, like UNHCR, Red Cross and War Child, have the experience and infrastructure to make things happen and are legitimate and trustworthy. There are also several local organizations that you can support, although their credibility is not so clear.
With your investments there are three ways to indirectly impact those affected by recent events:
Divestment (and talking about it)
Investors across the world are divesting, for example, Norway’s Sovereign Wealth Fund is divesting all its Russian Assets, whilst pension funds in the US, Scotland and the Netherlands are preparing to do the same. BP grabbed headlines on the weekend by selling its 20% share of the government’s oil company, Rosneft. Whilst some are divesting from Russian assets because they simply no longer wish to be associated with the country, others are doing so in order to have a negative impact on Russian companies.
While divestment can be a symbolic gesture, it may be an important signal at this point — if many investors do it at the same time, and publicly speak about their divesting. The effect is three-fold:
First it intensifies the pressure on the Russian economy. It does this by having a material impact on Russian companies’ ability to fund their operations, and hence continue operating. Selling down any debt positions, in the absence of new buyers, will likely push up the yield (the cost of borrowing), making it much harder for these companies to raise new capital or refinance existing debt. These actions will also make it materially less likely that banks will move to fill the funding gap (with the companies seen as high credit risks), even in those countries where direct sanctions do not yet apply. Many Russian companies also have dollar dominated equity listings in markets such as London. While the value of most of these has already fallen dramatically, further divestment will effectively disable this as a future route for capital raising.
Secondly, it emboldens politicians and business leaders to act, even when there is a cost. For that reason, it is important to announce the divestment publicly. At the same time, it would be good to announce that one is ready to re-invest in case of a cease-fire.
Third, we believe that public attention on divestment, and on the link between investment and Russian companies is positive for the sustainable finance sector as it highlights growing awareness of the link between investments and real world impact.
You, as a private wealth owner, can ask your advisor and financial professionals to screen your portfolio and present an overview of investees with ties to Russia. Discuss with them what can be done in support of Ukraine, and explore the option of divestment. When you divest, use your network and influence to talk about it which influences opinions and inspires others to take action too.
Engaging your bank
Many European banks have mandated the freezing of Russian assets. Even the Swiss government, which usually stays neutral, has recently made a U-Turn on mandating banks to freeze Russian assets. You can engage your bank and demonstrate your active interest by enquiring how they will implement these measures on their assets and the expected timeline.
Besides looking into new opportunities to provide financial support, it is also worth looking through existing investees. Are there any impact funds or direct investments influenced acutely by the Russian invasion? Do they need additional capital? Do they need more long-term capital? For instance, Russia had a growing social entrepreneurship scene; now the sanction put a halt to all of their work. Providing more concessional terms for fund managers or enterprises struggling under the circumstances can be equally impactful.
Additionally, there can be enterprises in your portfolio that can extend their platforms to provide services needed in the current situation. For instance, TalentPools and Techfugees offer help to Ukrainians leaving the country offer employers their services remotely. Quality journalist platforms — including Russian ones — are offering Ukraine related news for free to prevent the spreading of fake news.
Read here about the key principles of helping right now in part 1.
Read more about what you can do in the aftermaths for the people of Ukraine in part 3.