MSCI cuts ESG government ratings of Russia and Belarus

By Simon Jessop and Ross Kerber

LONDON/NEW YORK (Reuters) -MSCI Inc, which ranks corporations and nations on their environmental, social and governance (ESG) efficiency, stated on Tuesday it downgraded Russia and Belarus in response to Moscow’s invasion of Ukraine.

The transfer might add to strain on western asset managers to maneuver away from Russian shares and debt, analysts stated, though few ESG-focused funds personal a lot in Russia.

MSCI stated it lower Russia to “B” from “BBB” and Belarus to “B” from “BB” with instant impact. Rankings vary from “AAA,” the very best, to “CCC,” the bottom, it stated, including that each had a adverse outlook.

“We’re monitoring the state of affairs carefully and imagine there may be nonetheless important draw back danger to Russia’s ESG Authorities Score. It’s attainable that additional developments might but drive an extra downgrade,” MSCI stated in an announcement.

Todd Rosenbluth, head of ETF and Mutual Fund Analysis for CFRA Analysis, stated the downgrades would probably have little influence on most ESG funds “given the low present publicity to Russia in comparison with China” or different bigger markets.

Solely about 3% of BlackRock Inc’s iShares ESG MSCI EM Leaders ETF holdings are in Russia, for example, Rosenbluth stated.

Requested in regards to the downgrades, BlackRock didn’t touch upon what influence there may very well be on its index funds. In an announcement despatched by an organization spokesperson, BlackRock stated it’s consulting with regulators, index suppliers and different market contributors “to assist guarantee our purchasers can exit their positions in Russian securities” the place allowed.

BlackRock additionally stated it would adjust to all relevant sanctions legal guidelines and laws. [L1N2V41XQ]

(Reporting by Simon Jessop and Ross Kerber; modifying by Huw Jones and Will Dunham)

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