Pension schemes respond to Russian invasion of Ukraine

Several pension schemes and financial institutions are looking to halt or cut their investments in Russian-linked assets following the nation’s invasion of Ukraine.

Russian president, Vladimir Putin, ordered troops to advance into Ukraine in February, drawing international condemnation as cities were attacked by Russian forces.

As a result, Russia has been facing economic sanctions from nations around the globe, and pension schemes and other financial institutions have been looking to offload assets linked to Russia.

Nest CEO, Helen Dean, said: “In view of the situation in Ukraine, we’ll be removing all our investment in Russian government bonds and Russian companies as soon as possible.”

A recent valuation of Nest’s investments in listed Russian companies, as of 25 February, was less than 0.1 per cent of its assets under management, while its Russian debt exposure was around the same.

However, Nest noted that it was currently “very difficult” to transact in the Russian market, which was hindering accurate valuations.

Due to the further fall in valuation, Nest estimated that its current exposure to all Russian investments, as of 1 March, was less than 0.1 per cent of its portfolio.

The BT Pension Scheme has announced that it reduced its exposure to Russian securities by £162m between the end of December 2021 and the end of February 2022.

It had £192m, or around 0.3 per cent of its asset portfolio, invested in Russian securities at the end of 2021, but this has been reduced to £30m, or around 0.05 per cent, as of the end of February.

The scheme’s exposure to Russian securities had been “relatively small” due to governance concerns and ownership rights associated with the region, and it had been working with its investment managers since the beginning of the year to minimise its exposure in a “disciplined manner”.

It added that the scheme will continue to look to reduce its exposures further if market conditions allowed, and that it will continue to monitor the situation, taking “appropriate steps” to protect the scheme and its members.

The trustee of the Transport for London (TfL) Pension Fund has also responded to the Russian invasion.

In an update, TfL director of pensions and reward, Stephen Field, stated that, in light of the ongoing situation in Ukraine, the trustee has “carefully assessed” the fund’s exposure to bond and equity holdings domiciled in Russia.

The TfL fund’s current exposure to Russian-linked assets totalled approximately £28m, or 0.2 per cent of the fund’s total assets.

The trustee noted that £25m of this was held in direct investments.

Following investment and legal advice, the trustee is instructing the fund’s investment managers to freeze all existing direct holdings in Russian-domiciled investments.

This means that the fund will make no additional direct investments or investments in Russian bonds or equities until further notice.

The trustee noted that the lack of activity was in recognition of the current lack of market for selling these assets and the trustee’s fiduciary duty to act in the best interests of the fund’s members.

It added that the trustee and the fund will continue to comply with all economic sanctions in force and will continue to keep the matter “under active review”.

The Church of England has also confirmed that it has already taken action on reducing its holdings in Russian investments.

A Church of England spokesperson said: “On 24 February, in response to the attack on Ukraine by Russia and supporting the sanctions announced by the UK and other governments the Church Commissioners and the Church of England Pensions Board issued instructions to our managers to exit all of our current direct holdings in Russian companies and to make no further investments in Russian companies.

"Prior to the instruction, holdings across portfolios in Russian companies represented approximately 0.16 per cent of total investments. No investments were held in Russian sovereign debt.”

Other financial institutions have also been responding to the invasion, with Abrdn chief executive, Stephen Bird, commenting that, in the context of the “deeply troubling escalation of conflict”, the firm has acted to reduce its holdings in Russia and Belarus.

“We are approaching this in a disciplined manner, protecting our clients' interests,” he continued. “And we have concluded that we will not invest in Russia and Belarus for the foreseeable future.”

Legal & General Investment Management (LGIM) has announced that it has already reduced its clients’ exposure to Russian securities and would continue to “act and deliver as a responsible investor on behalf of clients”.

A spokesperson for LGIM said: “The invasion of Ukraine contravenes almost every measurable ESG metric. LGIM has already, where possible, reduced our clients’ exposure to Russian securities. Opportunities to de-risk positions in sanctioned Russian companies have been limited, and given that the market is now effectively frozen for foreign investors, we continue to monitor the situation and reduce holdings if and when market conditions allow.

“Our total exposure to Russia is small; approximately 0.1 per cent of our assets under management. This is mainly held through index funds and ETFs and we are actively working with the major index providers to confirm Russia’s future role in global indices.

“These are exceptional times for investors. We are engaging with the boards and management teams of companies who have exposure to Russia via their businesses, and are drawing on previous experience in dealing with sanctions of this nature. This is a challenging situation for all boards with exposure to Russia.”

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