Stocktake: Companies profiting in Russia get top ESG scores

Even before the Ukrainian invasion, Russia was infamous for corruption and human rights abuses. Consequently, companies doing significant business in Russia were more likely to score poorly in environmental, social, and governance (ESG) activities – right?

Actually, no. A recent analysis by Dutch academic Jurian Hendrikse found the average ESG score of European companies with “substantial” activities in Russia was 78 – much higher than the average score of similarly sized companies that didn’t operate in Russia (64).

The average social (the S in ESG) score of the Russia-invested group was 81, compared to just 68 for their European peers. In terms of human rights performance, companies profiting from Russian activities earned a “whopping” average score of 84, compared to just 67 for their European peer firms.

A full 12 days after the invasion, over a quarter of European companies hadn’t taken “even the most modest form of public action” (for example, condemning the invasion or expressing support for the Ukrainian people). Did such companies have a lower ESG score than companies that did take meaningful and timely action? Again, the answer is no.

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For ESG scores to be meaningful, concludes Hendrikse, they need to do a “much better job” of reflecting companies’ activities in “suspect countries that are known for widespread corruption and human rights abuses”.