Our position on investing in Russia

In these FAQs, we set out Aviva Investors’ position on Russia following its invasion of Ukraine

What is your overall position on Russian investments in light of the conflict in Ukraine?

First and foremost, we are extremely concerned at the events unfolding in Ukraine and our thoughts are with all Ukrainians at this time. All sanctioned Russian entities have been placed on our stop list, in line with our legal and regulatory responsibilities. Our parent, and largest client, Aviva plc has stated it will divest from all Russian securities when it is appropriate to do so. We believe Russia should be cut off from capital markets and any new investments in the country should be prohibited. That reflects customer sentiment, our ESG principles and the investment case. As a result, we have committed not to purchase any Russian investments for all clients. That will remain our position until there is material change in the situation.

How big is your exposure to Russia, Ukraine and Belarus?

Our exposure to Russia is small – less than 0.09% of our global AUM – and concentrated in our emerging market debt and emerging market equity strategies. The small size of the holdings reflects the negative view we have held on Russia for some time. Our exposure to Ukraine is approximately 0.06% of AUM and we have no exposure to Belarus.

Do you plan to divest all Russian bond and equity holdings from your pooled funds?

We are an agent for our clients’ investments and have a fiduciary duty to act in their best interests. The combination of sanctions and other actions taken against Russia by international governments have caused a significant dislocation to Russian financial markets, with liquidity severely restricted and bonds and equities at extremely distressed levels (where we have seen forced selling). We will continue to closely monitor conditions and exit existing holdings when it is appropriate and in the best interests of clients. 

How long do you expect to exclude Russian entities from your investments?

This will remain our position until there is material change in the situation that would cause us to reassess Russian entities in alignment with our fiduciary responsibilities and ESG analysis.

What is your current ESG position on Russia?

The citizens of an aggressor state are often one of the primary constituencies negatively impacted in such a crisis. For this reason, we have to carefully consider the complex long-term social impacts of our investment decisions. The Russian government historically has spent c.20% of its annual budget on health and education. Starving the Russian government of access to funding will likely have long-term negative ramifications for the welfare of millions of Russian families. However, in light of its actions in Ukraine, we must weigh this against the moral obligation to ensure we are not providing any direct or indirect support to Russia at this time. This extends beyond government financing to key domestic industries that will be central to Russia’s foreign policy objectives. Consequently, we have made a decision to immediately cease any primary market funding of Russian entities and will look to exit any existing positions when it is appropriate and in the best interests of clients.

What is your view on whether Russian entities should be excluded from benchmark indices?

Given Russia’s actions, customer sentiment, our ESG principles and the investment case, we support the decisions taken by index providers to exclude Russian entities from benchmark indices. However, this needs to be accompanied by mechanisms that allow Russian exposures to be managed effectively within existing fund structures. Funds could then be managed in an orderly way again against new benchmarks without carrying the illiquid assets that are causing pricing issues for some. It would also ensure tracking error and risk constraints can be maintained and enable appropriate performance measurement.

How concerned are you about the second-order effect of the crisis on other holdings (i.e. energy companies, banks, telecoms stocks with exposure to Russia)?

Day-to-day developments in Ukraine (and Russia) are dominating the mood in financial markets and more widely. The crisis has already ushered in a sequence of “risk-off” days, leading to sharp falls in equity markets and other risk assets and some (more limited) rallies in safe-haven investments. There have also been periodic reversals as the mood fluctuates. Any final resolution could take months or longer, but heightened volatility is likely to be a feature for some time.

In the short term, the immediate effects of the crisis are likely to be:

  • Further increases in commodity prices, which will put more pressure on inflation.
  • Heightened volatility, which will impact market sentiment.
  • Sector-specific impacts in areas such as banking, energy and airlines.

We continue to monitor the situation and will consider all appropriate measures to protect our clients’ investments, including through engaging with companies that have exposure to Russia.

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