CIRCA5000 | Russian Investments

Russian Investments

By CIRCA5000 TeamBack to Mission Control

Investment updates • 3 min read 

CIRCA5000 Update: Is my money invested in Russia?

Over the last two weeks, the world has watched in horror as the military invasion of Ukraine has unfolded. Russia’s incursion has decimated the country and led to the loss of many innocent lives. Our thoughts are with our Ukrainian friends and colleagues and their families at home.

It’s hard for CIRCA5000 to make a material difference on the ground. But as the news hit our screens, we started working on a process to remove all Russian exposure from our portfolios. We can now update you on the progress we have made.

What exposure did we have in the first place?

Fortunately, we have never had a material exposure to Russian investments. Russia is classified as an emerging market and prior to the invasion, it accounted for around 3% of emerging market stock indices. This exposure dropped below 1% in ESG and socially responsible indices. This is because many Russian companies failed to meet the required ethical standards.

Our CIRCA5000 portfolios have no investments in any Russian stocks. We also hold no Russian investments in our Government Bond fund because only G7 governments are eligible for inclusion.

However, within our Green Bond fund we do hold one position: 0.02% of the fund is invested in a green bond issued by Russian Railways. The bond was issued to finance the upgrade of old Russian trains to newer electric trains, a project that was independently verified by Sustainalytics.

What have we done about the bond?

We do not want to continue our support of Russian Railways via the bond under any circumstances. Soon after the invasion, we initiated proceedings to have the bond removed from the index that the fund tracks, the Solactive Green Bond Index. We wrote to the Solactive CEO to request the removal of the bond immediately. As the fund looks to replicate the index, this was a necessary first step.

Our letter, which was presumably accompanied by many others, triggered a consultation process to update the index rules and remove all Russian positions from any Solactive bond or stock index. Again, this is a necessary step required by regulators when updating an index. 

The result

Investors overwhelmingly approved the removal of all Russian investments from Solactive indices for the foreseeable future. The Russian Railway bond will be removed when markets open on Thursday, 10 March 2022. Whilst this step might seem small in the greater scheme of things, Solactive have more than $200B of investments tracking their indices that will no longer be able to invest in Russia.

What next?

The Russian market is currently closed so it is almost impossible for the fund to actually sell the bond. When the market does reopen, the bond will be sold and the CIRCA5000 portfolios will no longer hold any Russian investments.

We will continue to monitor the situation and will keep you updated on any further changes. 

Capital at risk.

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