Vladimir Putin’s unprovoked and brutal assault on the Ukrainian people is reverberating around the world in many ways. It will continue to do so for years, if not decades, to come. One place it has already touched is “ESG investing,” by whatever name. I certainly don’t want to trivialize the human suffering this war is creating for both the Ukrainian and, to a much lesser extent (at least for how), Russian people. However, I do want to take this unexpected opportunity from tragic circumstances to try to bring some clarity to the muddled world of ESG investing.

Not surprisingly, investors are dumping the stocks of Russian companies and Western banks are now refusing to deal with them. Many liken this to how the financial community divested from and then excluded South African companies in the apartheid years. While divesting Russian stocks has symbolic importance it is easy to do for large and diversified investors. The Russian equity market is a tiny—and rapidly shrinking—percentage of global equity value and is unlikely to rise any time soon. More important, and harder, is for companies to stop doing business in Russia if it is a major market for them. Some notable consumer goods companies are dragging their feet. Natalie Jaresko, a former Ukrainian finance minister, has rightly called out ESG-rhetoric companies to have their actions match their words.

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