MSCI Downgrades Russia To Lowest ESG Rating

The move comes on the eve of MSCI axing Russian assets from its indexes.

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Reviewed by: Dan Mika
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Edited by: Dan Mika

Indexing giant MSCI has cut Russian assets to the lowest possible score on its ESG rankings for sovereign debt ahead of removing Russia from its fixed income indexes on Wednesday. 

In a statement Tuesday, MSCI said the downgrade from the second-worst rating of B to the worst rating on its ESG scale of CCC takes immediate effect due to Western countries sanctions en masse in response to the Russian invasion of Ukraine.  

Those sanctions bring the ratings firm’s “economic environment” and “financial governance” factors for Russia to zero, matching the country’s existing zero rating for its political governance score. 

The firm already downgraded Russia and its ally Belarus to the B ranking last week. 

MSCI is the first of the major ESG ratings firms to announce a full downgrade for Russia’s ESG status, but it’s not entirely clear what impact it will have. 

MSCI and several other index providers have already announced they would strip Russian equities and debt from their standard emerging market indices in response to heavy sanctions from the U.S. Treasury Department and its counterpart foreign agencies. 

Russian sovereign debt is currently frozen under Treasury orders, while MSCI has declared Russia’s equity market “uninvestable,” as the Moscow Exchange has been closed for trading for more than a week. 

MSCI did not immediately return a request for comment Tuesday afternoon. 

 

Contact Dan Mika at [email protected], and follow him on Twitter 

Dan Mika is a reporter for etf.com. He has previously covered business for the Ames Tribune and Cedar Rapids Gazette in Iowa, and BizWest Media in Fort Collins, Colorado. Dan holds a bachelor's degree in journalism from Truman State University.