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Wall Street must stop buying Russian securities 

Associated Press

Wall Street is buying Russian stocks and bonds at depressed prices following the unprecedented economic sanctions imposed on Russia and Russian businesses.

Goldman Sachs and JPMorgan are reported to have purchased the bonds of some well-known Russian issuers, either for their own account or for customers. BlackRock’s purchase of shares in Russian mining company Polymetal caused its stock price to rally, even as other Russian stocks also began to rebound. To its credit, BlackRock later announced it was suspending all purchases of Russian securities in active and index-linked funds.

Millions of dollars in research are spent in identifying cheap assets, so when there is an obvious drop in price driven by external events, it’s a natural impulse for Wall Street to take advantage.

Yet, for the Russia sanctions to be fully effective, that impulse needs to be resisted.

To understand why, one only needs to look at the move to divest the stocks of companies doing business in South Africa in the 1980s. Calls for divestment are often credited with the end of South African apartheid. In fact, while the movement brought substantial unwanted attention to companies doing business in South Africa, later studies indicated that the effects of that pressure on stock prices were fairly modest. For some, investing in businesses with ties to South Africa raised ethical concerns and questions about management responsibility. For others, depressed stock prices offered investment opportunities that offset the downward pressure on share prices from sales by activists.

Wall Street must learn from the past.

This is the time when firms must put into action their commitment to including environmental, social and governance (ESG) factors in their investment decision-making, alongside financial factors. In a world devoted to ESG investing, actions that may dull, even marginally, the impact of the Russia sanctions must be measured against the human suffering that prompted those sanctions in the first place.

This is not only a lesson for those who consider investing in Russian securities — BlackRock should be lauded for quickly correcting its misstep — but it should be learned by those who facilitate the purchases of others, including Goldman Sachs and JPMorgan.

My Wall Street friends will say this is too harsh. Their investments have risk, and it is just as likely that what they buy will drop further in value. That misses the point. If we are serious about penalizing Russian aggression, Wall Street should not profit from opportunities that arise in response to the suffering of the Ukrainian people.

Better for Wall Street firms to refrain from buying voluntarily, as BlackRock did, rather than raise the need for government intervention.

Charles K. Whitehead is the Myron C. Taylor Alumni Professor of Business Law at Cornell University and Founding Director of the Law, Technology & Entrepreneurship Program at Cornell Tech. Prior to academia, he was a managing director at Citigroup and Salomon Brothers.

Tags BlackRock ESG Finance Goldman Sachs JP Morgan Polymetal Russia Russian invasion of Ukraine Russian sanctions Stock market Ukraine Wall Street War crimes

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