ESG Rating Firms Reeling as War Exposes Russian Blind Spot (1)

Vladimir Putin’s invasion of Ukraine is shining a spotlight on the largely unregulated business of ESG ratings, after investments billed as socially conscious bought into a regime that’s now being accused of war crimes.

On the eve of the invasion, about $9.5 billion in funds meeting European environmental, social or governance standards were in Russia, often on the basis of ratings from companies such as Sustainalytics and MSCI Inc.

While ESG raters weren’t alone in misjudging Russia’s belligerence, their exposure is particularly awkward given their analysts are paid to focus on factors such as democracy, human rights and ...