The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades. We had already seen connectivity between nations, companies and even people strained by two years of the pandemic. It has left many communities and people feeling isolated and looking inward. I believe this has exacerbated the polarization and extremist behavior we are seeing across society today.
The invasion has catalyzed nations and governments to come together to sever financial and business ties with Russia. United in their steadfast commitment to support the Ukrainian people, they launched an “economic war” against Russia. Governments across the world almost unanimously imposed sanctions, including taking the unprecedented step of barring the Russian central bank from deploying its hard currency reserves.
Capital markets, financial institutions and companies have gone even further beyond government-imposed sanctions. As I wrote in my letter to CEOs earlier this year, access to capital markets is a privilege, not a right. And following Russia’s invasion, we saw how the private sector quickly terminated longstanding business and investment relationships.
BlackRock has been committed to doing our part. Grounded in our fiduciary duty, we moved quickly to suspend the purchase of any Russian securities in our active or index portfolios. Over the past few weeks, I’ve spoken to countless stakeholders, including our clients and employees, who are all looking to understand what could be done to prevent capital from being deployed to Russia.
The speed and magnitude of company actions to amplify sanctions has been incredible. Iconic American consumer brands have suspended their operations of non-essential products. And financial services companies have taken similar steps to further isolate the Russian economy from the global financial system.
These actions taken by the private sector demonstrate the power of the capital markets: how the markets can provide capital to those who constructively work within the system and how quickly they can deny it to those who operate outside of it. Russia has been essentially cut off from global capital markets, demonstrating the commitment of major companies to operate consistent with core values. This “economic war” shows what we can achieve when companies, supported by their stakeholders, come together in the face of violence and aggression.
BlackRock never had significant investments in Russia for the vast majority of our portfolios. For clients who wanted exposure to an index where Russia is a component, such as an emerging markets index, or an active strategy where Russia plays a critical role, such as natural resources, BlackRock invested on their behalf. But our lack of operations in Russia or major exposure has allowed us to pivot quickly in this new environment and move forward with little direct impact to the firm.
It’s impossible to predict precisely what path this war will take. BlackRock is focused on monitoring the direct and indirect impacts of the crisis and working with our clients to understand how to navigate this new investment environment.