Russia´s invasion of Ukraine has caused  U.S. pension plan sponsors to focus on the long-term sustainability of their plan’s investments.

U.S. sanctions imposed on Russia have caused U.S.-based pension funds to divest from or suspend allocations to the emerging market’s assets. But this will have narrow impacts to defined benefit plans’ risk and return outlooks, according to pension investment experts.

“For most of our clients, their exposure to Russian securities is very small,” says David Eisenberg, outsourced chief investment officer leader at Buck. Many pension plans for which Buck advises and consults are globally diversified and relatively mature, and therefore “lean toward fixed income,” allocations he explains.

Global Markets’ allocations to Russian equities were “about one and a half percent of the MSCI Emerging Markets Index, and Russian debt was a little over 2%,” Eisenberg says. Therefore, for a client that had 10% exposure to emerging markets, that plan’s Russia-specific exposure “at the index level is probably less than 20 basis points,” he adds.

Al Pierce, managing director for the SEI Institutional Group, agrees that pension allocations to Russia are so small as not to dent the plans. However, U.S. pensions are reacting to President Joe Biden imposing sanctions on Russia by concentrating a greater focus on the long-term overall sustainability of investments, he explains.

“What the Ukraine war brought to light is giving our plan sponsors more insight into the underlying criteria that we use around sustainability,” he says. “To take a step back and say, ‘What have pension plan sponsors done differently today [compared to] what they were doing before the war in Ukraine?’ They’ve taken a broader look at sustainability as it relates to their investments.”

A couple of plan sponsors have acted to implement sustainability factors into the pension plans to gain greater insight into the plans’ sustainability and environmental, social and governance profile, Pierce adds.

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