The big shun

Mar 08, 2022 View in browser   By Lorraine Woellert, Jordan Wolman, Marissa Martinez and Debra Kahn THE BIG IDEA Ukraine solidarity has triggered an historic shunning. | (J. Scott Applewhite/AP Photo) DO SVIDANYA — The shunning of Russia is snowballing, with companies, states, and pension funds rushing to cut financial ties. But the race for Russia's exits won't be a straight sprint, and it's possible there won't be a decisive winner. First, some context. We've seen this before, most notably with organized campaigns to isolate South Africa's apartheid regime. But where that boycott took decades to reach a tipping point, the rise against Russia has surpassed it in a matter of days. Lawmakers in New Jersey, Pennsylvania, Massachusetts, South Carolina, Colorado, West Virginia and other states have introduced divestment bills. Some pension funds, including Pennsylvania's $75.2 billion Public School Employees' Retirement System, have already started selling. Governors in Arkansas, North Carolina, Oregon, Colorado and elsewhere are reassessing dealings with Russia and its energy companies. In oil country, Texas Gov. Greg Abbott is targeting vodka and other goods, as are officials in more than 10 states. On the corporate side, oil giants Exxon Mobil, Equinor, Shell PLC, and BP PLC are bailing. Norway's sovereign wealth fund will ditch its $25 billion in Russian holdings. Ikea, Apple Inc., Walt Disney Co., Visa, Mastercard, Ford Motor Co., reacting to western sanctions, are saying do svidaniya. "This is bigger than South Africa and it's moving toward almost a generalized boycott. I can't think of a precedent," said Tom Sanzillo, director of financial analysis at the nonprofit Institute for Energy Economics and Financial Analysis and a former New York City deputy comptroller. "It will be very difficult for Russia to recover." What's the problem? If Russia = bad, stakeholder capitalism - bad = good, right? But the equation is more complicated than simple subtraction. Let's look at three variables. Public pensions largely divested from Russia ages ago because it was a risky bet. Those that do have holdings will need to put political expediency aside to think of the investors they're supposed to protect. Any sale of Russian assets now, for example, will come at a loss. When California state Democrats introduced a bill to disentangle the state's pension funds from Russia, Controller Betty Yee pushed back, calling the idea ineffective and imprudent. "Virtue signaling," she called it. A "divorce" from the state's fiduciary duty, she said. Companies are doing calculus, not arithmetic. Russian stocks have tanked, its debt has been downgraded as risky, and the rouble is trading at record lows. Any exit from Russia will come at a deep cost, and executives have to weigh that against political and reputational risk. Corporate decision-makers "rarely make just a moral statement, but it's almost getting there," Sanzillo said. "There's always been a risk there. Now it's come home to roost. Are they cutting their losses? Yes." A boycott might not work. Where South Africa lost $1 billion in direct U.S. investment between 1985 and 1990, Russia is bleeding from the loss of untold billions of dollars in just a week. But will it force change? "Divestment is a blunt instrument," said Aron Cramer, president and CEO of consulting firm BSR. "It's unclear the degree to which it changes things." BREAKING — In an about-face, President Joe Biden announced a ban on Russian oil imports today. It looks increasingly unlikely that the EU will announce its own ban amid fear of inflation and potential retaliation from Russia. YOU TELL US Are you willing to take a financial loss to make a moral statement? How big a loss? Lorraine wants your two cents. Team Sustainability is editor Greg Mott, deputy editor Debra Kahn, reporters Lorraine Woellert and Catherine Boudreau and digital producer Jordan Wolman. Reach them at gmott@politico.com, dkahn@politico.com, lwoellert@politico.com, cboudreau@politico.com and jwolman@politico.com. Want more? Don't we all. Sign up for the Long Game. Four days a week and still free!   SUBSCRIBE TO NATIONAL SECURITY DAILY : Keep up with the latest critical developments from Ukraine and across Europe in our daily newsletter, National Security Daily. The Russian invasion of Ukraine could disrupt the established world order and result in a refugee crisis, increased cyberattacks, rising energy costs and additional disruption to global supply chains. Go inside the top national security and foreign-policymaking shops for insight on the global threats faced by the U.S. and its allies and what actions world leaders are taking to address them. Subscribe today.     SHAREHOLDER SCOREBOARD IT'S SPRING — The proxy races are off and running. ESG shareholders notched two wins out of the gate Friday, backing an audit at Apple Inc. and urging Jack In The Box Inc. to step up on sustainable packaging. At Apple, shareholders defied corporate leadership with a vote in favor of a civil rights audit at the tech giant. The shareholder proposal won support from Norges Bank, the world's largest sovereign wealth fund, the California State Teachers' Retirement System, the NYC Retirement Systems, the State Board of Administration of Florida and other institutional investors. SOC Investment Group launched the campaign with SEIU Capital Stewardship Program. Jack in the Box shareholders on Friday urged the fast-food chain to adopt a sustainable packaging policy, according to Green Century Management Inc., the firm that sponsored the proposal. The official vote count isn't available yet, but at the start of Jack in the Box's annual meeting, there was 95 percent support. It's the first time a packaging proposal has won a majority vote, said Green Century shareholder advocate Annalisa Tarizo. The Jack in the Box board opposed the resolution, saying the company already is moving to reduce plastic packaging, with compostable packaging at several restaurants across California, Hawaii, Oregon, and Washington. BUILDING BLOCKS Laura Friedman wants a few good women. | (Rich Pedroncelli/AP Photo) ROUGH ROAD — A confession on International Women's Day: Long Game's new Verbatim section has featured white men for three weeks, and we're about to run our fourth tomorrow. (It will be awesome, but still.) We wondered if we might have something to learn from the chair of California's Assembly Transportation Committee, Laura Friedman, who pledged last year to try to change the fact that roughly 85 percent of named highways and roads in California are named after men. "It's not going well," she told us Sunday. There are two issues: First, many roads are dedicated to people who die on them in the line of duty, and they're mostly men. Second, Friedman's fellow lawmakers aren't coming up with any women to honor. "It seems very hard for members to find women worthy of naming a highway after," she said. "Lots of my male colleagues seem to feel this is silly and they don't seem to have a problem having almost every single highway in this state named after men." Only two of the 16 people nominated last year were women — pilot Amelia Earhart and NASA astronaut Sally Ride. Friedman had said the committee wouldn't consider any more highway renamings until an equal number of women were nominated. But that rule has gone by the wayside while the state considers revamping the naming process more broadly. Diligent Institute The private sector isn't doing much better. As of January, women held only 26 percent of board seats across the U.S., Canada, the European Union, the U.K. and Australia. That marked a 2 percent increase over the previous year, according to Diligent Institute, the research arm of the software provider Diligent Corp. It's good news, considering the pandemic drove millions of women out of the workforce. But by that rate of progress, gender equality on corporate boards won't happen until 2033. Diversity advocates also express concern that the same group of women is being rotated from boardroom to boardroom. Diligent's research supports that notion: More than half of women directors hold more than one board seat (compared to about 36 percent of male directors). PLASTIC POLLUTION TODAY'S FUN FACT — We all know what a single-use plastic is, right? Like, maybe those flimsy grocery bags or plastic sporks? It seems intuitive, but the fact is there's no hard and fast definition. An accounting standards board is now trying to come up with one. When the SASB Standards Board went looking for ideas, it learned that of the 53 chemical companies that use its disclosure system, only four mention the term "single-use." "It's hard to find any chemical companies talking about single-use plastic," SASB board chair Jeffrey Hales said. Chemical companies recognize the social, environmental and regulatory concerns around single-use plastics, he said, but might be worried about future regulation. While chemical companies wait for a legal definition to come along, Hales himself might be contributing to the confusion. "I carry a plastic fork and knife everywhere I go, but I've been carrying the same ones for five years," he said. "If everybody did that, there would be a lot less concern about the regulation of these things." WHAT WE'RE CLICKING — Rising energy prices could have an unintended consequences: fueling a surge in home weatherizations. Get the latest from Bloomberg. — Not all plastic recycling is created equal. "Downcycling" is the most likely end result for plastics, and one French company is looking to improve the process, The Atlantic reports. — The Wall Street Journal explores how oil giants' years of big bets on conducting business with Russia fell apart in just days.   DON'T MISS POLITICO'S INAUGURAL HEALTH CARE SUMMIT ON 3/31: Join POLITICO for a discussion with health care providers, policymakers, federal regulators, patient representatives, and industry leaders to better understand the latest policy and industry solutions in place as we enter year three of the pandemic. Panelists will discuss the latest proposals to overcome long-standing health care challenges in the U.S., such as expanding access to care, affordability, and prescription drug prices. REGISTER HERE.       Follow us on Twitter Catherine Boudreau @ceboudreau Debra Kahn @debra_kahn Greg Mott @gwmott Lorraine Woellert @Woellert Jordan Wolman @jordanwolman   Follow us

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