Global trends

Handelsblatt International correspondent Torsten Riecke discusses interesting facts and trends from around the world in his weekly column. You can locate it at [email protected]

(Photo: Klawe Rzeczy)

London When it comes to money, the maxim “Put your money where your mouth is!” has long been applied to the financial sector. Almost no asset manager today can ignore the moral assumptions of their clients.

The fierce and partly justified criticism of the so-called ESG criteria does not change that. The “greenwashing” accusations are more a call to take a closer look at where you invest your money than a reason to completely turn off the “environmental, social and governance” filter when investing.

It is even more remarkable that although asset managers create new ethically oriented investments for investors almost every day, they are much less demanding when it comes to selecting their clients. In particular, cooperation between asset managers and sovereign wealth funds of authoritarian regimes is still seen as a “blind spot” in the “moral money” debate in the industry.

This could soon be retaliated: not only because, given geopolitical tensions between Western democracies and authoritarian states, it is increasingly risky to increase the fortunes of dictators who often have blood on their hands. There is also the threat of an image problem that will scare off other potential customers and employees.

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Experts estimate that more than ten percent of the world’s assets under management of around $120 trillion are in sovereign wealth fund accounts of authoritarian regimes. It is not known how much of these funds have been managed by external asset managers, but it is likely to be a considerable sum. According to the Chinese state fund CIC alone, more than 60 percent of its $1.35 trillion is managed by professional asset managers outside the fund.

Banks ignore the growing distance between the West and authoritarian states

This is also one of the reasons why the big Western banks simply ignore the geoeconomic decoupling between Western democracies and authoritarian states.

Last week, US bank JP Morgan and British Standard Chartered received permission from Beijing to expand their asset management in China. American bankers are benefiting from a deal brokered by Donald Trump that allows them to buy out their local Chinese joint venture partners.

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Also European asset managers such as the Swiss UBS they want to strengthen their engagement in China. Western fund managers primarily target the enormous private wealth of the Chinese. But there is also a fierce fight over sovereign wealth funds, and not just in China, but also in Saudi Arabia and other Gulf states.

Until recently, even Russian sovereign wealth funds were being courted by Western financial professionals. The harsh sanctions imposed by the West after the invasion of Ukraine by Russian troops show how risky business with dictator money has become. Even if, according to a new study, less than nine percent of all Western companies involved in Russia have cut ties with Putin’s empire.

In the future, CFOs will find it increasingly difficult to explain to their ethically conscious clients how, on the one hand, United Nations Principles on Business and Human Rights they hold onto their glossy brochures as they become the financial henchmen of dictators. “Put your money where your mouth is” – This should not only apply to investors, but also to their professional asset managers.

More: “Attacked From Right And Left”: America’s Climate Debate Is Blackrock

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