Pension trustees should speak with their investment consultants and managers to assess any direct exposure to Russian investments amid global sanctions, Sackers has said, emphasising the need to consider any potential exclusions from a financial perspective.

The pensions law firm encouraged trustees to check that their managers and custodians have effective measures in place to comply with the sanctions introduced as part of the global response to Russia's invasion of Ukraine.

Sackers acknowledged that many UK pension schemes have extremely low exposure to Russian entities, as most developed market benchmarks will have no direct exposure to Russia and exposure in emerging market indices will often be relatively small.

However, it suggested that where trustees do have direct exposure, and the investment managers are not already taking action, they could consider introducing their own scheme-based and targeted divestment policy.

According to the firm, a financially motivated divestment policy will usually be easier to implement than a non-financially motivated one from a legal perspective, although Sackers emphasised that, in either case, investment and legal advice will be needed.

It also acknowledged, however, that many issues that start out as non-financial can quickly become financial, such as where an issue translates into reputational damage, clarifying that financial investment case for divestment may often be found to mirror a non-financial issue

More broadly, the firm noted that there are also practical considerations to any divestment decisions, pointing out that any exposures within passive mandates would likely require discussion with the manager to apply an overlay to the index being tracked.

The firm also highlighted reports that Russia's central bank has ordered brokers to suspend the execution of all orders by foreign legal entities and persons who want to sell off their Russian investments, warning that this could bring practical challenges for any immediate divestment policies.

Member awareness also presents another consideration, as Sackers suggested that trustees may wish to make a statement to their scheme members about any actions being taken.

The firm also suggested that trustees without direct exposure to Russian entities within their investment portfolio may need to consider any indirect exposure by virtue of the business activities or subsidiaries of the non-Russian companies it is invested in.

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