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Sustainable trade

Russia, Myanmar, and the evolving face of ESG

Published 05 April 2022

In Myanmar and Russia, a series of unique circumstances interacted with shareholder and other sources of activism to prompt corporate exits from both countries. While this raises questions about the salience of the S component in environmental, social, and governance (ESG) frameworks, the exodus of multinationals provides an important precedent and reference point for future ESG responses.

Environmental, Social and Governance (ESG) investment is becoming increasingly mainstream. As of March 2022, notional ESG investments accounted for one in three dollars of total US assets under professional management – that amounts to US$17.1 trillion.[i] So far, its overall influence has long been disproportionally weighted towards environmental imperatives.[ii] Yet, in recent times, concerns about social issues and human rights figure prominently in two corporate exoduses – first in Myanmar and most recently in Russia.

Do corporate exits based ostensibly on human rights signal an elevation of the “S” component in ESG? In practice, the situation is not without some nuance.

Post-coup Myanmar

The military coup in February 2021 led by Senior General Min Aung Hlaing was widely condemned by Western nations and the more democratic nations of the Asia Pacific. Activist pressure from a variety of groups quickly followed, directly questioning the social license of multinational companies who had flocked into Asia’s “last frontier.”[iii, iv] Multinationals (and Chinese SOEs) were integral to Myanmar reaping record levels of almost US$5 billion of FDI in 2017 – equivalent to over 7% of GDP.[v]

At first, the pull-out of high-profile international companies was mostly limited to companies in direct partnership with military-owned businesses. Shortly after the coup, Korean steelmaker Posco and Japanese brewer Kirin announced plans to end respective joint-ventures with the junta-controlled Myanmar Economic Holdings (MEHL).[vi] Both cited human rights and/or activist pressure.[vii]

However, long before the coup, a United Nations report in 2019 had flagged MEHL as a significant source of revenue for the Tatmadaw, the armed forces widely accused of human rights abuses against minority groups in Myanmar.[viii] Alongside sister military conglomerate Myanmar Economic Holdings, MEHL funnels at least US$325 million annually to the Tatmadaw.[ix] Without the renewed focus on Myanmar following the coup, both Posco and Kirin may have continued their partnerships with MEHL.

Posco’s announcement occurred after US sanctions in March 2021 called into question the future viability of any ongoing commercial relationship.[x] Yet Posco has continued its partnership with state-owned Myanmar Oil and Gas Enterprise (MOGE) and is planning to significantly increase its investments.[xi] Posco justified its ongoing relationship with MOGE on the basis that withdrawing its 51% stake from the Shwe gas field could disrupt the power supply for civilians.[xii]

Self-interest aside, Posco’s positioning begs the question as to what an optimal ESG response entails. Are there are clear answers about the balancing of competing human rights imperatives?

Notably, operators in many industries less financially linked to the junta – such as the garment sector, a major local employer – have opted to remain in the country.[xiii] Some exceptions stand out. France’s renewables giant Voltalia, which provided electricity to remote communities lacking connection to the grid, exited Myanmar, citing the “political and humanitarian crisis”. The first two months of 2022 have also seen significant exits, especially in the oil and gas sector collectively worth billions.[xiv] Revenue from this sector (and the broader extractive industry) comprises approximately 50% of the junta’s foreign currency, over 35% of exports and at least 5% of GDP, and is crucial to the Tatmadaw’s military procurement.[xvxvi] Chevron, TotalEnergies, Woodside, and Shell announced plans to leave Myanmar, citing human rights considerations.[xvii] The withdrawal was a substantial about-face for Chevron in particular, as the company had reportedly previously lobbied Congress to protect its local energy interests from sanctions.[xviii]

It is difficult to quantify how much the generally deteriorating economic and security environment – and the threat of further sanctions – also factored into multinational decision-making. It is not inconceivable that corporate withdrawals framed in terms of human rights were largely motivated by other factors in a market that was already relatively marginal.

However, at least in the case of the EU’s sanctions on entities including MOGE, it is possible that Total’s exit may have provided an extra political impetus. Sanctions were likely necessary to legally justify Total discontinuing contractual payments to MOGE.[xix]

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Of course, it remains unclear whether the corporate exodus will encourage the Tatmadaw to abide by international conventions on human rights. In March 2022, Thai state firm PTTEP moved to take over operation of the Yadana gas field previously operated by TotalEnergies.[xx] This will prevent disruption to Yangon’s power supply and mitigate the damage to the Tatmadaw’s bottom line.

Russia’s invasion

The departure of multinationals from Russia after the invasion of Ukraine, aptly described as the “first European war in the ESG age”, was astonishing in its rapidity.[xxi] As of late March 2022, more than 400 companies have left Russia or suspended operations.[xxii] Major companies choosing to remain in Russia, such as Koch Industries and Subway, are now quickly becoming the exception to the rule.[xxiii]

Nor has the exodus been limited to Western companies. Reflecting the increasing prominence of ESG in Japan, the Keidanren (Japan’s pre-eminent business lobby) publicly argued that it was unjustifiable to work with a country that has “forcefully disrupted international affairs”.[xxiv] Nissan, Mitsubishi and Toyota have all left Russia or suspended operations, as has Uniqlo – after its initial pledge to stay in Russia was lambasted on social media.[xxv]

However, as is the case with Myanmar, it is difficult to view all corporate exits as being an unalloyed victory for ESG.

Take the case of BP and Shell’s Russia exit. BP’s 19.75% stake in oil giant Rosneft and Shell’s joint ventures with Gazprom had long been controversial. Rosneft oil powers the Russian military[xxvi] whilst Gazprom has long been geopolitically weaponised by Putin.[xxvii] Rather than an ESG awakening, the prompt exit of BP and Shell could instead be construed as a realisation that already awkward partnerships had become politically indefensible.

On a much larger scale than in Myanmar, comprehensive sanctions – coupled with the exit of Visa, Mastercard, and major logistics companies – have deprived investors of basic tools required to do business. Again, this makes it difficult to assess how much shareholder pressure and/or genuine ESG sentiment has factored into corporate decision-making.

Although the exodus is unlikely to change Putin’s calculus in the short-term, it will exacerbate the suffering of Russian citizens, many of whom oppose the war.

Even so, continuing to operate in Russia seems at the very best, starkly amoral.

ESG’s growing influence

In both Myanmar and Russia, a series of unique circumstances interacted with shareholder and other sources of activism to prompt corporate exits from both countries. The specificity of conditions causing company exits in these two cases raises questions about how much salience the S component of ESG has really gained.

Take the case of Siemens and Enel, criticised and in some cases screened from investment for their presence in Morocco-occupied Western Sahara.[xxviii] However, very limited media attention and US recognition in 2020 of Moroccan sovereignty over the contested region made the prospect of global sanctions even less likely. A more limited Myanmar-style corporate exodus is optimistic at best.

Nonetheless, exits from Myanmar and Russia provide an important precedent and reference point for ESG activism. Companies will find it increasingly difficult to justify investment in countries where egregious and well publicised human rights abuses are occurring. “If Ukraine then why not x” will at least have to be answered.

ESG responses will not always be wholly morally adequate, fairly applied, effective or even particularly genuine. Yet, however imperfect some individual responses may be, it is difficult to argue against greater respect for human rights in corporate decision-making. With ESG investment on track to be worth up to US$53 trillion by 2025, it will be difficult to ignore ESG’s evolving face.[xxix]

[i] Daniel Walters & William Manson, “SEC will consider climate disclosure rules for US companies on March 21 – it’s already facing threats of lawsuits”, The Conversation,
[ii] Mark Eggleton, “ESG is a game changer for investors”, Australian Financial Review,
[iii] Yohei Muramatsu & Koya Jibiki, “Myanmar’s economy, once Asia’s last frontier, lies in tatters”, Nikkei Asia,
[iv] Martin Farrer & Ben Doherty, “Ties with Myanmar military put pressure on Western companies”, The Guardian,
[v] Macrotrends, “Myanmar Foreign Direct Investment 1971-2022, Macrotrends,
[vi] Leo Lewis, “Kirin’s flawed exit from Myanmar tests the bounds of ESG”, Financial Times,
[vii] Joyce Lee & Cynthia Kim, “S.Korea’s POSCO C&C says to end Myanmar military-backed joint venture”, Reuters,
[viii] Leo Lewis, “Kirin’s flawed exit from Myanmar tests the bounds of ESG”, Financial Times,
[ix] Foreign Correspondent, “Uncovering the shadowy business empire bankrolling Myanmar’s military generals,” ABC News,
[x] Jacob Atkins, “Myanmar sanctions a tangled web for banks”, Global Trade Review,
[xi] Nikkei staff writers, “Asian majors keep Myanmar gas pumping despite EU sanctions”, Nikkei Asia,
[xii] Ibid.
[xiii] Feliz Solomon, “Doing Business in Myanmar Is Tough, but Norway’s Telenor Finds That Leaving Isn’t Much Easier”, Wall Street Journal,,Hotels%20SA%20are%20among%20them.
[xiv] The Irrawaddy staff writers, “Total, Chevron to Exit Myanmar Amid Rights Abuses,” The Irrawaddy,
[xv] David Hutt, “EU tarries on Myanmar oil and gas sanctions”, Asia Times,
[xvi] Open Development Myanmar staff writers, “Extractive Industries Myanmar,” OpenDevelopmentMyanmar,
[xvii] Emma Connors, “TotalEnergies and Chevron exit Myanmar gas projects”, Australian Financial Review,
[xviii] Reuters staff writes, “Chevon lobbies U.S. officials on Myanmar as sanctions pressure rises”, Reuters,
[xix] David Hutt, “EU tarries on Myanmar oil and gas sanctions”, Asia Times,
[xx] Reena Nathan, “PTTEP to become operator of Myanmar gas field: Update”, Argus Media,
[xxi] Matt Levine, “ESG Goes to War”, Bloomberg,
[xxii] Ryushiro Kodaira, “China exit? Russia crisis has businesses thinking the unthinkable”, Nikkei Asia,
[xxiii] Andrew Jeong & Adela Suliman, “Koch Industries to stay in Russia, says exiting does ‘more harm than good’”, Washington Post,
[xxiv] Toma Mochizuki, “Business exodus from Russia has limited impact on Japanese economy”, The Japan Times,
[xxv] Kanoko Matsuyama, “Uniqlo Fast-Fashion Joins Russia Exodus in Reversal”, Bloomberg,
[xxvi] Katie Prescott, “BP to offload stake in Rosneft amid Ukraine conflict”, BBC News,
[xxvii] Economist staff writers, “How Gazprom helps the Kremlin put the squeeze on Europe”, The Economist,
[xxviii] Carlos Tornero, “UPDATED Storebrand axes Siemens Energy and Enel over Western Sahara links amid ceasefire breach”, Responsible Investor,
[xxix] Bloomberg Intelligence, “ESG assets may hit $53 trillion by 2025, a third of global AUM,” Bloomberg,

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Henry Storey is a senior analyst at Dragoman, a Melbourne-based political risk consultancy. He is also a regular contributor of The Interpreter published by The Lowy Institute.

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