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ESG in Focus: A Case Study in How Companies are Responding to the War in Ukraine

Jim Madden, CFA

Protecting human rights and humanitarian principles are cornerstones of ESG investing. Since Russia invaded Ukraine, we’ve received an increase in questions regarding how ESG-focused businesses are responding, and what we can take away from these responses. What we’ve seen since we first began managing sustainable portfolios is that companies that demonstrate ethical behavior not only in “easy times” but also in times of upheaval and show a commitment to the people in the markets they serve are ultimately better positioned to thrive. As such, we are closely following how companies around the world are demonstrating their commitment to ESG through concrete actions in support of Ukraine.

One example that stands out is Jerónimo Martins, a food retailer and distributor focused on providing sustainable and locally sourced products at affordable prices. Though founded in Portugal in 1792, Jerónimo Martins’ greatest success has come in the past 25 years, mostly due to global expansion. It entered the Polish market in 1997 through its acquisition of Biedronka, a discount grocery chain. This foray was very successful, and Poland now accounts for around 70% of total company revenues. Jeronimo Martins’ financial success has been accompanied by a similarly strong showing across ESG pillars, such as fostering inclusion, and success with climate and water programs.

We Believe Strong ESG Characteristics and Financial Performance Are Related

Highlights below are from the company’s recent 2021 results presentation, under the heading “Important steps to deliver on our corporate responsibility pillars.”

corporate responsibility pillars

Source: Jerónimo Martins, “2021 FY Results.”

A Pledge to Customers and Support to Ukraine and Refugees

The presentation also included a strong statement addressing conditions in Poland. With more than 3 million Ukrainian refugees entering Poland due to the war and inflation nearing double digits, Jerónimo Martins stated in no uncertain terms that it would remain committed to the Polish people and their effort to help Ukraine. That commitment comes in the form of investing in price to keep food affordable even at a cost to company profitability. This pledge should benefit the business long-term but as the company responded when asked, the decision to invest in price was made for a mix of moral and business reasons. 

Additionally, the Jerónimo Martins Group offered a donation of €5 million that will go to organizations working to support the people of Ukraine. This amount is an addition to €2+ million that Biedronka had recently set in motion for assistance.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. Opinions are subject to change due to changes in the market, economic conditions or changes in the legal and/or regulatory environment and may not necessarily come to pass. This information is provided for informational purposes only and should not be considered tax, legal, or investment advice. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations.

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