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25 Nov 2021

Egbert Wesselink, PAX

Opinion: Dow Jones Sustainability Indices includes alleged war criminals Lundin despite claims to exclude companies with negative ESG activities

[…] Five days after the Swedish Prosecution Authority formally indicted Chairman Ian H. Lundin and Director Alex Schneiter of Lundin Energy for complicity in war crimes, their company was included in the S&P Dow Jones Sustainability Indices (DJSI). According to the Swedish public prosecution, Lundin Energy's operations in Sudan caused and contributed to war crimes. And by failing to know and address its human rights impacts, the company flouts the key requirement of the UN Guiding Principles. S&P Dow Jones prides itself of "combining rigorous company analysis, robust methodologies, and cutting-edge modelling to deliver state-of-the-art indices for ... ESG benchmarking.'' It claims to "exclude companies with activities in key negative ESG areas" […]

DJSI is only the last ethical rating company that believes that Lundin Energy is praiseworthy. The company achieves top quartile performance with MSCI (AA rating), Sustainalytics (Medium Risk, top 5% in the industry), CDP (A-rating), Moody’s V.E (Top 3 industry leader) and ISS ESG (Prime Status), and is a constituent of the FTSE4Good Index.

These ratings create a false impression and misguide investors. Many ethical investors believe that DJSI , FTSE4Good and the others are benchmarks for ethical investing. They are not. While some of them refer in their explanation to Lundin's direct links with war crimes, none of them gives this much weight. An indictment for the worst crimes known to mankind does affect one's ESG rating. Whether the company’s response to this ‘controversy’ is in line with its human rights obligations is not factored in at all […]

The inclusion of Lundin Energy in all important ESG indices shows that they need urgent reform. In addition to reviewing the system of issue offsetting, rating agencies should substantially raise the weight of salient issues […]