(Bloomberg) -- The head of multi-asset strategies at Robeco Institutional Asset Management is questioning the appropriateness of betting on commodities price gains given the current geopolitical climate.

“Naturally, when you buy an asset, you invest in the opportunity with an expectation that prices will go higher,” Colin Graham, who also co-manages Robeco’s Sustainable Multi-Asset Solutions, said in an interview. “But when there is a humanitarian crisis going on, I’m not sure that speculating on commodities is the right thing to do.”

The sustainable solutions unit he helps run went from being long commodities early last year -- an exposure it held via exchange-traded funds -- to neutral at the start of the fourth quarter. After Russia’s invasion of Ukraine, which has led to extreme price spikes in everything from fuels to grains, Graham stuck with that neutral position. The decision affects about 2.5 billion euros ($2.5 billion) of client money.

To seek to profit on commodities that are under supply constraints due to the war in Ukraine isn’t “aligned with our philosophy,” Graham said.

Graham’s team at Robeco has instead made it a point to “look elsewhere” for returns, including the currency markets. His group is long the dollar against the euro and the yen, which are both trading at multi-year lows against the greenback. 

“If we can add value for clients, then they are happy for us to use the flexibility to avoid certain assets at certain times,” Graham said. “We felt that the commodity price spikes earlier this year weren’t driven by just fundamentals. We didn’t follow the speculative crowd.” 

Read More: Wheat Jumps as Port Attack Sparks Worry Over Ukraine Export Deal

It’s a stance that distinguishes Robeco, which manages about $200 billion in assets, from a growing number of environmental, social and governance investment firms. In Europe, where Robeco is based and where war has upended both politics and markets, ESG equity funds have increased their exposure to the fossil-fuel industry in recent months, according to analysts at Bank of America Corp. 

At the same time, ESG funds that bought up commodities have trounced their peers this year. The MSCI World Commodity Producers Net Total Return USD Index is up about 12%, compared with an 18% decline in the broader MSCI World Index and a 25% slump in the MSCI World Information Technology Index. 

Some investors in commodities contend that the link between speculative demand and spot prices is unclear. They argue that financial market bets affecting the futures market aren’t to blame for higher spot prices, because futures prices tend to converge toward spot prices. But critics point out that such speculation, whether in futures or ETFs, has the potential to provoke price fears that could trigger a policy response akin to protectionism. 

Read More: Pay Debt or Feed People Is Hungry Nations’ Impossible Choice

Either way, higher commodities prices have driven the United Nations’ Food and Agriculture Organization Food Price Index to record highs this year. That’s contributing to significant political upheaval in some of the world’s poorest countries. 

Sri Lanka became the first nation this year to stop paying its foreign bondholders in response to surging food and fuel costs that stoked protests and chaos. Focus has now turned to other net food importers such as El Salvador, Ghana, Egypt, Tunisia and Pakistan -— nations that Bloomberg Economics sees as vulnerable to default.

United Nations Secretary-General Antonio Guterres has said that the world is facing the “real risk” of multiple famines this year. Speaking at an international conference on food security last month, he also warned that 2023 could be even worse, as all harvests look set to be hit by rising fuel and fertilizer prices. 

“This year’s food access issues could become next year’s global food shortage,” Guterres said.

Graham at Robeco said the portfolios he oversees have some exposure to commodity-related companies such as mining, energy and utilities. But he said these companies have offered credible transition plans to demonstrate how they’ll reduce the environmental impact of waste water and slash their carbon footprints. Placing bets on food commodities, however, remains off the table for the Robeco fund manager.

“I’ve seen some poverty and subsistence living when I travel,” Graham said. “That’s something I personally feel strongly about. We can make money other ways that can have a positive impact. It doesn’t have to go through commodities when prices are driven by speculation.”

(Adds size of Robeco assets under management, UN comment on food security)

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