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Digest MCUR №1

The English version of the MCUR Digest (MGIMO Centre for Sustainable Development and ESG Transformation) is a regular information source accumulating the main Russian news in the sphere of sustainable development and ESG transformation, responsible finance and climate agenda.

The first issue is focused on the latest news in the above-mentioned areas that were in the spotlight in Russia in December 2021 and January 2022. The originals of the news are available via active links in the text. English version in published monthly.

Sustainable finance

Sustainable finance is one of the strategic priorities for the development of the Russian financial market. This is evidenced by the Main directions for the financial markets development by the Bank of Russia. They consolidate the vectors of development of the financial sector until 2024. To realize the potential in this direction, a comprehensive and reliable infrastructure of responsible finance is required. Such infrastructure continues to build in Russia.

On the instructions of the Ministry of Economic Development VEB.RF has developed a draft taxonomy for social projects in sustainable development. The draft regulation includes definitions of key terms, a list of target social groups, as well as 10 target areas and types of social projects. Among the target areas are healthcare, education, employment, entrepreneurship and self-employment, affordable housing, sports, culture, art and tourism, affordable basic infrastructure (urban environment, transport, digitalization), food security, food availability, etc. The approval of the taxonomy for social projects, which is planned in 2022, will increase the volume of social bonds and stimulate the implementation of socially important projects.

In terms of green projects, even once the necessary taxonomy has been approved, vague procedures and mechanisms for financing such projects, especially at the stage of verification, as well as lack of market incentives will remain the main barriers to market development. In the report at the Gaidar Forum Mr. Torosov, Deputy Minister of Economic Development, noted that Ministry is working to expand the number of national verifiers of green projects, and a full-fledged verification system can be launched in 2023.

Sovcombank has offered an ESG deposit for corporate clients. The funds placed on such a deposit are directed to environmental, adaptative and social projects. The first deposit was arranged by Evraz plc. Other Russian banks, such as Otkritie and Rosbank, are also considering the possibility of creating similar ESG-investment instruments.

Other news on the topic:

29.12.2021 Centr-Invest Bank Promotes Transformation Of Regional Banks

12/22/2021 Moscow Exchange Upgraded The Sustainable Development Sector And Adjusted Its Requirements For ETFs

11.01.2022 Russian Environmental Operator Set To Bring Green Bonds To The Stock Exchange

12.01.2022 “There Will Be No Rogue ESG At The Bank”, Mikhail Avtukhov Told RBC

13.01.2022 VEB.RF Notes That Investors’ Demand For ESG-Instruments Exceeds Supply

13.01.2022 Sber – Global Internet Stock Fund Received A High ESG-Rating

Useful information:

The Main Directions Of Development Of The Russian Financial Market For 2022 And For The Period Of 2023-2024

Climate policy and carbon regulation

The Russian Ministry of Economic Development is designing legislation on a verification system for green projects, which is planned to be launched by 2023.

Following the European initiative to ban energy-intensive mining, according to a report by the Russian Central Bank, Russia plans to ban operations with cryptocurrencies, since “an increase in mining volumes entails huge electricity consumption and may put other enterprises at risk”.

According to the forecast made in the joint report by WEF and BCG, Russia’s export potential may reach up to 9-10 million tons of hydrogen/ammonia in the next 10 years.

On December 23, PJSC Lukoil and JSC Rusatom Overseas signed a Memorandum on Cooperation, according to it they will cooperate to stimulate the supplies of hydrogen to Romanian refineries, and to develop the production of green hydrogen at Petrotel-Lukoil S.A. later.

Another vector of decarbonization is transport electrification. In this area, RusHydro continues to implement its large-scale Silk Road project with the aim to provide sufficient electric transport infrastructure (80 electric chargers) to 18 regions of Russia to connect Moscow and Khabarovsk. Similarly to the Silk Road project, Green Drive, a Russian company, plans to install 20 fast electric chargers on the M4 highway between Moscow and Sochi. Russian-made electric chargers designed by Parus Electro will allow you to charge the car in less than 30 minutes.

Dmitriy Tortev, member of the Expert Council on ESG-Transformation of the Russian business association “Delovaya Rossiya”: “There is a credible estimation by Mr. Belousov, Deputy Prime Minister, that in order to shift the Russian economy to more eco-friendly energy sources an annual worth of 3.2 trillion rubles for the next 28 years is required. This amount accounts almost 3 percent of Russian GDP, so it can be balanced by the investment component”.

 

Other news on the topic:

21.12.2021 Rosneft Board of Directors Approved Rosneft 2030 Strategy

23.12.2021 Licenses For Construction Of Underground CO2 Storage Facilities Can Be Obtained From January 1, 2022

27.12.2021 Ctrl2GO Group Summed Up The First Carbon Landfill Season

28.12.2021 Ruslan Edelgeriev: “Russia Is Against Mixing The Concepts Of Climate And Security”

20.01.2022 “Russia Will Have To Compensate For The Decline In Hydrocarbon Exports Due To RES”, Expert Says

20.01.2022 Carbon Detox: How And When Will Greenhouse Gas Emissions Decrease In Russia?

Corporate ESG strategies

The ESG-transformation of Russian business is at the stage of institutionalization. At the end of January 2022, the first official meeting of the founders of the National ESG Alliance was held, and the charter and the structure of its governing bodies were adopted. The main governing body of the alliance will be the Supervisory Board, which includes 28 representatives of the founding companies. Andrey Sharonov, ex-president of Skolkovo and former vice mayor of Moscow, was elected as Chairman of the Alliance.

In January 2022, the following changes in ESG-ratings of Russian companies were observed:

  • On January 17, RAEX-Europe published the first update of the ESG-ranking of Russian companies in 2022.
  • NLMK rating was increased by FTSE Russell from 3.4 to 4.3 points (the maximum score is 5.0). NLMK Group has entered the top 3% metallurgical companies in the field of sustainable development.
  • Metalloinvest affirmed its EcoVadis rating at the “silver” level, entering the top-4% metallurgical companies and top-9% most successful companies worldwide. The largest increase in the rating scores was achieved in the business ethics and sustainable procurement.

Within corporate ESG-strategies, the following events of January 2022 should be noted:

  • Uralkali expanded its ESG strategy, supplementing it with goals in employee well-being, product quality, product safety and biodiversity conservation. In addition, in 2021 Uralkali gained the leading position in two sustainable development indices of the Russian Union of Industrialists and Entrepreneurs.
  • Lukoil adopted a Sustainable Development Policy that reflects the company’s stance on sustainable development issues, sets principles, goals and key objectives in this area.
  • A similar document was published by the Pipe Metallurgical Co., OJSC (OAO “TMK”).

Experts from Dentsu Russia, a communication group, and Better, a crowdsourcing platform, together with representatives of brands and retail, have conducted a large-scale study of sustainable development marketing in Russia for 2021 and compiled a guide for marketers for 2022. According to this study, the share of the costs on sustainable development marketing in advertising budgets may grow from 3 to 5 percent. The largest advertisers in terms of media investments in the field of social responsibility in 2021 were IKEA, Nestlé, VK Group and X5 Group.

The share of sustainable development marketing in advertising budgets of Russian companies may grow from 3 to 5 percent in 2022.

Other news on the topic:

10.01.2022 Expert RA Announces A New Methodology For ESG Ratings

10.01.2022 ESG-Agenda Is Reshaping Office Real Estate

15.01.2022 Federal Service For Supervision Of Natural Resources Has Created An Eco-Rating And Will Discuss It With The Russian Union of Industrialists and Entrepreneurs

19.01.2022 Donstroy Certifies First Russian School By LEED

27.01.2022 The IPO Boom in Russia May Continue In 2022, Research Says

Authors: Andrey Avramenko, Sofia Denisova, Polina Raikova, Nikita Savostitskiy, Egor Solovey, Kristina Zakharcheva

Editors-in-chief: Capitolina Tourbina, Andrey Avramenko, Sofia Denisova

Translator: Stanislav Shurygin

Designer: Maria Bakhireva

Disclaimer: The point of view of the MGIMO Centre for Sustainable Development and ESG Transformation may differ from the opinions of the authors of the news cited in the analytical publication. All materials are for reference only, and the MCUR is not responsible for their implementation in practice. The links to news sources used in the compilation of the MCUR Digest are indicated in the text and are active only in online format. The Digest does not use external copyrighted materials or reproduce them. If you have any questions, please contact: mcur@inno.mgimo.ru.

The MCUR Digest is being issued as part of the implementation of the strategic academic leadership program “Priority 2030”.

Department of International Complex Problems of Nature Management and Ecology

MGIMO Centre for Sustainable Development and ESG Transformation