MGIMO Centre for Sustainable Development and ESG Transformation Digest #14

MGIMO Centre for Sustainable Development and ESG Transformation Digest #14

7 June 2023

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

The thirteenth issue is focused on the latest developments in the above-mentioned areas that were in the spotlight in April 2023. The originals of the news are available via active links in the text.

Sustainable finance

According to the review titled “Future of Sustainable Finance Market: Shock Followed by Growth”, issued by Expert RA, a rating agency, Russia’s sustainable finance market is recovering after the challenging 2022. In 2023, analysts expect 8 new ESG bond placements and substantial market growth, to 400 billion rubles. The review also puts special focus on the situation in Russia’s ESG-linked loans and carbon units market.

In order to make information on sustainable loans more transparent, Russia’s Central Bank is planning to issue recommendations for financial sector companies in the first half of 2023.

The Russian Ministry of Economic Development together with VEB.RF have developed a draft taxonomy of social projects. The social taxonomy will be the final element of a system of sustainable financing in Russia. Business representatives, however, point out that there are not enough financial resources available to implement green projects. In order to create and maintain a full-fledged sustainable finance system, Russia needs not only to create the infrastructure, which includes the taxonomy, but also to subsidize it.

Russian banks continue to implement their ESG strategies and carry out the following projects:

  • Center-Invest Bank has implemented a methodology for assessing the carbon footprint of mortgage loans. The methodology allows to assess the projected amount of greenhouse gas emissions from the consumption of all energy resources in an apartment block.
  • DOM.RF Bank has published its first sustainable development report for 2022, featuring the issue of green mortgage securities in the amount of 5.5 billion rubles, as well as three issues of social bonds.
  • According to its recent announcement, Sber is developing recommendations for the sustainable development of the Khanty-Mansi Autonomous Okrug. Based on ESG diagnostics, strategic goals will be set to improve the investment attractiveness of the region and the standard of living of the local population.

Other news on the topic:

17.04.2023 Expert Council on Sustainable Development and Green Finance Meeting Was Held at Moscow State Law University

21.04.2023 ECB: Banks Not Ready for Climate Disclosure Rules

25.04.2023 Singapore and Hong Kong to Become Asia’s Centres of Sustainable Finance

26.04.2023 Green Bonds Will Help Purchase Electric Buses for Moscow

Useful materials:

A Review of Sustainable Development Strategies and Practices of Russian Financial Institutions by National Rating Agency (NRA). April 2023

Future of Sustainable Finance Market: Shock Followed by Growth. A review by Expert RA  

Climate policy and carbon regulation

The climate agenda is having an increasingly powerful effect on European and American societies.

  • The actions of the so-called “climate stickers” – activists of the German Letzte Generation (Last Generation) movement – who glue themselves to autobahns and runways, have led to a discussion on possible punishment for climate activists. Initially, penalties for protesters were limited to warnings and fines, and in the recent weeks some German courts imposed prison sentences on some climate campaigners. A similar tightening of punitive measures is underway in the UK, where two representatives of Just Stop Oil movement were sentenced to three years in prison.
  • Climate activists from the United States have proposed to reject the term “natural gas”, which has been in use for about 200 years, arguing that it inaccurately casts the substance as a clean, green source of energy. They suggest using the terms “methane gas” and “fossil gas” instead.
  • Germany has shut down its last three nuclear power plants. In Berlin, Munich and Baden-Württemberg, hundreds of anti-nuclear Germans took to the streets to celebrate the shutdown of the reactors. A significant part of the nation, however, does not support this decision or doubts its soundness.
  • Having rejected Russian natural gas and with discussions about the “greenness” of nuclear energy going on, Europeans and Japanese have had to buy liquefied natural gas (LNG) from the United States. However, environmental experts note that extraction, transportation of LNG, as well as construction and operation of the LNG-related infrastructure leads not only to higher costs, but also to significant carbon dioxide emissions. Comparatively, the carbon footprint from nuclear power and pipeline gas is lower than that of LNG. For example, the carbon footprint of Russian gas previously supplied to Europe via Nord Stream was four times lower than that of LNG supplied to Europe from the United States.

Other news on the topic:

01.04.2023 86.5 Billion Rubles Have Been Allocated for the Development of Electric Transport in 10 Russian Regions

06.04.2023 2022 Saw an Increase in the World’s Coal Power Plants Capacities

11.04.2023 Europe’s Green Hydrogen Rush in Africa Risks Energy “Cannibalization”

12.04.2023 A Record Amount of Electricity Was Produced from Wind and Sun in the World in 2022

16.04.2023 G7 Has Agreed to Reduce Car Emissions by 50% by 2035

17.04.2023 G7 Ministers Have Set New Targets for Solar and Wind Capacity

18.04.2023 EU Plans to Reduce CO2 Emissions by 62% by 2030

27.04.2023 EU Has Adopted 5 New Regulations to Reduce Greenhouse Gas Emissions

Useful materials:

“Climate Agenda: Challenges and Opportunities”. A recording of the lecture by Irina Petrunina, Director of the Department of Competition, Energy Efficiency and Ecology of Russia’s Ministry of Economic Development

“Russia is Still the World Leader in the Nuclear Industry”. An interview with Igbal Guliyev, Deputy Director of MGIMO Institute of Energy Policy and Diplomacy

Corporate ESG transformation

In terms of corporate ESG transformation, the regulatory framework and practices of non-financial reporting are being developed:

  • At the plenary session of the Russian Union of Industrialists and Entrepreneurs (RSPP) Congress it was instructed “to consider annual publication of non-financial statements by large Russian companies”.
  • En+ and RUSAL have published reports for 2022, and Sakhalin Energy has publicly verified its report at RSPP.

ESG ratings are also a crucial part of the ESG infrastructure. There has also been progress in this area:

  • In April 2023, two new climate-related rankings were published. The first one is the RAEX ranking titled “Top 50 Climate-Friendly Companies”, which is based on open information about climate actions of companies in the real sector. The second one is the Climate Efficiency Ranking of the Institute of Global Climate and Ecology, which is based on questionnaires filled out by Russian companies. Interestingly, the top 3 companies in the second ranking (Severstal, Gazprom and En+) have received completely different grades at RAEX (Severstal is the 10th there, Gazprom is the 21st, and En+ Group is the 18th).
  • RBC and National Credit Ratings have launched the second ESG index, which evaluates a company’s ESG profile. In 2022, 115 companies received the index.
  • ESG Alliance has approved the methodology proposed by NRA for assigning ESG ratings to companies of the financial and non-financial sector. The Alliance is poised to recommend the NRA methodology to large businesses, as well as across supply chains.

Russian companies continue their ESG transformation:

  • Rusal has once again been ranked one of the best sustainable suppliers in EcoVadis rating, having improved its grade and received the “silver” status.
  • Metalloinvest has stated that 44 per cent of its suppliers fill out a questionnaire to assess their ESG profile.
  • VK has established its ESG principles and approved its sustainable development policy.
  • MTS has launched its social project nicknamed “This Concerns Us”, which is a special online platform to support charity in Russia.
  • Aerodinamika, a holding which runs the airports of Sochi, Krasnodar and Anapa, has disclosed information about its ongoing projects in the field of sustainable development.

Other news on the topic:

03.04.2023 ESG-ranking of Russian Companies (April 2023)

04.04.2023 New Research Shows Companies Built for the Future Are Generating Shareholder Returns Almost Three Times Greater Than Those of the S&P 1200

10.04.2023 ISSB Gives Companies an Extra Year on General Sustainability Reporting to Allow Focus on Climate Disclosure

17.04.2023 Do ESG Efforts Create Value?

18.04.2023 There Will Be No Gender Equality for at Least Another 50 Years, World Bank Says

19.04.2023 CDP’s Environmental Disclosure System Opens for Reporting on Plastics for First Time at Request of Investors with US$130+ Trillion in Assets

20.04.2023 ESG Agenda Has Not Been Abandoned, but “Slowed Down”

22.04.2023 Russians’ Most Frequent Eco-Habits

24.04.2023 “ESG Transformation, a New Stage of Development” Forum Results

25.04.2023 A New Award for Green Office Tenants

27.04.2023 Roskachestvo to Finalize “Green” Standard Before Making It a New GOST

28.04.2023 Non-Financial Reporting Is a Time Challenge

25.04.2023 Corporate Sustainability: Firms to Tackle Impact on Human Rights and Environment

Useful materials:

EMM. Rate Rating Agencies 2023: ESG Ratings at a Crossroads

Environmental protection

Elimination of landfills and waste recycling remain priority area of Russia environmental policy.

One of the ways to reduce the amount of waste is to introduce extended producer responsibility (EPR). In April 2023, Russian government approved the draft law on EPR: from now on, the manufacturer will be responsible for the disposal of the packaging, and fines for non-compliance with the requirements will apply. “We have proposed to oblige manufacturers to dispose of the entire volume of packaging from January 1, 2027 and introduced requirements for recyclers, who are the main executors of EPR. The law will also be very useful for the industry of municipal solid waste (MSW) management. Let me remind you that this industry has just emerged in Russia and is facing plenty of challenges. Its development took decades in other countries. We are making every effort to make it work in our country, too”, Victoria Abramchenko, Deputy Prime Minister, said.

The Russian Environmental Operator (REO) has financed the construction of three waste recycling facilities in the Moscow region. The total investment amounted to 6.1 billion rubles. The funds, which had previously been raised through bonds issues, were allocated in the form of preferential loans. The bonds were fully repurchased by a debt purchase agreement with Sberbank. Once the new capacities are put into operation, the three facilities will be processing 2.85 million tons of waste per year. According to the latest REO press release, it is planning to invest 3.9 billion rubles in the construction of two waste processing plants in Bashkiria.

Another important area of environmental protection is the elimination of accumulated environmental damage.

The Siberian Branch of the Russian Academy of Sciences continues to work on technologies for processing, recycling, and neutralizing the waste stored at the landfill of the Baikalsk Pulp and Paper Mill. The federal government will allocate 22 billion rubles for the preservation of Lake Baikal in 2023-2025 and is actively working to reduce the anthropogenic load on the Baikal natural territory.

Other news on the topic:

05.04.2023 Drug Blister Packs Will Be Collected in Pharmacies and Hospitals

10.04.2023 Russia Plans to Spend 290 Billion Rubles on Environmental Protection in 2023

18.04.2023 SCO Ministers Have Discussed Environmental Cooperation

20.04.2023 State Duma Has Adopted Amendments to Subsoil Law

26.04.2023 Sustainable Development in Russia in 2022

26.04.2023 Regional Operators Will Start Monitoring Waste Disposal through Mobile App, REO Said

Useful materials:

”Recycling of MSW Can Be Eco-Friendly”. A radio broadcast with Andrey Lyapin, graduate of the Department of International Complex Problems of Nature Management and Ecology of MGIMO

”Fast Fashion” Dumped in the Desert

Authors: Andrey Avramenko, Sofia Denisova
Editor-in-chief: Capitolina Tourbina
Translator: Stanislav Shurygin
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:

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