During the meeting of the task group on responsible investment (ESG — finance) on October 28th, which included the topic of “green” financing, The Diagnostic Overview “Green Finance: the Agenda for Russia” (hereinafter: the Diagnostic Overview) was presented to the Expert Council on the Long-Term Investments Market at the Bank of Russia.
The Diagnostic Overview analyzes green trends in the global economy, the prerequisites for creating a green finance market in Russia, the organizational and legal frameworks for its formation and development. The document also provides an estimate of the market size, including an expert sample of potential issuers of green bonds in Russia.
As of September 1st, 2018, approximately 50 Russian companies, which are somehow active in the field of sustainable development and green investment, made 420 issues of corporate or concession bonds worth 6.5 trillion RUR in total. 37 of the issues worth 1.3 trillion RUR total are included in the List of securities admitted to trading on the Moscow Exchange and are planned for placement. When forming the national verification system for green bonds, which should be synchronized with existing international systems and at the same time take into account the peculiarities of the structure of the Russian economy, a number of issuers from this List have good chances for green marking of bonds.
In addition, the Diagnostic Overview developed a roadmap for the development of the green finance market in Russia, which includes, in particular, the task of developing an ideology and a consolidated position of regulators regarding the green finance market at the national level, a set of measures to create a unified national methodological center in the field of green finance.
Opening the meeting, Elena Chaikovskaya, the Advisor to the First Deputy Chairman of the Bank of Russia — Shvetsov, noted that the Diagnostic Overview presents an executive summary of the main events that occur in the Russian and foreign markets today and analyzes the activities of the main participants of the green finance market. The Diagnostic Overview was posted on the Bank of Russia’s website.
Denis Grigoriev, Head of the Department for Strategic Development of the Financial Market of the Bank of Russia, noted that the work on the “green note” showed that Russia already has a number of initiatives and projects that are green in nature and internal ideology as well as that there are bond issues that meet international green criteria, but don’t have green markings. Denis Grigoriev supports the interaction of all participants in the financial market to create a national system of verifiers in Russia.
Svetlana Bik, Executive Director of Concessionaires and long-term infrastructure investors National Association(COLTI), Chairman of the Expert Council on the Long-Term Investments Market at the Bank of Russia, noted that the green theme had recently entered the agenda of the Bank of Russia: the main directions of the development of the financial market of the Russian Federation were published on the regulator’s website for the period 2019–2021, where it is recorded that global challenges associated with climate change, accumulated environmental damage and reduced biodiversity have contributed to the creation and development on the international financial markets and specialized institutions and financial instruments for sustainable development, including "green" bonds. Russia will also have to get involved in the global process and work on the task of creating a national system of financial instruments for sustainable development and organizing the methodological and verification systems for responsible financing instruments.
Mikhail Babenko, Director of the Green Economy Program of the World Wide Fund for Nature (WWF Russia), drew the attention of the meeting participants to the understanding of international environmental organizations that it is not always possible to protect the environment by creating a conservancy area or creating measures to combat poachers. It is much more effective to work together with businesses and government agencies to create conditions for the development and improvement of environmental protection. In 2015, the “Sustainable Development Agenda to 2030” was adopted, which included 17 global Sustainable Development Goals, in the creation of which the World Wildlife Fund participated. According to Mikhail Babenko, all over the world, investors are starting to consider participation in environmental projects as new business opportunities that bring not only economic, but also a great social effect.
According to Kirill Bogomolov, the leading consultant of the Department of International Financial Relations of the Ministry of Finance of the Russian Federation, a large demand at the interstate level for the development of common criteria and principles of the green market is now clearly defined in the world. He noted that Russia lacks a common understanding of green funding, which is why the expert community should continue to work on defining the concepts themselves. The next step in the development of the market should be the transition from the format of expert discussions to the format of an official document. The Ministry of Finance of Russia is ready to continue working on the development of this area together with the Bank of Russia and the expert community.
Sergey Sementsov, Head of Green Economy at the Vnesheconombank (VEB) Institute, believes that national projects that are currently being formed and approved in Russia have raised the issue of green financing to a completely different level. The national project "Ecology" and the expansion of the list of applications of the best available technologies make green projects particularly relevant in the coming years. This means the highest level of need for organizing the financing of such projects.
Yuri Sizov, First Deputy Director of CJSC “Leader” (the Company on the management of pension fund assets), drew attention to the fact that right now Russia is moving in the same direction with the Western world in forming a market for green finance. The Diagnostic Overview shows that in our country there are already a number of bond issues that can be verified as green, and a number of issuers who are ready to issue green bonds in the future. The state is increasingly actively addressing the issues of building a green market in Russia: regulations are being adopted in relevant ministries, working groups are being formed, including the involvement of the expert community.
According to Dmitry Grishankov, the president of the RAEX rating agency, the system of green financing in Russia is at the early stage of formation, but over the next 10 years it will be fully formed: market leaders will be designated, ideology will be formed, the main criteria will be defined. That is why, in his opinion, cooperation between the regulator and the business community in the process of establishing the market for responsible financing in Russia is especially important.
Pavel Besshapov, President of JSC "Waste Management" spoke about the company's experience in the implementation of concession projects in the field of MSW management in Russia. The company “Waste Management” implements 11 concession projects in the field of municipally solid waste (MSW) management in 9 regions of Russia.
In March 2018, JSC Waste Management supported the initiative of Concessionaires and long-term infrastructure investors National Association in the field of sustainable development and green investment and voluntarily disclosed information on sustainable development and green investment activities in the non-financial part of its reporting. In addition, Pavel Besshapov believes that the company's activities are consistent with all the goals of sustainable development. JSC Waste Management is ready to go through verification as an issuer of green bonds.
The following experts have participated in the development of the Diagnostic Overview “Green Finance: the Agenda for Russia”:
- Svetlana Bik, Executive Director of Concessionaires and long-term infrastructure investors National Association (CoLTI), Chairman of the Expert Council on the Market for Long-term Investments under the Bank of Russia;
- Denis Grigoriev, Head of the Financial Market Strategic Development Bank of Russia;
- Kirill Bogomolov, leading consultant of the Department of International Financial Relations of the Ministry of Finance of the Russian Federation;
- Maria Golovko, Head of the CoLTI information and analytical department;
- Natalia Ponomareva, Head of the Sustainable Development Department of Eurasian Organization for Economic Cooperation;
- Mikhail Babenko, Director of the program "Green Economy" of the World Wildlife Fund (WWF Russia);
- Sergey Sementsov, Head of the Green Economy Department at the Vnesheconombank Institute;
- Victor Popov, CoLTI analyst.
In addition, when preparing the Diagnostic Overview, information and materials on the project were used, provided by experts from the Ministry of Finance of Russia, Moscow Exchange, CJSC “Leader”, Sberbank, NIFI, etc.
The task group on Responsible Financing (ESG-finance), including the “green” financing was created in the framework of the Expert Council on the Long-term Investment Market under the Bank of Russia in March 2018. The purpose of the task group is to analyze and develop proposals for the formation of a green market in the Russian Federation.
The Diagnostic Overview in English is published on the official website CoLTI here.
Information Agency INVESTINFRA investinfra.ru