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The ESG Race for USD 30 Trillion of Investment is on
6 June 2019
Responsible investment is a trend driving global economic development

Today, the number of companies which have officially subscribed to the principles of responsible investment as specified by the UN has grown to over 4,000. These companies manage USD 86 trillion. That means that 30 out of the 86 have been allocated [by funds investing on the basis of ESG criteria, – Ed.] specifically for companies which comply with these principles — Oleg Goshchansky, Chairman, Managing Partner, KPMG in Russia and the CIS .

Given current trends and the speed at which they become embedded, not only is acquiring new investors at stake, but more importantly, the is the risk of losing existing investors — Pavel Grachev, Chief Executive Officer, Polyus.

Russian companies are applying sustainable development practices increasingly often

Today, the ESG factor [encompassing environmental, social, and governance factors as principles of sustainable development, – Ed.] comes out top in Russian companies. More and more, it is viewed not as some fashionable agenda, but a genuine issue for the management team — Alexander Shevelyov, Chief Executive Officer, Severstal Management .

For Russia, the ‘E’ [environmental aspect, – Ed.] is the most complicated issue. We have taken the example of Sibur and introduced waste sorting, for example. We are also making every effort to follow trends, and this year are planning to institute a sector for green bonds and sustainable development — Anna Vasilenko, Managing Director for Key Clients and Issuer Relations, Moscow Exchange.

Our production facilities are an important aspect. They focus on safety, minimizing losses that we incur, and transitioning to other technologies in resource use and reducing emissions of pollutants as much as possible — Dmitry Konov, Head of the Administration of the Gusevsky City District Municipal Structure.

Last year, we spent RUB 8 billion just on environmental measures. These included improving the environment around our facilities and implementing high-tech innovations which allowed us to increase production by almost 50% without increasing emissions — Evgeniy Novitskiy, First Deputy General Director, PhosAgro.

Insufficient funds for businesses to embark on sustainable development

ESG is costly. One has to recognize that — Andrey Bugrov, Senior Vice President, Deputy Chairman of the Board of Directors, MMC Norilsk Nickel; Vice President, Interros Holding Company CJSC.

Our topic is related to investment, to money. We all know about the Russian discount [the undervaluation of Russian assets, – Ed.]. All Russian companies suffer to some extent from this — Thomas Blackwell, Chief Executive Officer, Co-Founder, EM.

With regards IPOs by Russian companies, one of the most complicated tasks they and other participants in the process – particularly banks – face in their preparations is to minimize the so-called Russian discount. Unfortunately, this is a real phenomenon — Dmitriy Sedov, Chairman, Goldman Sachs Russia.

It is difficult to assess the effect of abiding by ESG standards

We have encountered an issue whereby the quality of ESG analytics leave much to be desired. It leads to investors receiving distorted information about a company’s profile. We have encountered this on numerous occasions — Andrey Bugrov, Senior Vice President, Deputy Chairman of the Board of Directors, MMC Norilsk Nickel; Vice President, Interros Holding Company CJSC.

Long-term planning and set rules which are not subject to change

On the first question – on ESG – what we have seen is essentially that a number of very large investors, pension funds, sovereign wealth funds essentially have liabilities, so they need to make payments in the very long term. In that context, they want people who are managing money and investment companies to really think about long-term issues — Remy Briand, Head of ESG, MSCI.

The formation of management using ESG principles

Like other stock markets, the Moscow Exchange traditionally focuses on the ‘G’, on corporate governance, and management in general. <...> Our requirements primarily concern the independence of the board of directors and committees — Anna Vasilenko, Managing Director for Key Clients and Issuer Relations, Moscow Exchange.

Of the three letters which we are discussing today, the most important one from the point of view of investors looking at new Russian companies is probably ‘G’ — Alexei Yakovitsky, Global Chief Executive Officer, VTB Capital .

Correct positioning

The simplest and most obvious method that works – albeit one which is admittedly not always easy to achieve – is to make the perception of the Russian company as close as possible to its international counterparts. This can be done through various means and is easier to do in certain industries. For example, in internet technology it is traditionally easier to do, and the opportunity arises to attract investors which do not focus on emerging markets — Dmitriy Sedov, Chairman, Goldman Sachs Russia.

I think we need to move from an exclusionary policy to what is today becoming more mainstream, which is using ESG criteria to assess the risks, to include these aspects of an investment in your risk management processes — Jean Raby, Chief Executive Officer, Natixis Investment Managers .

The material was prepared by the Russian news agency TASS