Recently, we have transferred proposals to state bodies for the implementation of ESG-printing in the Russian financial sector, prepared on the basis of the research work of the State Privalry of the RANEPA. Russia has noticeably lagged behind in this important issue, but the gap can be reduced. This is what we offer.

A bright future

At the beginning of the XXI century. Human civilization has formed a new image of a bright future in which economic, natural and social coexists in harmony (ESG), and actively embeds it into life. The leading role is played by the financial sector and private investments. So far, international financial organizations and national governments are sitting in search of “financing for sustainable development”, private investors of “sustainable finance” have turned the world. According to the initiative “Principles of responsible investment” (PRI), the total value of assets managed in accordance with ESG-princes, from 2006 to 2020, increased from $ 6.5 trillion to $ 103.4 trillion (more the first assessments of the nominal global GDP 2020). On the responsible (following ESG-princes) investors in some developed countries are at least half of all investments under professional management.

This forces legislators, corporations and financial intermediaries to adapt to new norms and rules, stimulates the revision of fundamental ideas about the economy and finance.

Russia clearly lagged behind in the movement to a bright future, we have formed obstacles to introduce the concept of sustainable development.

What interferes

The first question that is asked: will the corporations be satisfied for which following this concept means additional costs? Indeed, it is pointless to bear additional costs without proper compensation.

In the rest of the world, the corporations following the ESG-instruments receive such compensation in the form of rapidly growing additional demand by responsible investors. But in Russia, there are almost no responsible investors, and the arrival of foreign ones is now impossible - not only due to sanctions, but also due to the disgusting image of Russia precisely among responsible investors. Such an image was formed by many years of causing ignoring by many Russian environmental agenda corporations in their production activities.

But another obstacle is more important. In developed countries, powerful wide coalitions for sustainable development have developed. They include leading political forces represented in parliament, presidents and national governments (in a number of countries - very actively promoting a new development paradigm), a significant part of corporations, financial organizations, experts, consultants and auditors. In Russia, supporters of the activation of environmental and social policy are mainly in the "non -systemic opposition" (environmental activists are sometimes killed), the government and financial organizations as a whole are still neutral, the corporations are more likely against (although some began to demonstrate to their foreign partners to commit a new paradigm). Active position “FOR” - with audit companies (which is natural, this is a new earnings), state corporations of VEB.RF and the Moscow Exchange; The Bank of Russia begins to “move”.

There is a third difference between Russia and the world that complicates the implementation of sustainable finances. In developed countries, a personal example of large investors and businessmen who enjoy authority in society who created stable investment funds (including will) was of great importance. In Russia, the authority of entrepreneurs is much lower, their actions are not an example to follow society, respectively, there is no initial push.

Carbon offshore

In the absence of significant internal incentives for the introduction of ESG-princes, the separation of the civilized part of the world from Russia in movement to sustainable development created (for some reason unexpectedly for the state-like snowfall in December) an extremely unpleasant alternative. Either Russian corporations are subject to additional fees for the right to supply their products to the main foreign trade partner, and the potential for attracting foreign investments by them is reduced sharply, or the principles of sustainable development are actually introduced in the maximum short time, and the principles of sustainable finance are actually being implemented.

When choosing the first option, Russia turns into a “carbon offshore”. European experts, analyzing the consequences of Green Deal, warn that “the release of Europe on dependence on fossil fuel will inevitably adversely affect a number of regional partners and can even destabilize them economically and politically”, clarifying that this influence will be most powerful for Russia, especially after 2030

The choice of the second option implies the most active efforts of the state in the maximum rapid implementation of ESG prints. But how to achieve this?

Revolution from above

In a situation where there are no responsible investors, and the total production of green bonds is 0.15% of the corporate bond market, the introduction of sustainable finances in the Russian financial sector as the “main blow” requires the transition to “carbon neutrality” of the Bank of Russia during clamp operations and operations of the repo. He assumes that the Central Bank will give priority to green bonds when forming a pawnshop list, repressing bonds of “dirty” issuers (the European Central Bank stated on such a transition in October 2020; the Swedish Rixbank has stopped buying “dirty” issuers this year). Only this will quickly form an interest in buying green bonds from private investors.

After that, other measures can and should be introduced - a careful introduction of requirements for the composition of the portfolios of institutional investors providing for the availability of stable finance tools; standardization of stable finance tools and their verification procedures; tax incentives; Significant changes in the field of corporate governance, accounting, audit, etc.

In addition to financial, there are other measures to transition to sustainable development:

mandatory adherence to ESG-Princips (confirmed by European ratings) to obtain permits for mining;
release of state and municipal green and social bonds;
investing funds of the national welfare fund only in green and social investment projects;
Development of a welfare budget that takes into account environmental and social effects, which in the future could replace the state budget (as has already been done in New Zealand).

While the developed countries dreamed of a bright ESG-Black, the Russians were picking in the communist and feudal dark past, touching the uniqueness of the union of European and Asian. With the beginning of the introduction of ESG-princips, it became clear what to choose-either European civilization, or the wildness of the people and the nomadicism of the elites. The rapid growth of the share of responsible investors in the world and the European Green Deal most exacerbated the alternative. Either we, as a lousy sheep, European partners and world investors will drag the ark of civilization into the Noah, or we will drown the occupiers in the mentality of the Horde: "We came - pledged - left."

How to quickly introduce ESG in Russia