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bne December 2019 Eastern Europe I 55
end of this year as originally planned, say experts.
Gazprom’s other export pipeline projects are also coming to completion. The southern route Turkish Stream is complete and Gazprom announced that it has started loading the pipeline with gas. And on October 31 the Russian
gas giant announced that the Power
of Siberia pipeline that links Russia
to China’s northwest territories has also been completed and is about
to be launched. Nord Stream 2 is the last of a trident of new pipelines that will carry Russian gas to Europe and effectively cut Ukraine out of the transit business.
The Nord Stream 2 operating company, a subsidiary of Gazprom, said in a state- ment welcoming Denmark’s approval that it would begin preparatory works on its Danish section within weeks. But how quickly it can commission the pipe- line and bring it to its peak flow capacity of 55bn cubic metres per year is another matter. Commissioning of a major gas pipeline can take months.
And timing is critical.
Gazprom devised Nord Stream 2 as a means of redirecting its European gas shipments away from Ukraine, currently the main transit route for Russian gas sales to the continent carrying circa 85bcm of the circa 200bcm Russia delivers to Europe each year.
Its long-term transit contract with Ukraine’s Naftogaz is due to expire at the end of this year, and Moscow had hoped that Nord Stream 2 would be ready by then so it could divert as much gas as possible away from Ukraine before agreeing new transit terms. Negotiations between the pair are ongoing, with little sign of progress.
Russia may also have to send some supplies via Nord Stream 2 that would otherwise have been pumped through its Nord Stream channel, following an EU court ruling limiting Gazprom’s access to Germany’s OPAL pipeline that handles Nord Stream’s gas.
ESG is a must-have in Russia, but adds no alpha
Ben Aris in Berlin
If a Russian company doesn't pay attention to its environmental, social and governance (ESG) score it will lose a large number of investors, but if it does invest what could be as much as billions of dollars needed to cut emissions and switch to a more sustainable development model it won’t earn any real reward.
Trying to choose between Scylla and Charybdis was never going to be easy, but with 2020 shaping up to be a super-climate year where CO2 emissions must start falling to prevent a climatic disaster, it is clear to everyone that the sea between the two monsters must be navigated.
Scandinavia leads the way, and Russia together with the US bring up the rear. But after Norway’s largest pension fund dumped all the shares it held in Norilsk Nickel in 2011 because it was polluting the Arctic, Russian corporates sat up and took notice. Change is coming.
ESG concerns first appeared in the 1990s but it wasn't until 2015-16 that they really took over as a major investment theme, driven by Scandinavian fund managers. In the last year or so ESG has become a worldwide theme that companies ignore at their peril.
“Most funds that we surveyed confirmed the increasing use of ESG as an additional consolidated investment metric in their investment process and expect the trend to continue. In particular, Scandinavian regulation already prohibits most local fund managers from investing in ‘non-ESG compliant’ stocks; for London/Europe/US, it is more about awareness, albeit slow migration towards prohibition is possible,” leading Russian based brokerage BCS Global Markets said in a report.
The Scandinavian regulator has already enacted rules forcing fund managers to look at sustainability when making investments and has banned investments into companies that are not ESG compliant. The other big stock market regulators, especially in London, have not gone that far yet.
The writing is clearly on the wall and fund managers in Europe have begun to do their homework; the preference for ESG compliant stocks is high and failing to pay attention to sustainability is already reducing the pool of investors a company can sell its shares to.
But it is still early days. The whole “green finance” phenomena is still in its infancy. The Institute of International Finance (IIF) reported in a note on the greening of capital that ESG compliant or “green bonds” still only account for 1% of the total outstanding bonds, although their share is growing fast.
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