Page 38 - BNE_magazine_11_2019

38 I Eastern Europe bne November 2019
Russia’s multi-billion dollar spending programme with Andrey Klepach, chief economist of Vnesheconombank
Russia’s economy is emerging from a nasty crisis in 2014-2016, but everyone agrees that growth is capped at 2% at best and incomes have been stagnant for six years already.
Russia needs a new economic model and the Kremlin has launched a RUB27 trillion spending programme to transform the country. But spending that amount of money, and spending it effectively, is not going to be easy. The Central Bank of Russia (CBR) for one is worried about soaring inflation and a consumer credit bubble for one.
bne IntelliNews editor-in-chief Ben Aris sat down with Andrey Klepach, the chief economist at Vnesheconombank that is going to oversee at least two thirds
of the spending to discuss the issues.
Andrey Klepach
chief economist of Vnesheconombank
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committees and IFRS accounts to ensure transparency.
“Corporate governance has become
a business tool,” says Shekshnya. “You do it not only to protect yourself from malfeasance, but also because it is sim- ply good business practice that makes the company easier to run.”
The social part is also taken care of by Samolet’s business model.
“We build complete villages which includes things like schools, hospitals and fire stations,” says Shekshnya. “You could say this adds to the costs, but it also adds to the value of the properties. We target the middle class and they have kids. They are not going to buy a place if there is no school or healthcare nearby, but will pay more if these things are eas- ily available. The social objects made the property more valuable.”
The social aspect of Samolet’s developments is also part of the
business model, as the relation with the client doesn't end with the sale of an apartment. The company also provides the financial services to pay for the apartment and then continues to service the village or town, providing the school, cafes, restaurants, health club, cleaning and maintenance, stores and transport for the village – in short the panoply of services that come with a town.
The environment is also covered in the
sense that shoddy Soviet-era housing accounts for 10% of Russia’s entire CO2 emissions. The modern buildings that Samolet and its peers are putting up are a lot more energy and emissions efficient and as bne IntelliNews recently reported in “The cost of carbon in Russia" the new developments have already cut the building related emissions by more than half since the 1970s.
“We have made substantial progress
in ESG in the last two years, but there
is still more to do. We need to add the planet to our plans and profits. We are well aware of the need and expect we will make more progress in the next two years,” says Shekshnya.
IPO ready
Taking ESG seriously has suddenly become a major issue in Russia as international equity investors have started shunning stocks that ignore sustainability as part of their business model. Some leading Russian blue chips lost a third of their investors last year, as a result of low ESG scores.
Three of Samolet’s largest peers are publicly traded companies and PIK in particular has proven to be popular with portfolio investors. Samolet will very likely list as well at some point.
“We are already IPO ready,” says Shek- shnya. “An IPO can add to our capital but it is important to do things in steps that benefit the company.”
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