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July 12, 2019 www.intellinews.com I Page 3
we don't have these credentials then it is nearly impossible to involve European and US investors. We have seen it as necessary to pay attention to these issues over the last three years,” says Pavel Grachev, chief executive officer of Polyus Gold.
Commitment to the cost of clean-up
Several of Russia’s companies have now em- braced the new ideas, despite the extra costs they incur, with open arms. Polyus Gold was recently included in the MSCI ranking of ESG leaders.
“There are only six companies in this index.
We are third after Novatek and Lukoil. This
is a ranking for companies for sustainable development. This is not just about formal criteria to be included in the ESG ranking, but just as important is the motivation to be included,” Polyus’ Grachev says.
Russia’s giant metal producer Norilsk Nickel is another one that has decided to change its spots. The nickel, copper and PGM (platinum group metals) plant is based in the far north of Russia at the site of a former Gulag camp.
“Norilsk used to be for decades the largest polluter in the world, or at least the northern hemisphere. That was due to the decisions that were implemented in the 30s through to the 60s when the prevailing environment was the neglect of the environment and other aspects of what we now call the ESG concept,” says Andrey Bugrov, senior vice president, deputy chairman of the board of directors, MMC Norilsk Nickel.
The company has embarked on a five-year programme to clean up its act – literally. It has introduced new technology to remove sulphur from its emission gases and by 2023 it should be removing 75% of those emissions.
“But ESG is costly,” says Bugrov. “The sulphur capture project will cost $2.5bn and it doesn't increase my production. It just goes into my bottom line. It is important to delineate the two sides of metals and mining: the one that pollutes
the atmosphere, but there is the upside too including the catalytic converters as without them the populations of big cites would suffocate.”
G
Of the three criteria the G, or governance, part
is probably the most familiar to investors. In Russia the drive to improve corporate governance was kicked off by oil major Yukos in about 2000 when it went from being the bad boy of corporate governance to a leading light. As the boom years started Yukos began quarterly GAPP financial reporting and introduced new transparent policies in its relations with investors. The stock rocketed, rising from around $0.20 in 1999 to a peak of $15 over three years.
“G is the most important for investors. Russia
is famous for its governance. The boom in the noughties was linked to the oligarch companies which were the main driver,” says Alexei Yakovitsky, global chief executive officer at VTB Capital. “The big owners of Russian companies have a very positive experience as they found that if you follow the rules set by western investors then you can be very successful.”
Russia’s leading exchange Moscow Exchange (MOEX) has kept the ball rolling by insisting companies that want to list meet strict compliance criteria.
“We want to create a quality market for investors that are including strict criteria in the listing requirements. MOEX is the driving engine of
these changes. MOEX pays attention to the G —
to corporate governance and general governance. We reformed our listing requirement in 2014 to improve governance and now it is one of the strictest in the world. First is the need for an independent board of directors and steering committee,” says Anna Vasilenko, managing director for key clients and issuer relations at MOEX.
E
Defining the contribution or harm a company does to the environment is a more complicated