Luxembourg Stock Exchange CEO Robert Scharfe Speaking About VEB.RF’s Efforts to Promote Green Financing: ‘Everything You Do Is Done Right’
With support from the Moscow Exchange, VEB.RF organised a digital conference on the present and future of green financing in Russia. The event discussed VEB.RF’s efforts to promote green financing and included speeches by VEB.RF Deputy Chairmen Aleksey Miroshnichenko and Yuriy Korsun, Moscow Exchange CEO Yury Denisov, and Luxembourg Stock Exchange CEO Robert Scharfe.
“I’m really impressed with your work,” Robert Scharfe said. “Everything you do is done right and you discuss the right things. Transparency, standardisation, taxonomy, these are what is important to create such a system.” As a reminder, the Luxembourg Stock Exchange lists 50% of the world’s sustainable (including green) debt instruments and is well ahead of its counterparts. According to Robert Scharfe, this market totalled 1 trillion US dollars in 2019.
Jean-Claude Knebeler, Head of Sustainable Development at the International and Comparative Law Research Center, noted that the fight to save our planet was global in nature. He said that promoting green financing in Russia enables investors, both Russian and international, to achieve positive outcomes for the natural environment not only in Russia but also globally. He also said that while living in Russia, he noticed that the government and the corporate sector had begun to pay much more attention to sustainable development in recent years, adding that VEB.RF’s efforts to create a green finance system in Russia were very important to channel capital into green projects.
According to Aleksey Miroshnichenko, responsible for green financing at VEB.RF, the Russian green finance system based on VEB.RF’s methodology is to be fully functional in mid-2021. In November 2020, the Government mandated that VEB.RF should act as the methodological centre for green financing and develop a methodology and taxonomy for green projects. These documents will be issued before the end of January 2021. VEB.RF released the first version of the taxonomy and recommended guidelines as early as July 2020 and invited all interested parties to send their comments about them. A total of about 600 comments came from different market participants. The received comments will be taken into account in the future versions of the methodologies, which will be submitted for review by the inter-agency working group.
VEB.RF Deputy Chairman Yuriy Korsun spoke about green projects interesting to VEB.RF. These are primarily projects related to green transport (rail transport, electric and gas-fuelled vehicles), waste disposal (Moscow Region waste-to-energy projects currently financed by VEB.RF), water purification, solar panels, hydropower, energy-efficient buildings etc. In addition, based on VEB.RF’s methodology, a pilot issue of Russian Railways perpetual bonds totalling 100 billion roubles was verified by Expert RA in September and certified by VEB.RF as compliant with the VEB.RF Guidelines.
VEB.RF Vice-President Dmitry Aksakov, who moderated the conference, noted that according to VEB.RF’s most conservative estimates, Russian companies would be able to raise 300 billion roubles from green investors in the next two or three years to modernise existing and create new production facilities.
Moscow Exchange CEO Yury Denisov spoke about the Russian exchange’s achievements in promoting green financing in Russia. “The Moscow Exchange tries to set an example for the market and consistently introduce sustainable practices,” he said. “We are working to make sure sustainability is integrated into strategic planning as well as our corporate governance and risk management.” According to Yury Denisov, the Moscow Exchange became a partner of the UN-supported Sustainable Stock Exchanges initiative in 2019 and a member of the Sustainability Working Group of the World Federation of Exchanges. “The Moscow Exchange intends to work with the government, VEB.RF and other interested parties to expand ESG integration and efforts to promote responsible investing in Russia,” he said in conclusion.
First Project Financed by VEB.RF and Gazprombank Through Project Financing Factory Goes into Commercial Operation
The project was completed by KuibyshevAzot and financed by VEB.RF and Gazprombank. It was the first to receive approval under the Project Financing Factory programme.
An official ceremony took place on 2 December 2020 to mark the opening of the facility. The event was attended by Igor Shuvalov, Chairman, VEB.RF; Viktor Kudryashov, Prime Minister of the Samara Region; Alexander Gerasimenko, Director General, KuibyshevAzot; and Vyacheslav Okhotin, Vice President and Head of Oil & Gas and Chemicals Financing, Gazprombank.
The facility’s annual output is 140,000 tonnes of K-grade sulphuric acid and 360,000 tonnes of refined oleum. The facility produces caprolactams used to make polyamide fibres and threads. The project aims to provide feedstock for caprolactams and derived products and scale up their production. The new sulphuric acid plant will also ensure feedstock security and stable operation for KuibyshevAzot throughout its import-substituting process chain. The project will result in increased tax revenues and new high-technology jobs. KuibyshevAzot exports 45% of its end products.
Investments in the project reached 8.6 billion roubles, including 4.7 billion roubles borrowed from Gazprombank and VEB.RF under the Project Financing Factory programme. The syndicated loan agreement was signed during the Russian Investment Forum in Sochi in February 2019. VEB.RF’s approved commitment totalled 3.8 billion roubles, while its share in the syndicate was 2.5 billion roubles. Gazprombank lent 2.2 billion roubles for ten years.
Igor Shuvalov, Chairman, VEB.RF, said: “VEB.RF’s key goal is to maximise investment in projects that contribute towards national goals. We are mandated to inject up to 3 trillion roubles into the economy and work with commercial banks to attract investment of 10 trillion roubles by 2025. VEB.RF and partner banks have approved 11 projects to date, totalling 930 billion roubles, and the first of them are already in the operational phase. The Tolyatti -based company’s project is the first transaction approved under the Project Financing Factory programme. We are satisfied with this partnership: the investors and Gazprombank agreed quickly and started production ahead of schedule.”
Vyacheslav Okhotin said: “Gazprombank was the first to carry out its customers’ projects through the Project Financing Factory. All the teams involved in the project—KuibyshevAzot, VEB.RF and Gazprombank—proved their professionalism and willingness to be innovative. The efficient preparation and execution of the transaction using a totally new financial mechanism in the market laid the foundations for its scalability in the future.”
Viktor Kudryashov, Prime Minister of the Samara Region, said: “The production started seven months ahead of schedule. It’s a new milestone in the company’s history because it will allow them to set up their own manufacturing operation for sulphuric acid and refined oleum and create a reliable source of feedstock, which will enable the company to scale up production, bring down costs and improve the quality of products sold all over the world. I want to thank you, Mr Shuvalov, and VEB.RF for your huge support for this project. The company, VEB.RF and Gazprombank signed the agreements to implement the project as early as a year ago. And today we are present at the opening ceremony here. We were able to put the idea for the project into practice largely because it was implemented in the Tolyatti advanced development zone, and the company gets considerable regional tax benefits.”
Alexander Gerasimenko said: “The project is aimed at increasing the competitiveness and export potential of Russia’s only process chain, from caprolactams and polyamides to threads and fabrics, created by KuibyshevAzot. Working in partnership with VEB.RF and Gazprombank under the state-supported Project Financing Factory programme demonstrated the high professionalism of the teams. We find it very important to use the Factory mechanism to obtain resources for the introduction of advanced technology ensuring a high level of industrial and environmental safety.”
In the environmental context, it is noteworthy that the project uses advanced technology ensuring 3.5-fold emission reduction compared even with best available techniques. Equipment has optimal characteristics with respect to feedstock, energy consumption and product quality with guaranteed optimal permissible emissions, effluents and waste.