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.
- New petrochemical businesses will allow Russia to increase its global market share
- Projects create a new quality of life in cities
VEB.RF Chairman Igor Shuvalov took part in a meeting chaired by the Russian President to discuss the development of the petrochemical industry.
According to Vladimir Putin, the petrochemical industry is showing a good rate of growth. Russian producers are able not only to meet the domestic demand for high-quality products, but also to gain a stronger position in the global market. This is a very promising area: world demand is expected to grow by 4% every year.
“This requires that the industry should implement large-scale projects with investments totalling about 5 trillion roubles. The two largest of them — Amur Gas Processing Plant and the ethane-containing gas processing project near the seaport of Ust-Luga in the Leningrad Region—are already under way with the support of VEB.RF,” Vladimir Putin said.
Overall, Russia is to launch 14 projects in the coming years. The projects will create about 17,000 highly skilled and well-paid jobs. According to Vladimir Putin, an important element in project implementation is to raise loans.
Igor Shuvalov emphasised that it was important for VEB.RF not only to provide funding for new production, but also to work towards the goal set out in the presidential decree, namely qualitative changes to the lives of Russians. “The most important thing is that SIBUR has a very important competency: they can invest in a modern way. Where they come, there is a new quality of life in cities. Tobolsk is a shining example,” Igor Shuvalov said. Such approaches are also considered for the cities of Svobodny (where nearly 50,000 people can receive a new quality of life) and Kingisepp. “As for financial resources, we know how to work without competing against commercial banks. Instead, we give them a helping hand to make loans on acceptable terms,” he said.
VEB.RF-supported petrochemical projects (completed and ongoing) total 5.5 trillion roubles, with VEB.RF’s commitment of 1 trillion roubles.
As a strategic partner of SIBUR, VEB.RF provided financing for the creation of a Tobolsk-based advanced hydrocarbon processing facility, one of the largest in the world. The VEB.RF Group is involved in large-scale projects at Ust-Luga (Russia’s largest ethane-containing gas processing facility), in the Amur Region (Amur Gas Processing Plant), in the Tula Region (Shchekinoazot) and in the Primorie Territory (Nakhodka Fertilizer Plant).
VEB.RF is also considering partnering up with Russian commercial banks to provide financing for another project that is a landmark in SIBUR’s gas-to-chemicals operations, namely the Amur polymer production facility.
Prime Minister Mikhail Mishustin Praises VEB.RF’s Efforts to Promote National Currencies Used Across SCO
During a meeting of the Council of Heads of Government (Prime Ministers) of the Shanghai Cooperation Organisation, Russian Prime Minister Mikhail Mishustin noted the importance of “developing alternative payment methods, independent of the dollar”. “We believe it’s a good idea to expand the use of mutual payments in national currencies,” he said. “It is necessary to reach agreement on this issue and then start negotiating the creation of financial mechanisms for SCO projects.” As a reminder, VEB.RF’s year-long presidency of the Interbank Consortium of the Shanghai Cooperation Organisation (SCO IBC) resulted in the SCO IBC Council giving its approval to the Joint Approaches to the wider use of national currencies.
Speaking to the Council of Heads of Government (Prime Ministers), VEB.RF Chairman Igor Shuvalov said that the document approved by the SCO IBC “includes approaches such as providing mutual access to liquidity in national currencies, developing hedging instruments for currency risks, developing the capital markets of the SCO countries, facilitating the wider use of national currencies in foreign trade”. According to him, the document will help the SCO member states to set up a more resilient system of trade, economic and investment ties.
Another important outcome of VEB.RF’s presidency was the Road Map adopted to cope with the repercussions of the pandemic. “Its implementation will help to create new growth points, give impetus to trade and investment. We intend to share our experience of support for companies. Our plans include creating a base of potential joint projects, developing mechanisms for long-term lending to infrastructure, and promoting green financing,” he said.
Igor Shuvalov also spoke in favour of expanding the SCO integration processes and exchanging best practices between the Shanghai Cooperation Organisation and the Eurasian Economic Union. “In the context of rebooting the post-pandemic economy, businesses in our countries could be more actively involved with integration projects across Eurasia,” he said. “I think these formats have enormous potential for complementing each other. The development banks can become a bridge to transfer best practices of integration projects.” Igor Shuvalov said that he was confident that this would help the SCO member states to adopt “a more transparent, inclusive, green and sustainable model of development”.
VEB.RF Completes Its Surety Bond Programme Helping Over 5 Million People to Keep Their Jobs and Income
- Surety bonds totalled 500 billion roubles
- The project was part of the Russian Government’s rescue scheme
- Businesses were given more than 250,000 loans
Under the first programme, VEB.RF issued surety bonds totalling 100 billion roubles to 15 commercial banks for zero-interest loans intended to help businesses to meet the immediate needs related to supporting and retaining their employees. VEB.RF’s surety bonds cover 30,688 loans given by commercial banks for more than 85 billion roubles.
The second package is a huge amount of 400 billion roubles in surety bonds issued by VEB.RF to commercial banks for 2% interest loans designed to help businesses to resume their operation. Under the lending programme launched on 1 June, businesses received 221,478 low-interest loans totalling about 415 billion roubles; 85% of each loan amount, including compound interest, is covered by VEB.RF’s surety bond. Overall, the programme covered 40 commercial—chiefly regional—banks.
“VEB.RF is actively involved with the government’s job retention scheme, including support for small and medium-sized enterprises. Our task was to promptly support commercial banks that gave loans to businesses. We created a unique guarantee product that made it possible to implement the government’s rescue scheme in the shortest possible time. And the VEB.RF team was able to meet the challenge. The low-interest loans with VEB.RF’s surety bonds helped businesses to retain over 5 million employees,” VEB.RF Chairman Igor Shuvalov said.