VEB.RF’s Green Finance Committee has recognised the 74th issue of City of Moscow bonds as a green financial instrument in accordance with the VEB.RF guidelines. This is the second bond issue certified as compliant with the VEB.RF guidelines (after the Russian Railways bonds issued last autumn) and the first to be issued by a constituent entity of the Russian Federation. As a reminder, the green finance guidelines received approval from the inter-agency working group chaired by Russian Minister of Economic Development Maxim Reshetnikov and composed of representatives of executive authorities, legislative bodies, the business community and non-governmental institutions.
“The projects that will use the proceeds from the issued bonds are fully compliant with the taxonomy,” said Aleksey Miroshnichenko, First Deputy Chairman, VEB.RF. “These include developing the Moscow Metro, which is a fully electrified system, and replacing petrol-powered buses by electric buses. The introduction of low-emission electric vehicles is consistent with the UN Sustainable Development Goals such as Goal 11 (Sustainable Cities and Communities) and Goal 13 (Climate Action). Monitoring how the proceeds are used will also be in accordance with our methodology.”
Together the projects will result in a potential reduction of 10,000 in the number of necessary motor vehicles by 2023, thus decreasing pollutant emissions by 885.5 tonnes per year and carbon dioxide emissions by 20,900 tonnes per year.
“The Moscow bonds were issued to increase funding for development projects. The city meets all its social obligations at its own expense and borrows to boost Moscow’s investment spending. We’ve studied how European urban agglomerations deal with this issue and we consider a trend towards targeted borrowing to be perfectly correct: loans are taken out to achieve sustainable development goals and undertake environmental projects. Moscow has a large number of green projects, most notably the construction of the Moscow Metro’s Large Circle Line, and the purchase of electric buses, environmentally friendly vehicles recognised all over the world. That is why one of our bond issues totalling 70 billion roubles will be green. Though all environmental projects in Moscow are together worth much more, our green borrowings start with this amount. Due to the current situation in the Russian green bond market, we are not expecting a greenium from investors in exchange for ESG performance, but we believe it’s right to float these bonds in Russia to promote the development of the local market. Foreign investors have already shown a lot of interest in our first bonds, which we offered for sale this week. We think green bonds will be even more in demand on an international scale, which will bring added impetus to the Russian sustainable finance market,” said Vladimir Yefimov, Deputy Mayor of Moscow, Economic Policy, Property and Land.
According to Yelena Zyabbarova, Moscow Minister and Finance Department Head, the city has been pursuing a systematic and consistent policy over the past 10 years to improve the environmental situation in Moscow and reduce the negative impact of motor vehicles on the environment. She said: “Green bonds provide a new tool to accelerate the implementation of projects helping to develop environmentally friendly public transport.
“In fact, Moscow is creating a new stock market segment in Russia by issuing the first sub-federal green bonds and participating actively in establishing an adequate regulatory framework. We are confident that Moscow’s experience and expertise in this area will be useful for other Russian regions in the future.
“We think the issuance of green bonds allows the city not only to raise funds for infrastructural projects, but also to publicly reaffirm the Moscow government’s commitment to environmentally responsible policy. As for stock market participants, they will be able to use green bonds to implement the principles of responsible investing, as well as giving support to projects to remedy the environmental situation and improve the urban environment.”
If any financial instrument is granted green status, this requires a higher level of reporting and additional measures to monitor how the proceeds from the issuance are used. The issuer should publish a special report once a year, which will be assessed for compliance with the green principles. The proceeds from the sold bonds will be used to fund the declared projects in 2021–2023.
VEB.RF’s green finance system consisting of a taxonomy for green projects, a taxonomy for intermediate (adaptational) projects, green finance guidelines and related documents is currently under consideration by the Russian Government. The system is expected to receive final approval and be ready for publication this summer.
Syndicate of VEB.RF and Commercial Banks to Provide Financing for Arctic LNG 2
- The syndicate of banks will lend 3.11 billion euros for 15 years
- Arctic LNG 2 is a major development project for Russia’s Arctic
A syndicate of VEB.RF and commercial banks—Sberbank, Gazprombank, Bank GPB International S.A. and Otkritie Bank—has signed a syndicated loan agreement with Arctic LNG 2 Ltd to carry out the Arctic LNG 2 project.
The syndicate of banks will lend 3.11 billion euros for 15 years to finance the construction of a facility designed for liquefied natural gas and stable gas condensate.
“This is an extremely important initiative in the region. The project has strategic significance for the Northern Sea Route and operations in the Arctic. VEB.RF is involved in the project in partnership with Russian commercial banks. VEB.RF has already begun financing the construction of 15 ice-class gas carriers, which will be used to transport LNG under the Arctic LNG 2 project,” said Daniil Algulyan, Deputy Chairman, VEB.RF.
“We are pleased to take part in such a large and strategically significant project as Arctic LNG 2. Sber will lend 2 billion euros for 15 years. Arctic LNG 2 will help Russia to strengthen its position in the global gas market. We find it especially important that the construction uses advanced technology that will help to minimise the environmental impact on Russia’s Arctic,” said Anatoly Popov, Deputy Chairman of the Executive Board, Sberbank.
“Gazprombank continues to be active in cooperating with Russia’s largest oil and gas market participants. We are a lender under the Yamal LNG project and we are pleased to be actively involved in another LNG megaproject implemented by NOVATEK, which is important for the socio-economic development of the entire country. I am sure the consolidated efforts of experienced, internationally recognised financial partners will ensure as much financing as necessary, and this will enable the construction to proceed at a fast pace,” said Alexey Belous, Deputy Chairman of the Management Board, Gazprombank.
“We are optimistic about the outcome of the project and we are grateful to our partners for their confidence and the opportunity to take part in the project. Low production costs, an efficient financial model and strong international investors make the project unique and truly competitive. Arctic LNG 2 is important for the Russian economy, and as a nationwide bank we are interested in its successful implementation,” said Viktor Nikolaev, Deputy President & Chairman of the Management Board, Otkritie Bank.
Arctic LNG 2 Ltd carries out a project to build three LNG trains, each with an annual capacity of 6.6 million tonnes and with a total annual capacity of 19.8 million tonnes of LNG and 1.6 million tonnes of stable gas condensate.
The project’s shareholders are NOVATEK (60%), Total (10%), CNPC (10%), CNOOC (10%), and Japan Arctic LNG and consortium of Mitsui & Co and JOGMEC (10%).
Photo courtesy of NOVATEK