IRIIS, Russia’s national infrastructure project assessment and certification system developed by VEB.RF, the National PPP Development Center and AECOM with support from the Russian Ministry of Finance, has become one of the criteria of the government-approved taxonomy for sustainable projects.
The Russian Government approved the system of criteria (taxonomy) for sustainable (including green) projects and the verification requirements for these projects in Russia. The document is aimed at promoting investment and encouraging private funding for projects that contribute towards the national development goals.
The taxonomy for adaptational projects in the Sustainable Infrastructure area is to include building and modernising green infrastructure facilities. Evidence of compliance with the sustainability criteria will be successful IRIIS assessment. Specifically, the Environment and Climate aspect requires that a project should meet at least 55% of the criteria.
IRIIS is part of efforts to introduce the G20 Principles for Quality Infrastructure Investment into Russia. IRIIS went into test operation in 2021 on projects in different infrastructural areas. One of the tested projects is the Ufa East Exit on the M-5 Ural federal highway, which was granted the “Gold” level of attainment. Several more projects are in the pipeline, including building a railway to the Kaluga special economic zone under a concession agreement between Russian Railways and the Kaluga Region. IRIIS is scheduled to become fully operational in late 2021.
Svetlana Yachevskaya, Deputy Chairperson and Member of the Management Board, VEB.RF:
“The fact that IRIIS was included in the taxonomy for adaptational projects is an important strategic step in creating sustainable infrastructure in this country. The pilot projects show how it is important to have independent, efficient due diligence. Approved on federal level, the [IRIIS] system will make it possible to promote best practices in project preparation and implementation and will allow project participants to get more favourable terms of financing.”
VEB.RF took part in the 16 September meeting of the Council of the Interbank Association of the Shanghai Cooperation Organisation (SCO IBA Council) in Dushanbe.
The Russin delegation was headed by VEB.RF Chief Banker Sergei Storchak.
The meeting resulted in signing the IBA Medium-Term Development Strategy.
The document describes areas of cooperation in post-pandemic recovery.
For instance, including under the Road Map endorsed by the SCO IBA member banks last year, the Strategy specifies efforts to make the IBA actively involved with the national governments’ responses to various calamities (economic, natural, climatic, epidemiological, anthropogenic).
The Strategy also includes the IBA banks’ efforts to help the SCO member states to expand the practice of payments in national currencies and use alternative interbank communication systems in order to make payments more secure and flexible.
The Strategy specifically deals with joint financing for healthcare projects, which will enable the SCO economies to be better prepared for possible epidemics and emergencies.
Apart from joint financing for projects in conventional areas, the new Strategy also covers cooperation in the digital economy, e-commerce and big data with a view to promoting economic development in the SCO in the context of Industry 4.0.
A new focus area of the SCO IBA is to create common approaches to responsible financing, promote green financing and green technology, and support gender equality and women’s empowerment.
In his speech, Sergei Storchak also told the meeting about a new stage in VEB.RF’s activities (the Russian Government approved two key documents in August 2021 to determine the future of VEB.RF’s operations, namely the Memorandum on Financial Policies and the 2024–2020 Strategy).
According to Sergei Storchak, the new Strategy contains VEB.RF’s targets for support for the economy and specifies how to meet them. The VEB.RF Group is to provide project financing totalling 6.5 trillion roubles (about 90 billion US dollars) over the next three years, while the total project value will be 18 trillion roubles (more than 240 billion US dollars), he said. 26% of financing will go to industrial projects, 43% to export support, 12% to city development projects, and 17% to SME projects.
The National Bank of the Republic of Uzbekistan for Foreign Economic Activity (NBU) will take over the presidency of the SCO IBA in 2022.
During the 18th International Banking Forum “Banks of Russia: 21st Century”, VEB.RF and Sber signed a memorandum of cooperation. The document was signed on behalf of VEB.RF by its First Deputy Chairman and Member of the Management Board Aleksey Miroshnichenko and on behalf of Sberbank by its Senior Vice-President Dzhangir Dzhangirov. The memorandum outlines cooperation between the institutions in analysing Environmental, Social, and Governance (ESG) risks.
The parties agreed that Sber would provide VEB.RF with ESG information standards that could be applied to VEB.RF’s existent and potential customers. The bank also intends to enable VEB.RF to have access to two of its in-house digital platforms—ESG ratings of Russian companies and carbon footprint assessment—currently under development by Sber. Additionally, the memorandum encompasses areas of cooperation such as ESG stress testing for the VEB.RF lending portfolio, independent environmental due diligence for VEB.RF transactions, and training for VEB.RF employees in ESG risk analysis.
First Deputy Chairman and Member of the Management Board, VEB.RF
As the national methodological centre for sustainable financial instruments, VEB.RF strives to use best practices, and it’s good to see many of them come into existence in the domestic market. Sber’s ESG disclosure standards, ESG-based borrower evaluation system and carbon footprint assessment model will help to make our lending process more transparent and efficient and will contribute to developing a fully fledged ESG financing market in Russia. Regulators and the Government would like to see that the banking community is more independent in devising its own regulatory mechanisms, and this is an excellent example of how a high-quality product is well positioned to become an industry standard.
Senior Vice-President, Sberbank
Sustainability is more than a vogue term today; it’s a vital necessity. Sber has already built a considerable knowledge base for ESG scoring, and we continue to develop expertise in this area. Under the memorandum, we’ll share up-to-date information with the country’s largest development institution and provide VEB.RF with access to our ESG digital platforms. We will also help VEB.RF to assess ESG risks of its customers.
International Webinar ‘Sustainable Infrastructure: Price-Quality Balance’ Held by VEB.RF
On 8 September 2021, VEB.RF held the international webinar “Sustainable Infrastructure: Looking for the Balance between Quality and Costs”. The event is in continuation of VEB.RF’s leading the Working group on Sustainable and Quality Infrastructure of the D20 Long-Term Investors Club (D20-LTIC).
The webinar started with the opening remarks by VEB.RF Deputy Chairperson Svetlana Yachevskaya, who stressed the importance of quality infrastructure investment and development institutions’ potential contribution towards this goal. She said: “Identifying and structuring infrastructure projects that are attractive to development banks seem to be the most important precondition for increasing infrastructure investment in developing and developed countries. This is where development institutions can make a difference by helping to prepare high-quality projects, reducing risks, creating the favourable conditions for investment, promoting co-investment mechanisms or providing guarantees.” In response to global challenges of sustainable development, the webinar focused on the following topics: the role of financial development institutions in promoting quality infrastructure investment, and sustainable and quality infrastructure in emerging markets and developing economies.
The first session brought together the European Investment Bank (EIB), the New Development Bank (NDB), Spanish Instituto de Crédito Oficial (ICO), the B20 Finance and Infrastructure Task Force, HSBC Asset Management, and Global Infrastructure Basel (GIB) Foundation. The session was moderated by Christophe Dossarps, CEO, Sustainable Infrastructure Foundation (SIF).
The primary focus of the session was on how to involve development institutions in quality infrastructure investment, modernise existing infrastructure facilities, combat greenwashing and harmonise existing methodologies. In addition, the participants noted the importance of co-financing mechanisms and the development of new financial instruments for quality infrastructure investment and national development programmes.
The second session featured speakers from PT Sarana Multi Infrastruktur (PT SMI), the Long-Term Infrastructure Investors Association (LTIIA), AECOM Europe, and the Global Infrastructure Hub (GI Hub). The session was moderated by Maksim Merkulov, Head of PPP International Practices and Mechanisms, VEB.RF.
The session discussed a wide range of issues related to the particularities and implementation of infrastructural projects in developing countries. Specifically, the speakers noted that project preparation, promotion costs and risks in those countries are higher than in developed economies. However, it would be wrong to differentiate between practices of implementing infrastructural projects on the basis of a country’s level of economic development. As for measures to stimulate private investment, it is advisable to work on the standardisation of financial instruments and documents.
In his concluding remarks, VEB.RF Senior Banker Sergei Storchak emphasised the importance of discussions to find the best possible solutions. He noted that the issue of mobilising long-term investment had first been raised by Russia as early as its G20 presidency in 2013. This issue has since consistently evolved into promoting quality infrastructure investment and making infrastructure attractive to private investors. Efforts to find the best possible solutions are additionally supported by discussions, including the D20-LTIC agenda. According to Sergei Storchak, proposals discussed during the webinar are closely connected with the policy recommendations on infrastructure investment that will be presented by the D20 members to the G20 governments.
The Long-Term Investors Club (LTIC) was created by European major institutional investors in April 2009 to cope with the aftermath of the 2008 financial crisis. VEB.RF joined the Club at its first conference in 2009.
The D20 (Development 20) was initiated by VEB.RF in 2013 under the Russian presidency in the G20 Group with the aim of bringing together the G20 development banks. The D20 is an informal group with a development, promotional or public mandate.
The D20 and the Long-Term Investors Club merged in 2019.
The D20-LTIC comprises 20 members, including major development institutions and banks. In line with the Italian G20 presidency in 2021, D20-LTIC events are hosted by Cassa Depositi e Prestiti (CDP).
VEB.RF Calls on BRICS Banks to Follow ESG Agenda to Recover Economies
During the annual meeting of member banks of the BRICS Interbank Cooperation Mechanism (ICM), VEB.RF Deputy Chairman and Member of the Management Board Daniil Algulian said that VEB.RF was adjusting business conduct approaches and launching the ESG transformation in partnership with commercial banks. “The Federal Law on VEB.RF and our Memorandum on Financial Policies have been amended to reflect our new mission: integrating social entrepreneurship principles focused primarily on improving quality of life and well-being into business processes.” Daniil Algulian said.
He proposed to the BRICS partners to mutually recognise national green taxonomies, including the Russian Taxonomy issued by VEB.RF and the Russian Ministry of Economic Development, and to use them to lay down uniform principles for financing sustainable development projects.
According to Daniil Algulian, environmental issues have been used lately to pursue protectionist goals. “Together, we can confront the prospects of imposing some universal approaches to expedite the transformation to the low carbon economy,” Daniil Algulian added. He mentioned the agreement reached by Ministers of Finance of the BRICS countries in August to promote the concept of common but differentiated responsibilities that provides for that climate action plans should be devised with due consideration for national opportunities.
Daniil Algulian highlighted VEB.RF’s efforts in supporting the Russian economy during the pandemics and the post-pandemic recovery, VEB.RF’s transformation based on sustainability principles, and VEB.RF’s short-term strategy. As compared to financing provided in 2017-2020, VEB.RF aims to increase its support for projects 1.7 times to reach 17 trillion roubles (232 billion US dollars) in 2021-2024 together with all VEB.RF Group entities and partners. VEB.RF itself will invest directly 2.9 trillion roubles (39 billion US dollars).
Sustainability issues were also raised by VEB.RF Deputy Chairperson and Member of the Management Board Natalya Timakova at the meeting of the BRICS Financial Forum. She highlighted the role of the BRICS development banks in relaunching the investment cycle and restoring economic activity in the post-pandemic period. Specifically, she told the audience about Russian government programmes in areas such as supporting small- and medium businesses, developing the education and healthcare systems, and financing industrial, infrastructure and digitalisation projects.
Natalya Timakova noted that the recovery should be long-term and sustainable and suggested to focus on the ESG transformation agenda and to consider improving urban quality of life.
According to Natalya Timakova, the BRICS ICM could become a workshop for assembling new financial ideas and projects in areas that both encourage economic growth and help to achieve comprehensive social, environmental and governance outcomes.
VEB.RF representatives also called upon their ICM partners to continue joint work on formulating recommendations to implement the principles of responsible financing based on OECD’s experience and best practices and developing the BRICS infrastructural digital platform. (The Memorandum on the Principles of Responsible Financing was signed in November 2020).