State Development Corporation VEB.RF has become a member of the Zero Waste Charter (hartia.ru) aimed at developing an efficient waste management sector in Russia. A respective announcement was made during the ESG-day event organised by VEB.RF.
Cooperation of major public and private companies is an important step towards introducing a circular economy and zero dumping in Russia.
The Charter agreement was previously signed by Business Russia, Russian Environmental Operator and RT-Invest. Ten companies are now involved in joint work focused on complying with sustainability principles and improving quality of life in Russia.
“We welcome the fact that VEB.RF acceded to the Charter designed to develop an efficient waste management sector and ESG-principles in Russia. Sustainable development basically means a long-term trend materially affecting all types of companies. Businesses are well aware of investor attention to, and a growing consumer interest in sustainability, and are under great pressure from supervisors, regulators and intergovernmental institutions. The Environmental Protection national project provides for 100 percent waste sorting and a two-fold landfill decrease by 2030. Together with its partners, Business Russia hopes to efficiently achieve the ambitious goals of the national project. We are ready to consolidate our efforts to attain the goals set. As far as we know, RT-Invest is consistently developing a comprehensive MSW management system. High level competencies of the Charter participants will enable Russia to accelerate the creation of a comprehensive waste management system and generate steady demand for the use of recyclable materials to produce new goods. We will introduce circular economy principles in cooperation with all stakeholders (manufacturers, processors and consumers),” Business Russia’s Vice-President and Head of the Executive Committee Nonna Kagramanian said.
The Zero Waste Charter participants are keen on creating in Russia a comprehensive waste management system and generating demand for the use of recyclable materials to produce new goods. Manufacturers, processors and consumers will be actively involved in introducing the circular economy principles including separate collection, recycling and reuse, composting of organic waste and construction of energy-from-waste facilities. Thus, all types of waste will be recycled and reincluded in the economic turnover.
Nikolay Tsekhomsky, First Deputy Chairman and Member of the Management Board, VEB.RF:
“Environmental agenda is extremely important for VEB.RF as a financial partner in a whole range of waste management projects. VEB.RF is currently considering projects for separate collection, sorting and disposal of municipal solid waste. These projects will help to improve the environment, encourage additional investment in Russia’s industrial sector and create high-technology jobs in the regions. We are also planning to attract commercial banks, financial institutions and private investors to these projects, including through public-private partnerships and green bonds.
VEB.RF believes that in order to achieve economic and social development goals and improve quality of life in Russia, the Charter participants should prioritise ESG projects and be guided by global best practices in sustainable development. That is why VEB.RF offered to include these provisions in the text of the Charter.”
The efforts of the Charter participants intended to develop the circular economy include creating and developing the system of bottle/can recycling kiosks, introducing separate collection of waste, constructing waste recycling and disposal facilities and energy-from-waste facilities, and landfill reclamation and full rejection.
“We are pleased that VEB.RF has a clear strategic view of the sector needs. As a financial development institution, VEB.RF is developing a national practice for operating with green socially responsible capital. The company supports projects aimed at achieving the goals of zero dumping. RT-Invest has offered a programme for developing an efficient comprehensive waste treatment system designed to recycle each kilogram of waste into new goods and energy. Our goal is to close by 2035 and to prevent opening of 200 new landfills across the country,” RT-Invest General Director Andrey Shipelov said.
All these measures will help to eliminate landfills altogether at first in resort clusters and cities with population over one million, and then across Russia. The Charter will be another important step towards zero dumping in Russia.
Regulatory Changes Take Effect: New Risk-Weighting Coefficient of 20% for VEB.RF’s Rouble-Denominated Debt Instruments
The Bank of Russia’s Directive No. 5886-U of 18 August 2021, amending Instruction of the Bank of Russia No. 199-I of 28 November 2019 “On Banks’ Required Ratios and Capital Adequacy Buffers for Banks with a Universal Licence”, became effective on 12 October.
“This is long-awaited news for us, our investors and lenders. The effect of the Bank of Russia’s decision will facilitate interbank cooperation, including by bolstering the demand for VEB.RF’s public debt instruments among Russian banks. The regulatory changes will create the necessary conditions for scaling up capital market funding for VEB.RF’s operations and will allow us to work with Russian banks to provide financing for landmark investment projects in the Russian economy,” said Konstantin Vyshkovskiy, Senior Banker and Member of the Management Board, VEB.RF.
The regulatory changes provide that banks should invariably use a lowered risk-weighting coefficient of 20% to calculate their prudential ratios for creditors’ claims denominated and funded in roubles in relation to VEB.RF (including investments in VEB.RF bonds).
The amendments to the Bank of Russia’s instruction are only the first step. Further changes are expected to be made to banking regulation in the near future to reflect the fact that the regulator has recognised the high creditworthiness of VEB.RF as a borrower and its status as Russia’s leading national development institution.
Shchekinoazot’s New Methanol Production Facility in Operation with Financial Support from VEB.RF
- The project was completed through the Project Financing Factory; VEB.RF’s financial partner was Gazprombank
- The expansion of production created 120 jobs
- The new production facility is to make Shchekinoazot one of Russia’s largest methanol producers and exporters
Shchekinoazot’s methanol production facility with a capacity of 500,000 tonnes per year was put into operation in the Tula Region. The project was a pilot under VEB.RF’s Project Financing Factory (PFF) programme. The project is to increase current methanol output by 50% to 1.5 million tonnes per year. Shchekinoazot’s share is forecasted to reach about one-third of the Russian methanol market by 2023.
An official ceremony took place on 8 October 2021 to mark the launch of production. The event was attended by VEB.RF Chairman Igor Shuvalov and Shchekinoazot President Boris Sokol.
The project is consistent with the presidential decree concerning the promotion of non-resource non-energy exports. The total project value is 22 billion roubles.
Igor Shuvalov, Chairman, VEB.RF:
“This is already the fourth project completed through the PFF. In partnership with Gazprombank and us, the project initiator was able to start production one and a half years ahead of schedule. The Project Financing Factory was an effective mechanism to support the project. In addition, the changes made to the PFF programme this year enable us to combine different kinds of government support within one investment project. For example, the Corporate Competitiveness Enhancement Programme (CCEP) is important to many of our export-oriented projects. It gives substantial subsidies on the interest rate, and the Shchekinoazot project used it in conjunction with the PFF mechanism. We have a large-scale programme to develop the Yefremov site ahead of us. We are happy to work in partnership with Shchekinoazot and we want to increase cooperation with them.”
Boris Sokol, President, Shchekinoazot:
“The M-500 is a high-tech facility. It uses resource- and energy-efficient technology. The project has strategic significance to the company and as well as this country. What we’ve done is the result of our painstaking work, accurate cost analysis, knowledge of the market, and ability to develop a strategic vision. None of this would have been possible without the help of our skilful, highly qualified staff; without cooperation with authorities, major financial institutions or international licensor. And the cornerstone is science and advanced technology, which ensure the industrial and environmental safety of our production. We build production facilities, but we do so without harm to unique nature in the Tula Region, to the Yasnaya Polyana conservation area.”
Alexey Belous, Deputy Chairman of the Management Board, Gazprombank:
“Gazprombank is a long-time partner of Shchekinoazot. The project enabled the company to get additional advantages of financing and start production ahead of schedule. The new facility consumes less natural gas and energy than its peers, operates an environmental monitoring system and helps this country to fulfil its export potential. I think the Project Financing Factory mechanism has proved effective. I’m sure Gazprombank’s experience and expertise in carrying out high-profile investment projects will allow us to continue to implement initiatives contributing to economic growth in Russia.”
The M-500 project used high-performance technology to minimise its environmental impact.
The syndicated loan agreement for the project to build the M-500 methanol production facility using project financing was signed by Shchekinoazot, VEB.RF and Gazprombank during the Russian Investment Forum in Sochi in 2019.
According to experts, VEB.RF’s comprehensive approach to unlocking the potential of gas-to-chemicals projects will allow methanol production to be increased by 50% by 2030 due to investment projects. If all projects that VEB.RF has in the pipeline are completed, methanol production will rise by more than 11 million tonnes per year.
VEB.RF to Select Pilot Projects by Year-End for IRIIS Implementation
The first IRIIS-verified project is the construction of the Ufa East Exit on the M-5 Ural federal highway
MOSCOW, 29 September. /TASS/. VEB.RF has completed the assessment of two first projects in Russia’s national infrastructure project assessment system (IRIIS). The pilot group of projects is to be formed by the end of 2021 to bring the system into operation, according to VEB.RF’s Deputy Chairperson and Member of the Management Board Svetlana Yachevskaya.
IRIIS is under development by VEB.RF, the National PPP Development Center (part of the VEB.RF Group) and AECOM with support from the Russian Ministry of Finance and is designed to assist with the introduction of the G20 Principles for Quality Infrastructure Investment. IRIIS is to help Russian and foreign investors to assess risks and opportunities in Russian-based projects.
“We expect projects totalling at least 1.5 trillion roubles in different industries will go through IRIIS in the next five years. We can see it’s important for regional and municipal authorities to have quality assessment tools and criteria to decide on support for really feasible project proposals with minimal risks. At the very start of a project, IRIIS makes it possible to set up the project management model correctly and effectively and give due consideration to all possible factors: economic, social and environmental,” Svetlana Yachevskaya said.
IRIIS has attracted the interest of both project initiators and regional authorities. The key aspects of the methodology are Economy and Governance, Quality of Life, Environment and Climate, she added.
The first IRIIS-verified project is the construction of the Ufa East Exit on the M-5 Ural federal highway. This is a 25-year concession in the Republic of Bashkortostan with investments totalling about 40 billion roubles. A syndicate of VEB.RF and VTB is financing the project through the Project Financing Factory. Another pilot project is carried out by Russian Railways to build a railway to the Kaluga special economic zone in the Kaluga Region, according to VEB.RF.
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.”