Russian Agricultural Bank and Frank RG presented a joint research on ESG investment in Russia and the world. According to the research, 86% of investors believe that the use of ESG criteria can lead to higher profitability of financial instruments in the long term, and concern for the reputation and external social and environmental pressure remains the main driver of implementing a sustainable development policy in Russian companies.
The results of the research were presented in the framework of RusAg and Frank RG meetup “ESG Investment Market in Russia: present and future”. The work objective was to analyze the current situation in the ESG investment market in Russia and the world, assess the effectiveness of investment instruments, as well as factors affecting the speed of implementation of principles of sustainable development by companies and banks. The research demonstrates the difference in approaches to ESG across countries.
According to the research, the main motivation for North American companies to implement ESG principles is employee engagement, customer demand, and reputation building. For European countries – environmental and social pressure, for countries of the Asia-Pacific region – regulatory requirements.
For Russian business, the main motivation to implement ESG principles is the relevance of the subject and the company’s reputation. Environmental and social pressure is of great importance. However, employee engagement proved to be the least significant driver of change for Russian investors.
Of all the three ESG criteria for environmental, social and corporate governance, it is the latter that investors in Russia pay special attention to when assessing a company’s investment attractiveness.
To find out the attitude of banks towards ESG, Frank RG conducted a survey as part of the private banking market research: eight out of 13 banks stated that they take ESG criteria into account when forming their own investment products and compiling their clients’ portfolios. In 2020, the share of ESG investment products in the range of all private banking investment products accounted to 13.1%. According to Frank RG, the penetration of ESG products into the private banking customer base averaged 9%, into the product line – 13.1%, and into the investment capital — 5.7%.
According to the research “ESG Investment Market in Russia: present and future”, 86% of investors believe that using ESG criteria can lead to higher returns in the long run.
In the Russian market, investors’ interest in ESG instruments is growing, said Anna Kuznetsova, Deputy Chairman of the Management Board at RusAg, during the meetup: the volume of green or social bonds on the market increased from RUB 12 billion at the end of 2019 to RUB 150 billion by 19 October 2021.
When implementing sustainable development policies, banks should pay attention to all three criteria, notes Kuznetsova: “We work with both large corporate clients, providing them with a full range of green financing, and with retail clients, providing a wide range of investment products aimed at ESG. Taking care of the environment by involving customers and employees in environmental initiatives is a smart approach for banks working in the modern world."
Full version of the research “ESG Investment Market in Russia: present and future” by RusAg and Frank RGT is available at https://www.rshb.ru/download-file/472115/
Video from the meetup with the participation of the largest banks: https://youtu.be/hhamxqPTUaI