Is Russia ready for the global ESG transformation?

3 September 2021

Is Russia ready for the global ESG transformation?

KEY FINDINGS

The climate problem has evolved from a local European problem to a global one

"There has been a slight geopolitical evolution on the globe in two years, which for some reason we have not noticed. There is nothing to say about the United States. Biden (US President Joe Biden – ed.) reentered the Paris Accords on the second day after he came into office. It's obvious as it is. But somehow, we've also lost a "small" China of a billion and a half in the interim. China, which has declared climate neutrality, unlike us, by 2060. China, which launched the world's largest carbon exchange ... China, which … has radically revised its policies", said Anatoly Chubais, Special Representative of the President of the Russian Federation for relations with international organisations to achieve sustainable development goals.

Climate change has become one of the main reasons for the increase in the number of refugees

"126 Nobel laureates wrote an open letter saying that the world is too late and irreversible processes have already started. To stop (the processes – ed.) or compensate to some extent, we must reduce emissions in the next 21–30 years by a half, which, in fact, does not yet seem very realistic. But what really amazes me is the Red Cross figures. I used to think that refugees in our world were a product of all sorts of conflicts ... It turns out that the key driver that produces this problem is climate change. Today we have over 30 million refugees in the world who are climate refugees", said German Gref, President, Chairman of the Board, Sberbank.

The initiative to discuss the climate agenda is supported both inside and outside Russia

"We are fast approaching the point where the climate change agenda does not affect us. Moreover, there is a growing understanding that this agenda is not one imposed on us but one that really affects us. We are a northern country that is warming at a much faster pace. But of course, the factors that are now accelerating our understanding lie in many ways, maybe, in the external agenda. This is the topic of cross-border carbon regulation, ... this and ... the topic of the European Green Deal. There are about 14 acts that deal with abandoning internal combustion engines, reducing coal consumption by 70% by the year 30, and reducing fertilizer consumption. Among internal factors ... our largest companies, like exporters and the banking community, are taking an active and proactive stance (ed.)”, said Maxim Reshetnikov, Minister of Economic Development of the Russian Federation.

PROBLEMS

The energy transition will deprive Russia of the resource rents that enable business development and job creation

"The main risk we need to look at is the loss of resource rents. We are all well aware that those subsoil resources, those benefits that our country has, have several positive effects for us. First, these are investments, which give order to domestic industry, create jobs, create cities, and allow us to attract social services. Then, accordingly, a rent is formed, which is partially withdrawn by the state. Then the state invests this money in other sectors, does other things ... And part of this rent goes to companies in order for them to reinvest, to pay dividends, which is to create a business. This rent is going to go down, whether we want it to or not," Pavel Sorokin, Deputy Minister of Energy of the Russian Federation.

There are many reasons why the two energy systems will continue to function in parallel for a long time to come

"At the moment, of course, you and I see quite high prices for hydrocarbons, including oil. They may not be record high, but they are high. I mean, ... not only low hydrocarbon prices await us in the long term. It is absolutely clear that the two energy cycles, the traditional and new energy cycles, will continue for some time, for a very long time. A quick transition to a new energy paradigm is not possible ... There are many reasons for that. These are not only technological reasons, these are certain inertia factors, these are certainly economic reasons," said Alexander Dyukov, Chairman of the Management Board, CEO, PJSC Gazprom Neft.

The Russian population may not support some of the ESG principles

"What is ESG? It seems to be ecology, social responsibility, management. It is generally a socially responsible approach to business. What happens next, and what are the risks of this approach? What happens is as follows. We are taking a European view of this issue. Unsurprisingly, Europeans do not care about the state of the environment, much less about jobs in our country. But we do care. We understand that Europe, for all the 1970s, 1980s, and even more so in the 1990s, was dealing with other problems. It was solving just environmental problems: clean air, clean water, competent handling of household waste. And having solved these problems, it turned to climate change. But we have not solved these issues but decided to switch to climate change. And this is a huge risk because the following can happen: we forgot about 95% of our current Russian agenda, got carried away with the climate, and forgot to solve 95% of our plan. Ask the people what is more important to them: clean air or having a very beautiful solar or wind power plant standing somewhere?" said Stepan Solzhenitsyn, General Director, LLC Siberian Generating Company; General Director, JSC SUEK.

SOLUTIONS

Companies set ambitious targets to reduce carbon intensity

"Certainly, if we talk about the process of decarbonization of the economy, this is one such major trend in the development of the world economy. It is obvious for us that the world economy has followed this path ... Perhaps, perhaps, the point of no return has already been passed. Obviously, it is a challenge for oil companies, including ours. We are responding to that challenge. As you know, we have developed a new ESG strategy that, among other things, includes such an area as reducing the carbon intensity of our operations. So far, we have set a target to reduce our carbon intensity by one-third by 2030. Still, it is quite possible that this strategy will be refined, and we will set more ambitious goals," said Alexander Dyukov, Chairman of the Management Board, CEO, PJSC Gazprom Neft.

Private business and government are working together to forecast the stages of the energy transition correctly

"Indeed, we started to delve very deeply into this topic after several papers were published. This is a new paper on the analysis of the trajectory of the world towards net-zero emissions 2050. We got some rather complicated results from this analysis. After the EU published another document, our key trading partner, the so-called green deal, we tried to combine both forecasts, and a rather complicated picture emerged ... We sent that forecast to the Ministry of Economic Development, to the Ministry of Energy, and then, together with our colleagues, we worked on it over the past six months and added figures ... The picture that emerged, to be honest, makes us take a serious look at what we have to do in the near future," said German Gref, President, Chairman of the Management Board, Sberbank.

Read more in the Roscongress Foundation Information and Analytical System roscongress.org.