Government disagrees on incentives for green finance

by time news

The government is discussing with the Central Bank incentives to stimulate ESG financing in Russia within the framework of the taxonomy of green projects (criteria for assigning projects to this category). The authorities plan to launch a green financing market on the horizon of three years and this requires state support, Deputy Minister of Economic Development Ilya Torosov told Vedomosti.

In May, the Ministry of Economic Development and Trade prepared a draft resolution approving a package of documents for launching sustainable development projects in Russia and instruments for their financing. The package includes, in particular, criteria for sustainable development projects, guidelines for classifying financial instruments as green, a methodology for identifying verifiers. According to the taxonomy, a green project must meet the technological indicators of the best available technologies and have a positive impact on the environment, but at the same time not have harmful side effects.

According to Torosov, the following incentives are being discussed to stimulate ESG financing: easing the regulation of the Central Bank, zeroing the tax rate on the income of green bonds for three years (now the income on coupons of all bonds is taxed at a rate of 13%), actual compensation for the verification of green projects up to 1 million rub. According to Torosov, not everyone in the government supports the proposed approach: there is an opinion that all over the world green financing is developing without state support. It is planned that the decision on the benefits will be made by the end of the year.

The representative of the Central Bank told Vedomosti that a roadmap with measures to stimulate ESG financing is in the process of being discussed. “The key position in this context is the position of the Ministry of Finance. The Bank of Russia supports the position of the Ministry of Economic Development and Trade that at the initial stage of launching a sustainable development financing market, the state should show its interest in creating and developing such a market, ”the source said. According to the Bank of Russia, a large number of countries are applying government support measures, which are yielding tangible results.

The development of ESG financing itself does not need stimulation, says Ivan Chebeskov, director of the financial policy department of the Ministry of Finance. He stated this during the round table “ESG-banking: today and tomorrow” at the XVIII International Banking Forum, which was also attended by representatives of the Central Bank, the Ministry of Economic Development and banks.

ESG banking is not only incentives without additional burdens, it is a change in the paradigm of running an entire business, it is a transition from a model of maximizing short-term profits to maximizing stakeholder satisfaction in terms of ecology, social agenda and corporate governance, he added.

“I am not saying that the state will not stimulate, because from the point of view of state policy, we see value, some incentive measures are being developed,” he said. According to Chebeskov, Russia may need a more comprehensive approach in the event of an accelerated energy transition. “And in this regard, we cannot avoid a system like carbon trading, which will be the most market-based mechanism for redistributing incentives,” he added.

During the round table, the Bank of Russia presented its assessment of the green bond market: in the world it is $ 1.378 trillion. According to Elena Kuritsyna, director of the Central Bank’s corporate relations department, this market in Russia is estimated at $ 2 billion, of which $ 1.5 billion is the placement this year. Against the background of world statistics, Russian figures are rather modest, Kuritsyna admitted. At the same time, Russia has also entered the trend when the green finance market is growing exponentially.

Market potential

The Ministry of Economic Development is now also in the process of discussing the taxonomy of social projects in the field of healthcare, education, entrepreneurship, sports and culture, Torosov said during his speech. According to him, the social bond market in the world has been actively developing over the past year, including due to the pandemic. “If green financing doubles, then social taxonomy grows 7 times. Now it reaches $ 117 billion, and green finance – about $ 1 trillion, but at this rate they will quickly equalize, ”he added. In a conversation with Vedomosti, Torosov added that the green bond market in Russia has great potential for growth. Now the green bond market in the sustainable development sector of the Moscow Exchange reaches 108 billion rubles. taking into account Moscow bonds (this is still less than 1% of all bonds), and by 2024 it may increase by 300 billion rubles, the deputy minister estimated.

The Sustainable Development Sector has been operating at the Moscow Exchange since the end of 2019 to finance projects in the field of ecology, environmental protection and socially significant projects. In this sector, in May 2021, Moscow placed green bonds worth 70 billion rubles.

Russia is still a catching-up country in terms of the development of green financing, said Oleg Kolobov, deputy head of the Climate and Green Energy Department of the Center for Strategic Development. Separate support measures are needed, as is often the case with new emerging markets, the expert adds. According to him, the significant role of debt financing in the implementation of investment projects, including green ones, has a multiplier effect on the entire process of transition of the Russian economy to a sustainable development model. Yuri Tverdokhleb, associate professor of the Faculty of Finance and Banking, RANEPA, agrees with him: the green financing market is just beginning to develop and it is obvious that it is promising, so any incentives can only be welcomed. According to him, like any innovation, there may be a certain distrust in green bonds in terms of stability and risks of this instrument.

Such large Russian players as Sberbank and Gazprombank are showing an active interest in green financing, Kolobov notes. Participating in green finance can add value to companies, he said, although ESG criteria are diverse and research into this impact is still ongoing.

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