For many fund managers and retail investors, ESG has moved from being a secondary consideration or even a non-existent one in the investment decision process to becoming the key consideration. Profit without responsibility to the environment or the wider society is no longer seen as acceptable.
Every company needs to look itself in the mirror and see if the reflection meets the new standards expected. That’s exactly what the Moscow Exchange (MOEX) has done and we’d like to provide an update on how we are integrating ESG into our operations and also outline our work as the leading Exchange in Russia in developing responsible investing and supporting the industry through the current Covid-19 pandemic. After reviewing our ESG policies, publishing our first ESG report and launching an ESG sector in 2019 here are the steps we took most recently.
Markets
As a COVID-19 related support measure MOEX has abolished the fee it levies to small and medium enterprises on bonds listings. Since we made this change on the rise of the pandemic, we have saved these organizations RUB 400 mln ($ 5.3 mln as of 17.09.20). MOEX has also phased out a fee for new terminals to help market participants shift effortlessly to remote access.
In 2019 MOEX developed two ESG indexes and we are extremely pleased to say that as of the end of September there are already two Russian law ESG ETFs launched, managed by RSHB Asset Management and Sberbank Asset Management. Both ESG ETFs are based on the Moscow Exchange-RSPP Vector of Sustainable development index which is composed of equities which demonstrate the best results in sustainable development and corporate/social responsibility.
Moscow Exchange also contributes to raising awareness about responsible investment practices and provides regular webinars and conferences. Online in 2020 and offline in 2019 the exchange has partnered with rating agencies, expert groups, and sustainability initiatives to provide market members with relevant and up to date ESG-related information. Partners included: S&P Global Rating, Sustainalytics and LECAP among others.
Operations
In September the Moscow Exchange appointed our first Head of Sustainability to demonstrate our commitment to the ESG cause. We want to be at the forefront of ESG not just within our own company but also more broadly in Russia where we are central to the financial markets.
To strengthen ESG integration MOEX has revised and updated its Group Strategy and Corporate Governance Code as well as introducing a new group-wide risk management initiative. Our CEO, Yuri Denisov made these comments on the subject:
“A major event for MOEX in 2019 was the adoption of a new Group Strategy 2024. The strategy aims to support economic growth by providing nondiscriminatory and efficient access to markets for a wide variety of stakeholders. More than ever before this strategy focuses on strengthening our efforts towards even greater sustainability of MOEX’s operations. In addition, MOEX has updated its Corporate Governance Code, which now enshrines sustainability as a pillar of the Company’s corporate governance system and includes essential guidance on creating social and environmental impacts. In 2019 we also established a Managing Committee on Compliance and introduced a new “Stabilization 3.0” initiative – a comprehensive project aimed at enhancing the risk management, control, and audit functions, improving transparency and elevating the overall compliance culture”.
Community
Moscow Exchange has donated RUB 100 mln so far in 2020 to assist those affected by COVID-19, which exceeds the yearly corporate social responsibility budget of 2019 by four times. The funds will be used to purchase medical equipment and personal protective equipment and to aid healthcare professionals, social institutions, and the elderly. To roll out its program, Moscow Exchange has partnered with charitable organizations with extensive expertise and competence that are implementing programs to support communities affected by the COVID-19 pandemic.
The Road Ahead
Moscow Exchange sees one of its roles in equipping issuers with the necessary ESG tool set and guiding them towards more transparent and internationally recognized ESG reporting. To this purpose, the Exchange plans to issue an ESG information disclosure guide to issuers with all the necessary steps they need to make prior to bringing new requirements into effect. Here is what our CFO, Maxim Lapin says about this:
“At Moscow Exchange, we are paying keen attention to the growing importance of sustainability and the global trend of mitigating ESG risks. The approach of investors is shifting from screening out negatives and thus excluding companies from the investable universe to seeking positive, social, and environmental value-accretive drivers that help generate excess returns. We believe Moscow Exchange is a perfect institution to take up the challenge of integrating sustainability practices into operations in substantial and measurable ways and serve as a dissemination point for the market members.”
As we said at the beginning we need to be able to look in the mirror and like what we see.
MOEX Sustainability Team
