The International Economic Forum (SPIEF) that opened in St. Petersburg in 2021 looks fundamentally different than two years ago, when the SPIEF was last held in person. The form returned, but the main topic of discussion for both the state and business was the upcoming exit of the economy from the pandemic into the world of new corporate international ESG rules, in which companies must be demonstratively environmentally friendly, socially responsible and ethically managed. The economy of the Russian Federation is entering this reality faster than others, with excellent budgetary indicators, increased inflation, internal economic recovery – and with hopes of getting out of the gradually emerging self-isolation through the change in the world agenda.
The main annual economic forum of the Roscongress Foundation, SPIEF, officially opened in St. Petersburg on June 3, although its business program began on June 2 (the events will last until June 5). Traditionally, the first official day began with macroeconomic and government discussions and the signing of a package of large investment agreements. On the second day, President Vladimir Putin (the forum, we recall, has the status of “presidential”, and although representatives of the White House work there, the Prime Minister does not participate in it – Mikhail Mishustin flew on a working trip to the Volga region on Thursday), who was present at the signing on June 3 via video link, speak at the plenary session.
The forum, canceled in person last year, is held with unprecedented sanitary security measures – as First Deputy Prime Minister Andrei Belousov said on June 2, this is the first offline event of this magnitude in the world – but its program is not limited in comparison with previous years …
Meanwhile, two years have changed the SPIEF agenda enormously.
It’s not about the coronavirus: the US presidential elections in early 2021 led to the fact that the main agenda for power and business in the United States, Great Britain and the EU became unified and, apparently, consensus for the whole world: it is (at least in part) supported all OECD countries. In a first approximation, this is “the fight against climate change”, but in reality the process is apparently broader – in the corporate world it is described by the abbreviation ESG (environment, social, governance – environment, social responsibility, corporate governance). Already at one of the first round tables of the SPIEF, the First Deputy Chairman of the Bank of Russia Ksenia Yudaeva stated: the ESG standard will be integrated in the near future into IFRS standards and will be mandatory for companies operating in the international market.
The rest of the SPIEF agenda in 2021 demonstrates that both the government and large Russian companies are well aware of this, they are preparing for this, seeing in this not only risks, but also opportunities. Therefore, the “leap to ESG” at the SPIEF is clearly seen by everyone as a way to get out of the tendency that has emerged since 2014 (and not only for sanctions reasons) towards the isolation of the Russian economy on itself. The two-year informational pause gave rise to an unusual and somewhat comical effect for those who remembered the last stop: from quarantine both the government of the Russian Federation (during this time it managed to change), both regional authorities and Russian companies returned with radically new content and a new image – the topic of Russia’s “industrial power” used at the SPIEF in recent years and supplemented by rapid digitalization, is now fully complemented by the ESG agenda, which a significant part of the forum participants clearly learned about only months ago.
Finance Minister Anton Siluanov, commenting on future possible changes in tax policy on June 3, said that one of the main challenges for her is the risk of non-recovery in global oil demand due to the trend towards a general “greening” of the world economy.
The Ministry of Finance does not abandon, in principle, the idea of a “tax freeze” until 2024, although this greatly narrows its possibilities, but structural changes can be very rapid, Mr. Siluanov made it clear, and it may be necessary to “tune” the tax system.
The only thing that the Ministry of Finance is not ready to change in it is personal income tax (by the way, the Minister of Finance estimated additional payments of personal income tax increased to 15% for high incomes of individuals – in 2021, they may amount to 100 billion rubles, although earlier the Ministry of Finance expected them in the amount of about 60 billion rubles). Due to the general greening, the extractive sector needs to react more quickly, and the Ministry of Finance views tax policy as a tool to support and stimulate structural changes, albeit from a speech by Anton Siluanov and from a discussion on the morning of June 3 at SPIEF with the participation of the head of the Central Bank Elvira Nabiullina, aide to President Maxim Oreshkin, the head of the Ministry of Economy Maxim Reshetnikov and the head of the IMF Kristalina Georgieva, it was obvious: the authorities in the Russian Federation regard the very rapid movement of the world economy towards ESG principles, including as a source of risks. Although the results of stress testing by the Central Bank of the economy published last week with the introduction of different rates of the “carbon tax” by the EU from 2023 are quite encouraging, what is happening cannot but affect the economy of the Russian Federation (at least exporters) and will affect quite quickly, just at the stage of exiting pandemic COVID-19, that is, in the coming years: the Central Bank believes that this can “neutralize” the effect of the event itself, the “opening” of the world after the pandemic, for the Russian economy.
By itself, the Russian economy continues to recover from the economic fallout of the pandemic faster than the world on average and in better shape. So, the head of the Ministry of Finance announced that, perhaps, the budget deficit in 2021 will not be the projected 2.4%, but 1%, that is, it will return to balance early. Both the Ministry of Finance and the Central Bank insist that the exit should be accompanied by a quick “normalization” of the budgetary and monetary policy, that is, the rejection of the current super-soft policy. The Bank of Russia, announced Ksenia Yudaeva, is likely to raise the key rate by 0.25-0.5 percentage points on June 11, the likelihood of its preservation is low. Elvira Nabiullina, in turn, spoke in detail about the formation of long-term pro-inflationary trends in the economy – the Central Bank intends to extinguish them energetically. In his speeches at the SPIEF, what is happening with inflation, according to the general consensus, symptoms of a certain overheating, Andrei Belousov, in his speeches at the SPIEF, supplemented the explanation of high inflation both in the USA (above 4%) and in the EU (2% after 0%) with the assumption that this the reduction of world capital flows is at work.
Meanwhile, in addition to relatively high inflation, which in itself marks a certain revival in the Russian economy, at the SPIEF in 2021, on the very first day, symptoms of a significant improvement in the investment situation were demonstrated: even regional projects are significantly larger than before.
And so far the largest deals of SPIEF have been agreements between VTB and VEB.RF with the Russian Platinum company on financing in the amount of up to 190 billion rubles. development of the Chernogorskoye platinum deposit (total investment – up to 570 billion rubles) and the purchase by Qatari structures of 24.9% of the St. Petersburg highway project “Western High-Speed Diameter”.
Qatar, the SPIEF guest country, is represented at the forum by the largest foreign delegation (it is larger than the traditionally large delegations of the PRC and the United States), the largest pavilion and, apparently, will sign the bulk of foreign investment transactions with the Russian Federation. The state is also ready to support the investment revival with investments from the NWF: Andrey Belousov at the SPIEF announced a preliminary agreement to invest from the fund in projects worth RUB 400 billion in 2022–2024. per year (investments will increase investment risks more), of which 200 billion rubles each – according to previously developed rules for infrastructure investments. This is slightly more than previously expected.
Whatever the investment projects of the next years, the first day of SPIEF showed that they can no longer do without at least declarations of compliance with the EGS conventions. Exporters, on the other hand, have to act faster and more technologically. For example, the head of Interros, Sergei Batekhin, at the SPIEF announced the possibility of tokenizing (via the Swiss blockchain platform Atomyze) Norilsk Nickel’s ESG products. The company itself announced the production in 2021 of the first two batches (10 thousand tons) of “carbon-free” nickel that meets ESG standards – they can be in demand by interested manufacturers, such as Tesla and Apple. At the same time, the company announced investments of about 10 billion rubles. in seven medical centers in the regions of presence is also part of the ESG agenda.
Alisher Usmanov’s largest Russian mining company Metalloinvest will also invest 160 billion rubles. in 2021–2026 in six investment projects for the development of Lebedinsky GOK, Oskol metallurgical plant and green metallurgy technologies. “We will modernize and create new production facilities that will meet the needs of the Russian and world markets for high-quality products that help reduce the carbon footprint. All investment projects will be implemented using the best available technologies with minimal impact on the environment. More than a thousand skilled jobs will be created, ”commented the general director of Metalloinvest Nazim Efendiev.
At the SPIEF in 2021, dozens of projects of a similar orientation, and without declarations of environmental friendliness, in the first place, apparently, not a single project, agreement or round table at all can do: the new principles are clearly replacing the old accents of “regional development”, “sociality”, “innovativeness” and “digitalization”. In general, the ESG accents of the SPIEF are explained, among other things, by the certain, albeit still abstract, hopes of the Russian business that the quick adoption of the green agenda will allow it to re-engage in the process of globalization, which has stalled in recent years. In any case, ignoring it will deliberately fix the existing isolation of the Russian economy on itself, while success in this area will be very useful for the country’s economy.