PJSC Sberbank : Sberbank forms corporate client ESG rating and reduces rates for companies with high ESG indicators

Sberbank has begun implementing an ESG rating of its corporate clients and will reduce interest rates for clients who perform well in the rating. The ranking was announced by Alexander Vedyakhin, first deputy chairman of the Sberbank Executive Board, speaking at the 11^th Russian Forum on Corporate Governance, of which Sber was a strategic partner.

Speakers at the session titled "The Board of Directors at Public Companies: Resilience against Challenges?" discussed how a board of directors can lead a company through the many risks of today's world (including the COVID-19 pandemic, high inflation, staff shortages, supplier bankruptcies, new regulatory requirements, etc.) and how to implement an ESG transformation and integrate social responsibilities to ensure the business' sustainability in the long term.

Vedyakhin emphasized that a transition to an ESG model meets the main challenges of the modern world. The needs of companies are universal: access to sources of capital, attracting and retaining clients in the long term, maintaining competitiveness, and attracting and retaining new talent that moves the company forward. It is impossible to implement all these points without accounting for the ESG agenda.

Alexander Vedyakhin, first deputy chairman of the executive board, Sberbank:

"In Europe, 77% of all managed assets are already classified as responsible investment assets, and a total of USD 4 tn worldwide are invested in assets accounting for ESG factors. This volume will only increase. Consequently, if a company does not adopt a responsible investment approach, they run the risk of being left without investors. Capital and borrowed funds may also cost much more. Creating long-term value for clients is just as impossible without ESG as attracting and retaining talent. About one-third of the growth in our client base comes from young people, one of the fastest-growing client segments and, at the same time, an audience that shares more values based on ESG, sustainable development, and responsible behavior than other generations. ESG is a very pragmatic and comprehensible response to all of these challenges."

Vedyakhin noted that Sber plans to achieve carbon neutrality on Scopes 1 and 2 by 2030. The goal for 2022 is to reduce CO2 emissions by 5% for Scope 1 and 15% for Scope 2. For Sber, with nearly 14,000 branches across the country and substantial data processing capacity (industrial computing is carbon-intensive), this primarily means purchasing certified green energy from verified suppliers and reducing energy consumption, including by optimizing artificial intelligence algorithms. Sber also intends to work on Scope 3, i.e., client and supplier carbon footprints.

Alexander Vedyakhin, first deputy chairman of the executive board, Sberbank:

"We are now implementing an ESG rating for our corporate clients, and we will be reducing interest rates for clients who place high in the rating. Accordingly, we will also provide additional discounts when financing green and ESG projects. We will help companies that have not yet made it to the top of the rating to achieve an ESG transformation, which will lead to carbon neutrality and the introduction of new technology, as well as making the Russian economy greener and more progressive. We will also provide loans for ESG transformations at a reduced rate."

So how do we accelerate the ESG transformation so that as many companies as possible move from words and strategies to concrete actions as soon as possible? An effective incentive is including ESG metrics in key performance indicators for executives, according to Vedyakhin.

Alexander Vedyakhin, first deputy chairman of the executive board, Sberbank:

"Half of the FTSE 100 companies use ESG metrics to calculate executive bonuses. At Sber, there are ESG metrics for the entire executive team, not just the executive board. That, among other reasons, is why we are succeeding at this transformation. So I can give you some advice: link management bonuses to ESG targets achievement, and you will soon see results."

Also participating in the session were: Andrey Trapeznikov, co-chairman of the sustainability committee of the Association of Professional Directors and chairman of the board of directors of private companies (moderator), Tatiana Mitrova, independent director at NOVATEK, Elena Kuritsyna, director of the Corporate Affairs Department of the Bank of Russia, Agnes Ritter, member of the Severstal Board of Directors, and John Boynton, independent non-executive chairman of the board of directors of Yandex.

The XI Russian Forum on Corporate Governance is an annual platform where government officials and representatives of the business sector and society discuss strategic issues of governance. The 16^th national Director of the Year award is also presented in the framework of the forum.