According to the UN forecast, by 2040 the average annual temperature on the planet will rise by 1.5 °C compared to pre-industrial levels. States are taking measures: they are tightening control over the operation of enterprises, limiting the sale of goods that negatively affect the environment. But the war on global warming is too costly to win without private investment. Are Russian investors ready for “green” financing?
Investor priorities have changed
The total budget of the national project “Ecology”, aimed at combating climate change and other environmental problems, is 4 trillion rubles. Most of this amount — about 3 trillion rubles — falls on extra-budgetary funds. In 2018, before the launch of the national project, Dmitry Kobylkin, Chairman of the State Duma Committee on Ecology, Natural Resources and Environment Protection, noted that in the course of working with industrial companies, these figures could change upwards. But the expectations were not fully justified. So, in 2019, business invested 11% of the planned amount in the implementation of the national project “Ecology”, and 2.7% in 2020.
In 2022, the situation worsened: many large companies temporarily froze their budgets for social and environmental initiatives. Yulia Shulga, General Director of the Center for Expertise and Integral Models, believes that business expects not only an improvement in the economic situation, but also an opportunity to assess the risks and prospects of “green” investments.
Not only companies, but also individuals are cautious about environmental initiatives. According to the CloudPayments payment service, in 2022, regular transfers from Russians helping Russian environmental funds decreased by 57%. This phenomenon is also associated with changes in the economy.
Thus, against the backdrop of global uncertainty, private investors, without changing their overall commitment to “green” investments, are waiting for clearer signals about their benefits. They understand that “green” investment is an investment in the future, but they need to do business right now.
Where investors’ money goes
Meanwhile, investments in the oil sector still occupy a leading position — more than 30% of the global energy balance. Audun Martinsen, Head of Energy Service Research at Rystad Energy, noted that in 2022 the world is spending more on energy than ever.
UN Secretary-General António Guterres has criticized increased investment in fossil fuels. He believes that the unstable economic situation is a bad excuse to direct funds that should have been spent on the environment to an industry that pollutes nature and exacerbates the climate catastrophe.
Humanity is already consuming 1.7 times more resources than the planet can give it. This means that reserves are depleted and the well-being of future generations is at risk. The ecological footprint is also increasing, that is, the negative human impact on the environment.
Why companies avoid spending on the environment
Aleksey Miroshnichenko, Member of the Board of the State Investment Bank “VEB.RF”, believes that Russian investors are ignoring “green” finance instruments because they are not sure that they will bring them maximum income. But in the future, priorities may change, because the ESG agenda is not a tribute to fashion, but a long-term global trend focused on achieving the UN Sustainable Development Goals.
In economically developed countries, many companies invest in the environment on their own initiative. This improves the reputation of the business, attracts investors, and therefore increases profits. In Russia, this trend is just beginning to emerge, and its development needs to be accelerated, among other things, in order to prevent the loss of competitiveness of domestic companies in the international market.
There are not enough funds to save the planet
The trend of declining interest of Russians in “green” financing can be called an inverted pyramid, inexorably narrowing and leading to disaster. Of course, the implementation of the national project “Ecology” continues, albeit more slowly than originally planned. But the delay also has consequences — both for the climate and the health of the country’s inhabitants, and for the economy. Thus, analysts at the consulting company Kept calculated that the costs of Russian companies from carbon regulation in the markets of Asian countries (mainly China and Turkey) will amount to about $875 million per year.
The International Energy Agency (IEA) calls for at least a threefold increase in funding for the transition to renewable energy sources and other eco-projects. If investment remains at current levels, by 2100 the global temperature of the Earth will rise by a catastrophic 2.6 °C. This will lead to irreversible changes: extreme temperature fluctuations, frequent and devastating natural disasters, coastal flooding, famine, and the extinction of animals and plants.
The future of the earth depends on everyone
Entrepreneurs can contribute to preventing an environmental catastrophe not only by investing in national projects and “green” finance instruments, but also by creating their own strategy to reduce environmental impact. There are many positive examples, for example, Sberbank implements about a hundred eco-projects, and also supports “responsible and caring” people. Companies can get advice on environmental risk management, as well as get a “green credit” on favorable terms, if the money received is used for ESG goals (reducing emissions, cleaning water bodies, and so on).
Participation in saving the planet has become even easier with the launch of Russia’s first national fund for the support and development of environmental initiatives “Compass”. You can help the foundation both with deeds and with money, and see the result of your indifference.
Author: Vera Zhikhareva
Cover photo: Yvonne Lebens / iStock
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