Bank of Russia issues methodology for companies to develop transition plans

January 31, 2024|Written by |Bank of Russia

The Bank of Russia (BoR) has issued a methodology for public joint-stock companies and issuers to develop sustainable development and climate transition plans. The bank aims to help Russian companies transition to a low-carbon economy and remain competitive globally, as the carbon-intensive country is vulnerable to climate risks.

Integrating Russia’s national goals and the Paris Agreement into a sustainable development and climate transition strategy is the first step businesses should take in the transition to a greener economy, the BoR said.

Taking ESG and sustainable factors into account when organising corporate governance and when forming value chains will help ensure greater business resilience to market volatility in both the short and long-term. Developing transition plans will also add value to companies, the bank wrote.

The framework explains that, when creating transition strategies, companies should first prioritise their goals and identify key indicators. They should also develop goals aimed at achieving those goals.

Each goal should be developed with five core principles, the bank said. First, transition plans and sustainable development strategies should be consistent with the overall corporate strategy of the company. The central bank also recommends that companies set goals that are achievable and can be supported by the current and planned resources of the firm.

Companies should also make sure their plans are guided by scientifically-based forecasts and scenarios, using current data and nationally and internationally recognized scientific research. As knowledge changes, targets should be adjusted, but that should not be used as a reason to delay the adoption of a firm’s transition plans.

In addition, businesses should consider double materiality when setting their goals for transition plans and sustainable development strategies. Finally, the BoR said companies should apply the “do no significant harm” principle and avoid any potential negative impact on the environment or society, or minimise such impacts as much as possible.

The BoR introduced climate capital rules for banks in 2021 and adjusted capital requirements based on the climate impact of loans issued. In December, the central bank recommended financial institutions analyse climate risks based on potential scenarios and create a system to monitor those risks. The BoR plans to prepare further recommendations for how banks can take climate risks into account when applying capital assessments

Russia was given a D- in the Green Central Banking Scorecard, largely due to a lack of monetary and financial policy.

This page was last updated January 31, 2024

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