Asian markets will be more challenging than Europe
ESG GAZETA spoke with Andrey Vladimirovich Sharonov, CEO of the National ESG Alliance
Russia is making an economic and, evidently, political turn to the East, Southeast Asia, to friendly countries of the Asia-Pacific region. Do you think that Russia’s ESG agenda will also be redirected towards these markets?
Andrey Sharonov: I think it will, but with certain nuances, which were revealed by the research conducted by the National ESG Alliance together with Kept (formerly KPMG). We analyzed the business infrastructure and the regulatory framework in the Asian, Southeast Asian, and Middle Eastern markets (13 countries and 19 exchanges). The overall picture is that all these countries have, to a greater or lesser extent, defined their national sustainable development agendas and adopted their own policies, but they are mainly guided by existing global standards. And in this sense, the pivot to Eastern markets does not mean abandoning the ESG agenda. Russian companies will continue to operate within the global ESG framework, perhaps with some adjustments. Moreover, the Hong Kong Stock Exchange’s requirements for issuers wishing to list their securities, whether equities or bonds, appear to be even more stringent than those of the London Stock Exchange. That is, the benchmarks in Asia are already quite high. And we should not forget that our neighbor and long-time partner China, the world’s largest polluter, has ambitious plans to reduce its emissions and has been working for many years not only on national legislation but also on harmonizing Chinese and EU regulations. This includes taxonomy and other issues. Now that China is becoming more important in our foreign trade and economic relations, we also have to take into account China’s domestic regulations, which, as I said, are getting closer to the European ones. So, all the requirements for our exporters remain relevant.
What are the areas where ESG integration with China is possible?
I think that sooner or later China will not only embrace the idea of transboundary carbon regulation (TCR), but will actually implement this practice, because it will find itself in a similar situation, trading with the EU and the US. And China will try to make sure that the incoming flows of goods, the entire supply chain, also comply with these rules. Therefore, the issue of TCR, which was alarming for Russia in the context of the adoption of carbon regulation in Europe from 2026, remains relevant for us in the context of our relations with China. Moreover, these processes will be very similar due to the harmonization of Chinese and European regulations.
You said that the ESG Alliance is analyzing the situation in the Asian markets. What other roles do you see for the National ESG Alliance?
The Alliance was established in January this year and actually started its activities in May. So, we are a very young organization, not even two months old. But we were established in a country that has been on a path of harmonization with international trends and legal requirements in the areas of sustainable development, corporate governance, and social responsibility for several years. We operate in a country where many companies have been publishing non-financial reports for more than 10 years. In a country where, for example, the Central Bank has already issued guidelines on non-financial reporting, and where there is a low-carbon strategy that aims to achieve zero emissions by 2060. These are very serious and, let’s face it, ambitious commitments for Russian business and finance. We are now engaged in research that will answer questions that are important to the members and founders of the Alliance. We need to identify the gaps and holes created by the withdrawal of international organizations from the Russian market. After all, exporting companies do not want the trend to be interrupted. They want to continue publishing reports and receiving ratings. And there are great difficulties in this area today, and our task is to replace the missing pieces of the global infrastructure so that Russian players can continue being part of the ESG trend. So, we see ourselves as part of the national ESG infrastructure that supports Russian companies.
Perhaps you could also become a link and a mediator between Russia and foreign partners?
I think that despite the seriousness of the situation, climate issues will continue to be of great interest to all foreign partners. Including those from so-called “unfriendly” countries. After all, climate is a global phenomenon, and you cannot have a conversation about climate without taking into account the GHG emissions of Russia, the fourth largest emitter in the world. Otherwise, the efforts of the rest of the world would be in vain. We must work together to achieve the desired results.
And more generally, in the context of the sanctions, the emerging energy crisis in Europe, where the need to revive the coal industry, to reopen plants, to return to nuclear power is already being discussed, how does all this influence the global “green” agenda?
You can see that all this is already having a very serious impact on the global “green” agenda, as the so-called “transition periods” have been extended; and the very return to coal power and other “dirtier” technologies de facto confirms this. What will come of it? I think we have not yet felt the depth of the crisis that will hit the energy sector, food supply, agriculture and fertilizers. It will probably be the worst crisis since the end of the Second World War, and of course it will affect the ability of countries to stick to their climate agenda. If you look at Maslow’s hierarchy of needs, we are heading down. Now we (and by “we” I mean the world) have to take care of the basic needs for physical survival: food, heat, transportation. At a minimum, everything becomes more expensive and at a maximum, less accessible. This diverts resources away from the higher levels of Maslow’s pyramid, which, of course, include climate issues. It is a temporary setback, but it is inevitable. At the same time, I think we should not lower the bar too much and suggest that climate and environmental issues are no longer relevant. That would be wrong, because we have already made much progress, and companies and manufacturers have kept up the pace to meet domestic and especially external benchmarks. It is also important for society: Russia, for example, has serious problems with solid waste. We need to promote responsible waste management. It is important that the government and large companies take a stand to show that, despite the difficulties, we remain committed to the sustainable development agenda. Because we live here, because it affects our quality of life. Because if we let go now, it will be even more expensive to come back.