Only to a certain extent. First, the “Western” understanding of ESG is now in a turbulent zone, as there is no unified approach to many key issues, and I am sure there will not be in the near future. In the United States, ESG and the climate agenda are now almost the main battleground between Republicans and Democrats; and the situation is unlikely to return to normal in the near future as the titans of the “red” states and the financial market seem to be on a head-on collision course. A year ago, it was unimaginable that Larry Fink, CEO of BlackRock, the world’s largest asset manager with more than $10 trillion under management, would be forced to publicly defend his company’s leadership in ESG investing. And Europe’s ESG priorities will be put to the test in the coming years. After all, energy is the backbone of the modern economy, and the energy issue is understandably going to be quite challenging for Europe for some time to come. The new Western understanding of ESG is thus a work in progress. Especially under the pressure of today’s challenges: not only in terms of the climate agenda, but also in terms of preserving biodiversity. I am convinced that the global destruction of the Earth’s natural environment is the most pressing problem facing humanity today.

ESG as a system of values was created by the international community on the basis of the UN. Each state implements these values in accordance with its national peculiarities, but the basic principles remain the same. It is wrong to say that Russia is abandoning ESG as a derivative of Western values. It is just that the economy and business are currently facing tasks of a different level and priority.

The role of ESG as a tool for responsible investors has been somewhat diminished by the current situation in Russia. But if we look at ESG as a set of approaches and management practices, there is no such diminishment. On the contrary, companies are trying to use all mechanisms available to maintain sustainability. In this respect, ESG has great potential.

Although there is a scientific definition of the term ESG, it seems to me that Russia and the West have always prioritized different “letters” of the term. In the West, the term has traditionally been associated more with the “green” agenda, the environment, and the need to reduce CO2 emissions. Russia, on the other hand, has always tried to see these three letters as a whole. So today we should rather be talking about harmonizing Russia’s and the West’s understanding of the term.

Yes, every country has its own approach to ESG. So does Russia. Despite the global scale of environmental and social problems in the modern world and the existence of a common model of sustainable development, each country has its own peculiarities: climate, natural resources, soil conditions, labor legislation, social guarantees, and local traditions of the population. And all this should be based on a national platform. There is a general consensus that forests must be protected. But forest protection in Russia is different from forest protection in Brazil. Methodologies and indicators may be different. Why would anyone want to copy something foreign and unnecessary?

The priorities for developing the national ESG agenda are to move from “exported ESG” to “local ESG” and to adapt the whole framework to take into account the interests of people, not just investors or regulators.

In terms of national goals and environmental, energy, and social standards, Russia organically fit into the global picture, and in some sectors it even set international benchmarks, for example in energy and heavy industry. It will take much more time for Russia to define its unique path in the new geopolitical landscape: not just one year, but several years. But it is already clear that relations with East and West Asian countries will be strengthened. There will be an exchange of experience, development of common standards, joint programs, and development projects in the field of ESG.

Russian experts are now faced with the task of recycling foreign standards and practices into domestic approaches. This is not a bad thing, because we have a number of specific national and regional characteristics that are not adequately reflected in foreign methodologies. At the same time, however, it is important to maintain the continuity and universality of the approaches in such a way that there is still a possibility of re-integration when the situation stabilizes. For example, the upcoming sustainability reporting law should include correlation with the principles of international reporting standards (ideally up to index correlation). Or, the approaches defined by the well-known LEED, BREEAM, and WELL should not be radically changed by the green building standards currently being adopted. It is important to know that despite this temporary isolation, our practices and approaches do not contradict international frameworks and may even enhance them. It is similar to the way animals evolved in Australia, sometimes acquiring bizarre shapes and features. Nevertheless, they still breathe the same air and are very viable even if you move them to another continent.

And I think the task of creating “sovereign” standards and practices can be done at a very high level. One example is VEB’s green taxonomy, which was developed methodologically according to global standards.

Today, Russia has the opportunity to interpret the concept of ESG without reference to the West. It is clear that no one is going to abandon the ESG agenda. For example, with regard to the pillar “E” (Environment), the issue of environmental protection around large industrial sites is becoming even more important. The government is not going to loosen its grip on the industrial giants, because concern for the environment in the regions where they operate encourages companies to make serious investments. Speaking of the pillar “S” (Social), we should remember that Russian companies know that the key to their success is people who are willing to invest their knowledge and experience in business development. Everyone recognizes the importance of employees. Major corporate taxpayers cannot afford not to contribute to the prosperity and well-being of the communities in which they operate. Therefore, human capital and public space development projects will remain relevant for such companies in the future. Companies that can address these issues in an integrated way will stand out. Despite the loosening of regulatory control, we see that, with respect to the pillar “G” (Governance), companies are trying to maintain their corporate governance practices. Our last survey has shown that boards of directors have been maintained, as has the institution of independent directors. The trend toward maintaining the number and quality of boards of directors is certainly relevant.

There is no need to drop the term. But there is a need to add new terms. There is an international market, where we need to speak the same language as everyone else. Even in Russia, there are many people and professionals who prefer not to translate the acronym ESG into Russian. But there are also many people who don’t like this acronym. In such cases, I suggest using the Russian alternative “ЭСУ” which stands for Ecology, Social Issues, and Governance. Not all the letters are exactly the same, but the meaning is there. I believe that any new concept should be promoted in the language of the consumer. No one seems to mind that in Russia we use the acronym “СУР” instead of the Latin SDG. And nothing bad happens. An acronym cannot be good or bad, it all depends on what it stands for.

The Russian language has the terms “sustainable development”, “sustainable development goals”, which have been successfully used so far.

There is no need to create unnecessary constructs. Experiments with language rarely result in a meaningful product. Take, for example, the failed attempt to translate “LEAN manufacturing” as “cost-conscious” or, worse, “frugal” manufacturing. I’d rather see new terms left untranslated, because any translation distorts the essence of the concept and fills it with new meanings. Working with translated terms is also more difficult. I have to convince people that “lean manufacturing” is not just for factories (why would they use the word “manufacturing” then?) and not just for the poor and greedy (why would they call it “lean” then?). Let ESG be.

In my opinion, replacing the term ESG is not a particularly relevant issue. The market has developed a clear understanding of the term; it has become part of the professional vocabulary. Any attempt to replace it will only be a distraction.

The ESG agenda will remain both in Russia and in the world in five and even ten years. This is the most important thing. Because ESG encompasses all the most acute problems accumulated by modern capitalism. And they need to be addressed. In my opinion, ESG will change along with the world, which, of course, will not be the same.

Targets may be adjusted, standards may be revised, but globally the main lines of sustainable development will remain as they have been shaped over the past twenty years. The challenge for us is to work together to set priorities for the next few years so that the progress we have made is maintained and the relevance of the issue is not lost. This is a massive and complex undertaking for the community.

It is true to say that environmental, social, and economic issues will become more difficult to address. This means that the need for sustainable development will be even greater than it is today.

We are making progress, both socially and economically, and we will certainly continue to improve. Some elements of the ESG agenda will probably be reconsidered, while others, such as public welfare or environmental issues, will be emphasized.