Sustainable development is the development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
The world is paying increasingly more attention to climate and environmental risks and the enhancement of sustainable development tools and infrastructure. Russia ratified the Paris Agreement on climate change in 2019. This international treaty sets the ideological and legal framework for the new global redistribution of capital flows in favour of the markets meeting today’s needs.
The global trend towards decarbonisation, the development of environmental standards for production, and an increase in businesses’ social responsibility forms an understanding that market participants not respecting these factors will create elevated risks for the financial sector.
The Bank of Russia’s objectives are to:
- provide opportunities for people and businesses to take part in shaping the future of the world by developing required infrastructure and sustainable financial instruments, specifically green mortgage, green bonds, and green loans;
- help financial institutions and public companies adjust to new challenges and conditions. The financial sector should first and foremost be able to take into account risks associated with the shift to the sustainable development goals and be aware that elevated risk is mostly due to the neglect to attain the sustainable development goals in its operations. It is therefore crucial to create systems for ESG risks identification, assessment, monitoring, and stress testing.
At the end of 2020, the Bank of Russia established the Working Group on Sustainable Development Financing that sets the strategic agenda in this area and controls its implementation. The group comprises five dedicated expert subgroups that include representatives of federal executive authorities, development institutes, financial market participants, self-regulatory organisations, and science.