Responsible investing and sustainable growth
As sustainable finance becomes increasingly mainstream, and as the achievement of SDGs becomes ever more pressing, most exchanges already consider sustainability as a strategic goal.
The mobilization of finance is central to what exchanges do and the existence of well-functioning exchanges can, therefore, contribute to economic growth and development. As the Sustainable
Stock Exchanges initiative has declared, stock exchanges can play an important role to enable innovative financing mechanisms and promote a reorientation of financial markets through improved corporate sustainability reporting.
As a member of Sustainable Stock Exchanges, MOEX Group has incorporated the global trend toward responsible investing into its market environment. The Group sees responsible investment as an approach that explicitly acknowledges the relevance of ESG factors and long-term health and stability of the market to the investor. Responsible investment recognizes that the generation of long-term sustainable returns is dependent on stable, well-functioning and well-governed social, environmental, and economic systems.
On a regular basis, Moscow Exchange together with its issuers discuss feedback on new MOEX ESG products as part of the work of Bond Issuers Committee and find mutual solutions to improve services provided by MOEX.
MOEX Group supports sustainable growth and financial stability while ensuring the fair treatment of shareholders and other stakeholders. This section demonstrates what the Group does to foster sustainable growth and how it facilitates responsible investing through green bonds, ESG funds and other products.
|MOEX Group corporate goals relevant for this focus area and set in line with UN SDG targets
||SDG 8.3, 9.3 Increase growth opportunities and access to financial markets for small and medium-sized enterprises (SMEs)
SDG 8.10 Develop a financial infrastructure for access to capital markets, and promote the development of a local investor base
SDG 9.b Increase growth opportunities and access to financial markets
for companies developing innovative products
SDG 9.1 Increase access to financial services for retail investors
SDG 12.6, 12.8 Improve the quality and quantity of ESG information disclosed by issuers
SDG 12.6, 13.3 Increase companies’ awareness of sustainability trends, standards and best practices
Major highlights in responsible investing and sustainable growth
- ESG bonds
Moscow Exchange has developed financial instruments and products that will help meet the investor community’s growing demand for responsible investment tools. Together with the Ministry of Economic Development of the Russian Federation, Moscow Exchange launched the Sustainability Sector, which helps issuers raise funds for sustainability initiatives and other initiatives that meet the objectives of projects. The Sector incorporates international best practices and constitutes one of the most significant measures that Moscow Exchange has taken as a member of the Sustainable Stock Exchanges (SSE) initiative.
The Sustainability Sector is designed to:
- Help corporates, government bodies and other issuers raise funds for environmental and social projects;
- Create an environment that encourages foreign investment into local Russian bonds;
- Offer a set of instruments for funding initiatives that meet the objectives of national projects and the goals of the Russian Presidential Decree No. 204 of 7 May 2018 "On the National Goals and Strategic Development Objectives of the Russian Federation to 2024".
The Sustainability Sector has three independent segments: green bonds, social bonds and national projects. The green and social bonds segments feature bonds issued by various Russian issuers, provided that the bond issue or investment project meets the green or social financing principles, as per the guidelines of the International Capital Market Association (ICMA) or the Climate Bonds Initiative (CBI), and provided that the offer, issuer or project has received an independent verification that confirms compliance with the principles or standard. For an issue to be identified using the words "green bonds", "social bonds", registration of the bonds by the Bank of Russia and the Exchange is required. Registration in this case is carried out in accordance with the Securities Issuance Standards.
Performance indicators of greenhouse gas emissions reduced / avoided among others can be used for reporting by green bond issuers as it is recommended by ICMA Green Bond Principles.
In order to be considered for inclusion in the Sustainability sector, an issuer must submit the following:
- an application for inclusion in the sector;
- a certificate from an external verifying body;
- a statement that the issuer undertakes to disclose information (no less than once a year throughout the lifetime of the bond) confirming that the funds raised are being put to appropriate use;
- for the national projects segment: a statement by a government body, official, or interdepartmental committee confirming that the offering, the issuer, or the investment project are consistent with the objectives and results.
Moscow Exchange pays great attention to feedback received from its clients on ESG instruments. This topic is widely discussed at User Committees meetings.
- Listing Rules of Moscow Exchange
- Social Bonds Principles (SPB)
- Green Bond Principles of the International Capital Market Association, (ICMA), 2018
- Climate Bonds Standard of the Climate Bonds Initiative
- VEB.RF Taxonomy (VEB.RF National Methodology for Green Financing)
- Listing Department
- Issuer Relations Department
- ESG indices
ESG indices are designed to represent the performance of the most common ESG investment approaches by including, re-weighting or excluding companies by leveraging ESG criteria. Moscow Exchange aims to offer the range of ESG indexes to meet the needs of investors whatever ESG outcomes they want to achieve. In accordance with the partnership agreement that Moscow Exchange and RSPP signed in March 2019, Moscow Exchange calculates the MOEX-RSPP Responsibility and Transparency and the MOEX-RSPP Sustainability Vector sustainability indices daily. The purpose of the partnership agreement is to develop and bolster sustainable business practices among Russian issuers, improve their investment appeal and help them become more transparent and trustworthy from the investor’s point of view.
The MOEX-RSPP Responsibility and Transparency Index (MRRT) includes stocks of 23 issuers that are leading the way in sustainability reporting area. While analyzing the quality of reporting, international non-financial reporting standards and requirements are considered. Each issuer’s share in the index is adjusted on a quarterly basis, using the free float market capitalization method. The share of any given company is limited to 15%.
The MOEX-RSPP Sustainability Vector Index (MRSV) is based on stocks of 20 issuers that publish the best results based on the following ESG metrics (as compared to the previous year):
- GHG emissions;
- Water consumption;
- Power consumption;
- Waste management;
- Employee productivity;
- Occupational health and safety;
- Wages and social support for employees;
- Employee training and skill improvement;
- Staff turnover;
- Social expenditures.
The indices calculation basis is reviewed annually, depending on the results of an analysis of the largest Russian companies’ financial reports conducted by the RSPP. The indices are shared daily on Moscow Exchange and RSPP websites and through various information agencies.
- Methodology for Calculating Moscow Exchange ESG Indices
- Indices and Market Data Department
- ESG ETFs
Two Russian ESG ETFs are managed by RSHB Asset Management and Sberbank Asset Management. Both ESG ETFs are based on Moscow Exchange-RSPP Sustainability Vector Index that is composed of equities which demonstrate the best results in sustainability and corporate social responsibility.
The ETFs based on the MOEX-RSPP Sustainability Vector Index are the first two ESG ETFs in Russia. Historically, the companies included in this index demonstrate strong performance and attractive dividend yields. By purchasing ETFs , the investor receives exposure to a diversified portfolio that includes shares of constituent companies of the MOEX-RSPP Sustainability Vector Index constituents, which reflects the most progressive Russian companies that comply with the best ESG practices.
- Rules for Trading on the Equity and Bond Market of Moscow Exchange
- SME segment
In 2017, Moscow Exchange launched the Growth sector in cooperation with the Central Bank of Russia and several other partners, including the Ministry of Economic Development of the Russian Federation, SME Corporation and SME Bank.
The purpose of the sector is to help promising small and medium-sized enterprises raise capital. The primary objective of the sector is to facilitate the implementation of the national project "Small and Medium-sized Entrepreneurship and Support of Individual Entrepreneurship Initiatives".
The sector already has a mature ecosystem that includes:
- a set of rules of entry to the sector, including a risk management system for vetting companies;
- a set of partners (development institutions);
- a network of professional service organizations;
- government support tools;
- a specialized project team within Moscow Exchange which is experienced in working with SMEs.
The Growth sector of Moscow Exchange is supported by the government, per Russian Government Decree No. 532 dated 30 April 2019, which provides for partial compensation of the costs of issuing shares and bonds and the costs of agreements on assignment of a credit rating.
Measures to support companies in the Growth sector include:
- subsidies of up to 70% of the coupon rate;
- compensation of up to RUB 2.5 million for the issuer’s costs on placement of the securities;
- anchor investments from SME Bank, with an option to act as the co-organizer of the offering;
- guarantees and endorsements for SME Corporation’s bond offerings (up to RUB 1 billion);
- help from the territorial divisions of the Central Bank of Russia in organizing events for issuers;
- waived listing fees for SMEs placing bonds of up to RUB 400 million up to the end of 2022;
- reduced free-float listing requirements for Tier II stocks: RUB 500 million (compared to RUB 1 billion) for ordinary stock, and RUB 250 million (compared to RUB 500 million) for preferred stock.
Listing rules for SMEs:
- the issuer must have been established at least three years prior to the issue;
- the issuer must have revenue of at least RUB 120 million. The maximum revenue must be less than RUB 10 billion for bond issuers and less than RUB 25 billion for issuers of shares;
- for bond issuers:
- the minimum issue volume is RUB 50 million;
- there must be an assigned rating or support from development institutions (guarantees from the SME Corporation, anchor investments from SME Bank).
Company screening and risk management
Companies that wish to join the Growth sector must meet a number of criteria. Each new issuer must undergo KYC (Know Your Customer) procedures that include a review by experts from Moscow Exchange departments who check each applicant against a set of risk parameters.
If the review reveals any potential risks, the issuer’s file is forwarded to the Growth Sector Board Committee, which then makes a final recommendation.
Many small and medium-sized businesses joined the Growth sector after receiving support from our partners, such as guarantees and endorsements from the SME Corporation, anchor investments from SME Bank, or a subsidized coupon rate (which significantly reduces the likelihood of default). Issuers in high-risk industries (real estate development, lease financing) can only join the Growth sector if they have an approved credit rating and have received a favorable recommendation from the Committee.
Priority is given to:
- companies showing growth in financial results;
- industrial companies;
- companies with export revenue;
- companies that have received support from the SME Corporation, SME Bank, FRP, REC or RDIF
- Listing rules of Moscow Exchange
- Criteria for Inclusion in the High Investment Risk Sector
- Government Decree No. 2374 dated December 30, 2020
- Growth Sector Council
- The Committee of the Growth Sector Council
- Listing Department
- Innovation and Investment Market
The Innovation and Investment Market (IIM) of Moscow Exchange was launched in 2009 to attract investments to the innovative sector of the Russian economy. The IIM consists of three segments.
Each is intended for certain types of investors and issuers at different stages of development:
- The IIM sector helps innovative companies conduct IPO/SPOs and gain admission to public trading.
- The IIM-2 sector is a special exchange sector for private placements. Special exchange technology (block trading) is available for investors and issuers. This sector is for qualified investors only.
- The IPO board is an online information and trading system that provides access to venture capital and private equity for leading innovative small and medium-sized companies from Russia.
Key listing requirements:
- market capitalization of at least RUB 500 million;
- business areas: telecommunications, internet, software, development and production of semiconductor devices, biotechnology, pharmaceuticals, high-tech, knowledge-based technologies, new materials, energy efficiency, etc.;
- credit rating assigned to the issuer and/or its bond issue by one of the approved ratings agencies;
- securities prospectus drawn up in line with Russian laws and information disclosure standards;
- investment memorandum containing detailed information about the company’s financial and operational activity and the main goals and plans for delivering potential growth.
The innovative segment requires the involvement of a listing agent (i.e., an advisory, broker, or investment company accredited by Moscow Exchange).
Measures to support companies in the IIM sector:
- marketing and promotion programs for issuers conducting an IPO/SPO;
- attracting investors targeting companies of the given type;
- IR services and tools: presentations for investors, roadshows, webinars;
- information and analytical coverage based on monthly IIM reports;
- access to pension savings: according to Central Bank of Russia Regulation No. 580-P, up to 5%
- of the portfolio of pension savings of NPFs can be invested in shares of issuers included in the IIM-Prime segment;
- tax incentives for investors.
- Rules for Classifying Shares and Bonds of Russian Organizations, as well as Investment Units Circulating on the Organized Securities Market as Securities of the High-tech (Innovative) Sector of the Economy (approved by Russian Government Decree No. 156 dated 22 February 2012)
- Managing Director for Relations with Issuers and Authorities
- Committee for Development of the Innovation and Investment Market
- Innovation and Investment Market Coordination Council