18 декабря 2019 г.

Ethical investments are gaining more traction, as the issues of sustainability and social impact are becoming one of the key factors for executives to consider before investing their money.

Partially, the concerns are about mitigating risks and making investments more profitable in the long run. The second reason is a rising understanding of socially responsible investing and better (thus, more effective) corporate relations.

To discuss these issues in detail, on December 16, CFA Association Russia held an evening seminar focusing on the role of environmental, social and corporate governance (ESG) in credit ratings. The event was organized in cooperation with Deloitte CIS and featured two presentations – the first one given by the consulting firm’s own Sustainability Services department and a detailed presentation by two analysts from Moody’s Investors Service.

Ivan Kukhin, Partner at Deloitte’s Strategic & Reputation Risk Services, and his colleague Andrew Risk gave a quick overview of ESG and its history. They also touched on popular questions that companies in Russia and the CIS ask when contemplating on whether to follow the ESG principles.

Above: Ivan Kukhin, Deloitte

“As investors, especially the older and wealthier ones, reach a certain level of mindfulness, they start thinking about sustainability and legacy. Since our services began working not long ago, the demand for sustainability-related consultative services has been on the rise,” Ivan explained.

After the Deloitte presentation, Yulia Pribytkova, a vice-president and senior analyst, and Svetlana Pavlova, CFA, an assistant vice-president from Moody’s Investors Service, took the floor.

According to Moody’s, a market momentum around ESG is rising around the world. Between 2014 and 2018, for example, the assets under management (AUM) of socially responsible investments increased 83 percent in the United States, 31 percent in Europe and just over 31 per cent in Japan.

During their presentation, Yulia and Svetlana covered many aspects of how Moody’s considers ESG factors when rating companies and banks. In particular, Moody’s assessment of corporate governance incorporates a broad spectrum of factors, including a company’s financial strategy and risk management, compliance and reporting, a track record of its management’s credibility, reputation and organizational structure.

Above: Svetlana Pavlova, CFA, and Yulia Pribytkova, Moody's Investors Service.

“The key message here is that we take a detailed and broad look at everything that has to do with corporate governance.,” Svetlana said.

The speakers emphasized that Moody’s ratings capture all ESG considerations with material credit implications, whether or not their potential impact on the companies’ financials is straightforward to quantify. In addition to corporate governance risks, which have credit implications for issuers across sectors, , Moody’s pays attention to a great variety of environmental and social issues when ranking companies. 

The relevant social issues range from good customer relations, adherence to health & safety regulations, human capital, and responsible production, Yulia explained.

“In reality, there could be even more factors that affect the social responsibility part. For example, the production of animal protein – here one has to consider issues such as animal welfare and the use of antibiotics,” said Yulia. 

The speakers added that the increasing concern over these issues may have a negative impact on businesses. To find the perfect balance one would have to consider many parts in the equation, some of which could contradict each other.

The ESG theme definitely aroused interest among seminar guests. There were a lot of questions asked during the Q&A session of the event.

To watch a full video of the event and access the speakers’ presentations, as well as to gain unlimited access to all videos from previous CFA Russia events and seminars, please consider joining the society using this link.

FULL VIDEO OF THE EVENT >>>