“ESG in Russia” Meeting #1

Believe it or not, we’ve been able to run our first ESG Clubhouse room last Friday, 12 Feb. Overall we had between 70 and 100 listeners, which, I guess, is not bad considering the fact that there were tens of concurrently running rooms on more sexy topics. Still, we’re very thankful to the people who made it to our conversation and hope that our diversity of opinions has brought a smile on someone’s face.

ESG in Russia in 2021

Ekaterina Pochueva, Head of Risk and Compliance at Aviasales, has come up with (in my opinion) a very elegant statement: the Government controls the E, while companies are in control of the S and G. Why is this important?

  • Maybe it’s just a perception, but it does look and feel that the only eco-activities that have a chance to succeed must be blessed by the government (local or federal), and it’s up to the court or a government official to call for compliance or damage control.
  • Companies have lots of freedom in terms of the way they treat customers, employees, what work practices they employ, etc. Getting the S part right may be not as hard or expensive as it looks.
  • Getting the G part to the prescribed standard is harder due to the nature of the companies’ ownership in Russia: a vast majority of them are either government-controlled (i.e. there’s a big elephant in the china shop) or simply controlled by the majority owner. It’s not just the Russia’s specifics (look no further than the Middle East), just something to keep in mind when trying to blindly adopt rules and approaches.

Curious Topics


  • We were quite divided on whether paying the fair amount of tax is S or G (I can argue both ways, but I think it’s both). Shareholders are clearly going to be better off as a group if the company does its best to optimize taxation and pass the savings to them via share buybacks or dividends. However, there’s a strong argument to be made that since more companies now understand that their perpetuity of existence and limited liability granted by law is something the society provided them for the goal of making the country a better place (i.e. a two-way road), the society as a whole is in a position to politely inquire if the shareholder returns are achieved at the society’s expense.
  • The passage above does sound a bit socialist, but in this instance it’s acceptable as there’s another valid point to be made that organizations paying higher tax than the bare minimum can ask the government for favours, concessions or at least get a say in developing policies.


  • The topic of ecology is the most controversial one and at the same time is the most widely discussed, taking the most time in the conversations. It’s very clear why: it’s the same dynamics in the Board meetings – people tend to talk more about the familiar topics (regardless of their expertise). Also, it’s hard to argue that reducing waste and polluting less is a good idea regardless of the political agenda.
  • The question is whether greenwashing is good or not (in black and white terms). My take is that there’s nothing wrong with greenwashing in general (the company is still doing something efficient) if it doesn’t lead to the unfair transfer of wealth from the government and society as subsidies for something that can be simply explained by the optimization of commercial operations. By the way, greenwashing can be used for all three letters of ESG.

Greenwashing examples

  • (E) A large retailer has announced that they’ve reduced their carbon footprint by 22% over the past year due to the introduction of energy-savings technologies in each of their stores. But one doesn’t have to look far to understand that it’s driven by lower electricity costs, and there’s a positive business case to be made.
  • (E) An IT company has announced that they’ve reduced their carbon footprint by 10% by shutting down their large office and moving all their staff to work from home (less office electricity overhead, less carbon from moving people, etc). This is a clear case a greenwashing PR, and while the effect of the “initiative” (more likely – a forced move) is kind of neutral, the credibility of the CEO must suffer. (At least I’d hate myself if our PR crew made me say this.)
  • (S) A large retailer has announced an initiative to work with local communities through social investment. Brilliant, but the underlying reason is cost and PR control when it comes to unhappy customers preferring a competitor, or the reduction of theft and goods damage.
  • (S) A large retailer has announced an initiative to improve the working conditions of all the staff and have KPI’d their top managers on this. Brilliant, but the underlying reason is the churn of low-level employees who are getting fed up after working for 6-9 months; treating them as humans and providing the path to growth (think McDonald’s University) goes a long way towards honest retention.
  • There are many more examples; I guess we could discuss these topics at our next meetings.

Investment into ESG-focused companies

  • Sergey Fradkov made a comment that there’s an increasing number of investors looking to pick the stocks of companies with higher ESG scores – even if they’re unprofitable. There’s nothing wrong with this as long as the investment mandate allows for it. It would be interesting to see what percentage of highly ESG-rated companies take in the entire portfolios of such activists.
  • At the same time, it’s not clear how accurate the ESG scores are, and also whether these scores are descriptive (explain the performance) or predictive (predict the performance). Assuming the long-term nature of stock picking, this is most likely both.
  • Also, it’s important to mention that individual investors into investment funds (as opposed to investors holding shares in their names) don’t have any sort of control over the activities of the firm. Hence, the only recourse is switching investment funds.


  • Russia is a tricky country when it comes to human resources development. I’d argue that most people’s careers peak at around 35-40 and after 40 many people experience a permanent plateau (or age-based glass ceiling). There’s almost no sexism in Russia, so the core issue is the age, not the gender.
  • We briefly touched on the topic of corporate board education for people under 40, and the consensus has been quite disappointing to the candidate: the vast majority of Board positions in commercial organizations require a minimum of 20-30 years of experience, effectively ruling out anyone under 40. Another reason is that a 50-year-old CEO won’t be happy being challenged by a 40-year-old Director, leading to an unnecessary misunderstanding.
  • I still think it’s a good idea to take a course for the purpose of knowing what to expect from YOUR Board and to challenge THEM, but your mileage may vary.

Special thanks to Anastasia Khrisanfova, Sergey Fradkov, Ekaterina Pochueva.

… to be continued.

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