We lead the Russian market in terms of expert evaluation and financing of major investment projects and sectoral and regional development programmes. In the current economic context, the Bank focuses on lean use of financial resources to support projects that promote the government’s social and economic policy, including innovations, import substitution and infrastructure development. As part of our lending and investment efforts, we place a special emphasis on implementing responsible financing practices to minimise environmental and social risks of projects that we finance.
The major sectoral priorities and focus areas of Vnesheconombank’s investments are set forth in the Memorandum on Financial Policies of State Corporation 'Bank for Development and Foreign Economic Affairs (Vnesheconombank)'. We run our investment operations with a focus on supporting major projects of strategic importance for Russian economic growth that lack sufficient financing by commercial lending institutions due to their ambitious scope of investment requirements and long payback periods.
We decide on whether investment projects can and need to be financed based on their thorough analysis and evaluation governed by the Bank’s Regulations on Due Diligence of Investment Projects. In making our investment decisions, we always evaluate whether projects that apply for the Bank’s financing meet the requirements of national environmental laws.
To further enhance efficient management of the environmental and social footprint of our investment projects, we were the first in Russia to actively integrate responsible financing principles into our operations. The key objectives and vision in this area are defined in Vnesheconombank’s Responsible Financing Policy approved in 2013. In 2014, the Bank’s investment management focused on improving the methodology for environmental and social review of investment projects.
In 2014, we joined the initiative of the International Financial Corporation (IFC) on integrating corporate governance principles into investment activities, which became an important step towards making our investment policy more efficient. By engaging in this initiative, Vnesheconombank has committed to introduce a system to assess the quality of corporate governance of its borrowers, which will mitigate our lending and investment risks, but also will help us promote best international practices across the Russian business community.
We evaluate how efficient the projects we are financing are in line with the Procedure for Monitoring and Supporting Investment Projects Sponsored by Vnesheconombank. As part of monitoring, we assess actual macroeconomic and budgetary performance by projects against targets and evaluate social and economic effects produced by the projects.
In 2014, we particularly focused on evaluating the social and economic footprint of projects financed by us for such parameters as new jobs, and taxes and similar payments to federal, regional and local budgets.
Over the year, we consolidated the social and economic footprint data for more than 100 projects that we finance.
These efforts brought us a long way towards the goal of implementing an integrated system for evaluating the social and economic performance of our loans and investments. The relevant implementation guidelines developed in 2012 are currently at the validation stage. In 2014, these guidelines were tested on 10 investment projects of the Bank, with the testing slated to be completed in 2015. This will provide us with the necessary framework of practices for comprehensive evaluation of how our investment lending contributes to sustainable socio-economic growth of the Russian economy.
In 2014, as part of preparing its Development Strategy for
To ensure sustained growth and higher quality of Vnesheconombank’s loan portfolio, its Development Strategy for
The development bank’s loan portfolio for
Specific objectives with respect of special projects that are to make up about one half of the Bank’s loan portfolio will be set by the Supervisory Board of Vnesheconombank. On the back of a stagnating economy, rising costs and limited access to capital markets, some projects of the development bank may be reclassified as special projects that need public funding.
Given that the loan portfolio is broken down into development bank projects and special projects, the modernisation scenario of Vnesheconombank’s development for
Guided by the best international sustainability practices, we have been consistently integrating responsible financing principles into our operations to enhance efficiency of the system for management of environmental and social risks of investment projects and to ensure efficient support to environmental protection.
We were first in Russia to join the United Nations Environmental Programme Finance Initiative (UNEP FI) and confirm thereby our commitment to sustainability principles and our intention to implement a range of environmental initiatives in our investment lending operations. An important step towards meeting our obligations was to approve Vnesheconombank’s Responsible Financing Policy in 2013. The policy will be put in place, among other things, by implementing the Guidelines for Environmental and Social evaluation (ESE) of Investment Projects that the Bank started developing in 2014.
The draft investment project ESE guidelines prepared by Vnesheconombank capture the main approaches to the evaluation of project solutions currently used in the Russian Federation and best international practices, including approaches of the Organisation for Economic Cooperation and Development (OECD), the World Bank's policy and guidelines of the International Financial Corporation. The draft guidelines provide for evaluation of investment projects in terms of:
ESE mechanisms will be integrated into the existing investment project evaluation procedure of Vnesheconombank. The draft guidelines provide for environmental and social screening of all investment projects of the Bank and their ranking by the level of environmental and social risks at the preliminary due diligence stage. The formal ESE due diligence is run based on the results of the screening with respect to projects with high potential impact on environment and local life quality. Where necessary, an environmental and social roadmap is drafted based on ESE results to address risks identified.
When embedding ESE guidelines into our lending and investment activities, we focus on identifying environmentally and socially important projects among projects eligible for the Bank’s financial support. The draft guidelines provide for a list of criteria for the Bank’s project to be assigned to these categories, which will allow streamlining the Bank’s monitoring and analysis of the impact by its investment lending operations on the achievement of its sustainability objectives. Later on, we are considering providing additional lending preferences to projects with heavy environmental and social footprint.