ACRA confirms that the planned bond issue of International Leasing Group Joint Stock Company (hereinafter, the Company, or ILG JSC) complies with all basic Green Bond Principles (GBP) of the International Capital Market Association (ICMA). The use of proceeds, process of project evaluation and selection, approaches to managing proceeds, and ILG JSC’s reporting as described in the document Green Bond Policy at ILG JSC (hereinafter, the Green Bond Framework) fully meet the GBP criteria. Therefore, ACRA considers the Company’s planned bond issue to be green.

Key issue properties

Borrower

ILG JSC

Issuer’s credit rating

-

Actual issuer

ILG JSC

Type of security

Uncertificated interest-bearing non-convertible bond subject to centralized title registration

Planned issue volume

RUB 1 bln

ISIN

To be determined

Planned placement start date

Q1 2021

Planned maturity date

Q1 2041

ILG JSC was founded on February 1, 2019. The Company’s operations are focused on the financial leasing of automobiles, buses, freight transport, and environmentally friendly transportation vehicles (trolleybuses, electric buses, electric cars, and other equipment). ILG JSC has entered into 22 vehicle leasing contracts and operates in ten Russian regions. All the leasing deals have been concluded by the Company as part of public tenders in line with Federal Laws 44-FZ and 223-FZ. The shareholders of ILG JSC are two individuals (Anatoly Rogozin and Vladimir Sokolov), who each own a 50% stake. The Company’s charter capital is RUB 100 mln.

Geography of ILG JSC’s current lease portfolio

Region

Share in the lease portfolio

Irkutsk Region

36.7%

Moscow

28.9%

Moscow Region

14.1%

Rostov Region

6.8%

Chelyabinsk Region

4.1%

Samara Region

2.5%

Bryansk Region

2.3%

Sverdlovsk Region

2.0%

Republic of Bashkortostan

1.6%

Ivanovo Region

0.8%

Source: ILG JSC

The key objective of the Company is to comply with the resolutions of the Government of the Russian Federation on the transition of Russian enterprises to advanced equipment manufactured using best available technologies in accordance with the guidelines developed by the Ministry of Industry and Trade of the Russian Federation. Priorities in terms of financing will be developing technology that reduces environmental pollution, supporting renewable energy production, and deploying electric vehicles. In order to finance its activities, the Company plans to place its shares and bonds in the stock market. ILG JSC is issuing green bonds for the first time.

Key assessment factors

ILG JSC provided ACRA with documents reflecting the eligibility criteria for projects to be financed through the issuance of the Company’s green bonds, the project selection process, and approaches to managing proceeds and reporting. ACRA made conclusions on the compliance of the bond issue with the four GBP based on these documents.

GBP assessment

Source: ACRA

Use of proceeds

The goals of ILG JSC’s green bond issue are clearly formulated and correspond to GBP. Proceeds from the issue of green bonds will be used to carry out projects in the area of environmentally friendly transportation, all proceeds will be used to acquire and then lease out environmentally friendly transportation vehicles (trolleybuses, electric buses and trams). The Company provided a preliminary plan for acquiring electric transportation vehicles, as well as calculations on the reduction of emissions of pollutants for purchased vehicles compared to diesel-fueled buses.

ILG JSC’s preliminary plan for acquiring electric transport using proceeds from the green bond placement

Type of electric transportation

Units

Unit cost, RUB mln

Total, RUB mln

Avangard Trolleybus-Electric Bus 5298-0000010-01

28

10.85

303.8

LiAZ-6274 Electric Bus

12

31.4

376.8

Vityaz-M 71-931M Tram

3

100

300

Total

43

 

980.6

Source: ILG JSC

The preliminary calculation of the environmental impact from the implementation of ILG JSC’s projects financed by the planned green bond issue is based on the assumption that leased vehicles will replace diesel-powered buses.

Calculation of the annual environmental impact of projects that are planned to be financed using the proceeds from ILG JSC’s green bond issue

Pollutant

Annual reduction in emissions, tons

Carbon dioxide

1,001.9

Carbon monoxide

11.18

Nitrogen oxides

13.12

Hydrocarbons

9.68

Soot

0.65

Sulfur oxides

0.90

Formaldehyde

0.04

Source: ILG JSC

Process of evaluating and selecting projects

The project selection principles are described in general terms in the Green Bond Framework. According to this document, projects financed via green bond issues can fall into a single category: clean transportation. A list of possible projects is provided for this category: projects aimed at the acquisition and subsequent leasing of environmentally friendly transport (trolleybuses, trams, electric buses, and electric vehicles).

In order to reach the implementation stage, projects have to comply with the following criteria:

  • Reduction of the final consumption of electricity or fuel, and/or
  • Reduction of the consumption of other types of energy, which may ultimately be associated with the use of electricity or fuel, and
  • Reduction of the emission of pollutants into the atmosphere.

In general terms, the process of evaluating and selecting projects is as follows. (1) ILG JSC consults with vehicle manufacturers before entering into deals as part of procurement procedures under 44-FZ and 223-FZ. (2) Vehicle manufacturers provide certificates and other documentation confirming that their products meet environmental standards and clean transportation requirements. (3) If a project is recognized as compliant with the selection criteria, it is sent to the CEO of ILG JSC for approval.

This approach fully complies with GBP.

Management of proceeds

According to the Green Bond Framework, the Company will record funds from the placement of the green bonds in a separate account. In addition, the Company plans to create a register of projects financed via the issue of green bonds in order to detail the accounting of funds.

Temporary free funds raised through the placement of green bonds must not be used to finance projects that do not benefit the environment. These funds may be placed in deposits at commercial banks. ILG JSC intends to inform investors about proposed instruments for the temporary placement of unused funds raised from the issue of green bonds.

Reporting

In accordance with the Green Bond Framework, the Company intends to publish information on the areas in which funds from the issue of green bonds are invested in, as well as on the impact of the activities financed with these funds on the environment and sustainable development.

The following information is disclosed with regard to investments:

  • The size of investments for each project that meets the selection criteria;
  • The size of planned investments for each project;
  • A description of each project (in line with confidentiality agreements).

ILG JSC also plans to make every effort to disclose information regarding the environmental impact of projects financed using the proceeds from issuing green bonds.

ILG JSC’s reports on green financing will be regularly published on the Company’s website: https://ilg-green.com/.

Additional assessment factors

Organizational structure and strategy

ILG JSC is generally focused on sustainable development, the Company has a Green Bond Framework, and a special body — the Green Investment Committee — has been formed for the implementation of green projects.

Nevertheless, the overall level of strategic planning at ILG JSC can be characterized as low. The Company intends to continue working in its current segment, and ACRA assesses the possibility of the Company realizing its plans as high. This is based on the fact that the business model of ILG JSC is viable, and the focus on clean transportation increases the Company’s chances of being included in public procurement systems. According to the development strategy, the Company is entirely capable of maintaining its competitive positions and the stability of its business in the long term because ILG JSC does not intend to change its segment and is operating in an area that is not yet dominated by major players.

At the same time, realization of the strategy, which is aimed at aggressive business growth or acquiring major assets, envisages the Company accepting certain risks in the medium term, which lowers the strategic management assessment. It is not possible to judge how successful the strategy will be based on the previous experience of its implementation or draw conclusions on the ability of the Company’s management to manage serious operational and strategic risks.

Financial feasibility of projects

A check of the future projects for compliance with market prices did not reveal any major deviations from market conditions.  With this in mind, ACRA believes that all projects financed by ILG JSC using the proceeds of the issuance of green bonds are financially viable.

Key assumptions

  • Environmentally friendly vehicles will be used instead of buses that operate on diesel.

Assessment components

Compliance of the issue with GBP: yes.

Assessment score: GR2.

Information disclosure

The assessment of the green bonds of International Leasing Group JSC has been performed based on the Methodology for Green Debt Obligation Assessment with regard to green bond assessment.

ACRA has published its opinion on the compliance of the bonds of International Leasing Group JSC with GBP for the first time. The compliance assessment may be revised within one year following the publication date of this press release.

ACRA’s opinion on the compliance of the green bonds with GBP is based on the data provided by International Leasing Group JSC, information from publicly available sources, as well as ACRA’s own databases. The assessment of compliance of the green bonds was solicited, and International Leasing Group JSC participated in the assessment process.

No material discrepancies between the provided data and the data officially disclosed by International Leasing Group JSC have been discovered.

No conflicts of interest were discovered in the course of the assessment process.

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Analysts

Maxim Khudalov
Head of the Sustainable Development Risk Assessment Group
+7 (495) 139 04 96
Polina Zagorodnikh
Senior Analyst, Sustainable Development Risk Assessment Group
+7 (495) 139 04 80, доб. 157
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