ACRA has assigned ESG-3, category ESG-B to PJSC FGC UES (hereinafter, FGC UES, or the Company), which corresponds to the very high assessment in the field of the environment, social responsibility and governance.
According to the ESG Assessment Methodology, the very high ESG assessment means that the Company pays high attention to the environmental, social responsibility and governance matters.
This assessment stems from the Company's relatively favorable indicators in the field of environmental impact and social responsibility as compared to peers. In addition, the Company has established policies and procedures for managing certain industry ESG risks, and its compliance with the best practices is high.
FGC UES is a Russian energy company that operates and manages the Unified National Electric Grid (UNEG). The Company develops the UNEG and participates in the implementation of the state policy in the field of electric power industry. The UNEG of Russia includes main power transmission lines connecting most regions of the country. In this regard, the Company is a natural monopoly that is included in the list of Russia's systemically important organizations of strategic importance.
The sustainable development priorities of the Company are determined by its parent company, PJSC ROSSETI. These priorities are based on the Development Strategy for the Electric Grid Complex and the Development Strategy of PJSC ROSSETI and its subsidiary and associated companies for the period up to 2030. The ROSSETI group of companies has the following sustainable development priorities:
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Ensuring the reliability, quality and availability of electric power supply for consumers;
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Increasing operational and investment efficiency, technological and innovative development;
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Increasing energy efficiency, environment protection, and combating climate change;
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Maintaining stable business relationships with stakeholders, including shareholders, investors, lenders, local communities, and others;
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Taking care of employees, offering opportunities for professional career to each employee, developing the corporate culture, and complying with OHS standards.
KEY ASSESSMENT FACTORS
The very high assessment of the environmental impact and the minimization of industry environmental risks reflects the acceptable environmental metrics of the Company against industry peers and the positive dynamics of certain environmental indicators over the past three years.
In greenhouse gas emissions, energy consumption, and wastewater discharge per unit of revenue, the Company looks better than its peers. Indicators of waste generation, water consumption, and emissions of harmful substances generally correspond to the average industry levels. In addition, ACRA notes that the Company's greenhouse gas and harmful substances emissions per unit of revenue have shown significant positive dynamics (decrease) over the past three years. On the contrary, in the specific volumes of waste generation and energy consumption, negative dynamics (increase) have been observed over the past three years, which has a constraining effect on the assessment of this block.
The Company is active in the field of environmental risk management. Top-level documents on the management of key industry environmental risks have been developed, and measures are being taken to minimize these risks. In particular, the Company has developed measures aimed at minimizing climate and de-carbonization risks.
In terms of compliance with the best practices, the Company also received the highest score. PJSC FGC UES regularly monitors and assesses environmental risks, publishes its environmental policy approved by the board of directors (Environmental Policy of the Electric Grid Complex), as well as the Energy Saving and Energy Efficiency Improvement Program of Rosseti FGC UES for 2020–2024. The Company has established a mechanism for feedback and external communications with stakeholders on environmental impact issues. The lack of information on indirect greenhouse gas emissions, as well as the absence of a specific ESG committee in the Company, had a constraining effect on the assessment of compliance with best practices. However, ACRA notes that, as specified in the corporate annual report for 2021, the Company is considering the option to vest one of the existing board committees with the power to resolve sustainable development and ESG matters, as well as risks and opportunities associated with these matters.
The very high assessment of the Company's social impact and minimization of social risks. For some quantitative indicators of social impact, including manpower turnover and fatal injuries, the Company demonstrates the figures comparable to industry averages. The level of injuries in the Company is lower, and the level of social investments is much higher, than in the most of peers. On the contrary, in salary (in US dollars, taking into account purchasing power parity) and gender equality, the Company is inferior to peers. An additional constraining effect on the assessment is brought by the negative dynamics in injuries and the volume of social investments relative to revenues over the recent years.
The Company's social impact score has been adjusted upwards since the Company offers to its employees a range of wage supplements (including, among others, a non-governmental pension program), which is wider than that of peers. It also applies computerized safety systems. Another positive factor is the high systemic importance of the Company's operations that supply electricity to a significant part of the national infrastructure, including multiple social security properties.
The Company has drawn up core top-level documents for managing key industry-specific social risks. In particular, the Agency notes thoroughly elaborated and detailed OHS and HR management procedures.
From the viewpoint of compliance with the best practices, the Company discloses information about its gender composition as well as conducts regular staff trainings to improve their skills. The Agency also notes the relatively high level of information transparency of the Company. However, in ACRA's opinion, the discrimination and human rights protection matters are elaborated not so well in PJSC FGC UES compared to the best world practices.
The very high assessment of the quality of corporate governance reflects the high degree of disclosure of non-financial reports (the Company has experience in publishing its non-financial reports prepared in accordance with the standards of the Global Reporting Initiative for Sustainable Development in the main disclosure option) and a sound industry experience of the board members. The constraining factors include a relatively low percentage of independent directors and instability of the composition of the board of directors (in 2021, the board changed significantly). The assessment is supported by the Company's well-developed strategy. The assessment has been additionally upgraded since FGC UES has a third-party opinion on its non-financial reports, as well as the report on compliance with the principles and recommendations of the corporate governance code.
The Company has taken significant measures to minimize corporate governance risks and has drawn up top-level documents for managing these risks. To resolve certain matters, a special decision-making procedure is applied in view of the specifics of the Company's operations.
The assessment of the corporate governance quality is constrained by the absence of policies and procedures for monitoring the risks of using resources of doubtful origin, as well as a public policy for transactions with affiliates (the availability of such policies and procedures is considered the best practice).
KEY ASSUMPTIONS
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Companies of the sector "Power & Utilities: Grids" were selected as benchmarks (peer companies).
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Data presented by the Company in the questionnaire and the report on social responsibility and corporate sustainable development is reliable and comparable to benchmarks.
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In the near future, PJSC FGC UES will be reorganized and will acquire the parent company, PJSC ROSSETI, as well as "FEEMC – ENES", JSC, Tomskie Magistralnye Seti JSC, and Kubanskie Magistralnye Seti JSC. According to PJSC FGC UES, after the reorganization, the Company will accept all policies and procedures in the field of sustainable development of the parent company, PJSC ROSSETI.
Assessment components
Final ESG assessment: ESG-3.
Final ESG category: ESG-B.
ESG assessment determination: very high assessment in the field of the environment, social responsibility and governance. High attention is paid to the environment, social responsibility and governance matters.
ADDITIONAL INFORMATION
The ESG assessment has been assigned in accordance with the ESG Assessment Methodology.
The assessment is expected to be revised within one year following the publication date of this press release.
The ESG assessment was assigned based on data provided by PJSC FGC UES, information from publicly available sources, and ACRA’s databases.
The ESG assessment is solicited, and PJSC FGC UES participated its assignment.
In assigning the assessment, ACRA used only information, the quality and reliability of which was, in ACRA’s opinion, appropriate and sufficient to apply the methodology.
No conflicts of interest were identified in the course of assessment.
The assigned assessment is not a credit rating.No conflicts of interest were identified in the course of assessment.
The assigned assessment is not a credit rating.
