ACRA has assigned the ESG rating ESG-B, level ESG-2 to Sberbank (hereinafter, Sberbank, or the Bank), which corresponds to a very high assessment in the field of the environment, social responsibility, and governance.
According to the Methodology for Assigning ESG Ratings, a very high ESG assessment means that the Company pays increased attention to environmental, social responsibility, and governance matters.
Sberbank has policies, procedures and measurable performance indicators in the field of managing key industry ESG risks, a high level of compliance with best practices, as well as sustainable loan products (SLPs) [1] in its loan portfolio.
Sberbank is Russia’s largest bank and a leading global financial institution. Sberbank’s total assets as of the end of 2022 amounted to RUB 36.4 tln.
1 Loan products that stimulate or contribute to the client’s ESG transformation and sustainable development (as defined by Sberbank’s Responsible Financing Policy).
KEY ASSESSMENT FACTORS
The bulk of the Bank’s loan portfolio (44.6% as of March 31, 2023) analyzed by the Agency is made up of corporate loans issued to companies that belong to sectors with medium social risk. 30.3% of the portfolio is loans to companies from sectors with high social risk, while sectors with low social risk account for 17.5%.
The share of loans for which the Agency adjusted the level of environmental and social risks, taking into account the presence of SLPs is 4.5% of the corporate loan portfolio; the total share of SLPs in the corporate loan portfolio is 7%.
Loans to companies from sectors with high environmental risks account for 31.8% of the Bank’s loan portfolio, while loans to companies from sectors with medium and low environmental risks account for 28.3% and 32.3% of the portfolio, respectively.
Sberbank has a very high level of environmental risk management. The Bank received the highest score for all relevant risks, given its actions under legislation and general industry policies and procedures. In addition, the Bank provided the Agency with a description of the actions carried for monitoring and minimizing the specified risks, as well as a description of measurable performance indicators. In particular, Sberbank has adopted the Policy on Social and Environmental Responsibility, Corporate Governance and Sustainable Development, which governs such risk factors as waste management and unsustainable use of energy resources. The Code of Corporate Social Responsibility in Procurement regulates the risk management of the lack of consideration of environmental factors in the formation of the supply chain.
The 2023 Strategy2 describes the Bank’s obligations to protect the environment and lists target indicators, which were taken into account by the Agency as indicators for assessing the effectiveness of measures to manage ESG risks.
The elaboration of environmental protection issues at Sberbank is at a high level and is in line with best international practices. The Bank’s Risk Management Service identifies and assesses the significance of ESG risks. The Bank has also approved the ESG Risk Management Policy, which sets out the basic concepts, goals, objectives, principles, organizational structure and processes for managing this type of risk.
Sberbank uses industry guidelines to assess the individual level of a client’s ESG risk and create a list of recommended or mandatory ESG conditions to be included in the agreement with the client. The Bank’s ESG Unit ensures a systematic approach to managing ESG and sustainable development, and provides expert and methodological support to Sber Group’s divisions, regional banks, and companies. Sberbank’s Supervisory Board has a Strategic Planning and Sustainable Development Committee, and the Supervisory Board’s functions include setting strategic priorities and guidelines in the field of sustainable development and ESG, as well as approving top-level documents.
The Bank has developed loan products in the green, adaptation, social and ESG lending categories, and has a Green Bond Framework that regulates the process for assessing and selecting green projects. The Bank has put together and published the Responsible Financing Policy, which, among other things, includes approaches to managing ESG risks as part of the corporate lending and investment processes, as well as a blacklist of activities that the Bank is obliged to not finance.
2 https://www.sberbank.com/common/img/uploaded/files/info/en/sber_investor_day_strategy_2023.pdf
ACRA applied the following positive modifiers in the Environment block:
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The Bank’s experience of issuing green bonds;
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Implementation of the green office program;
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Participation in the TCFD3 international initiative (the Bank disclosed a TCFD report as part of its 2022 Annual Report);
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The presence of public ESG goals that were set out in the 2022 Annual Report;
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Participation in other ESG initiatives that are relevant to the Bank (UNEP Finance Initiative Principles for Responsible Banking and the UN Global Compact);
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Improving the efficiency of energy use in the Bank’s offices and other initiatives aimed at greening its operations.
The Bank received the highest score for all relevant social risks — all policies, procedures and actions ensure high quality management of these risks and their minimization. In addition, the Bank provided the Agency with measurable indicators for evaluating the effectiveness of the implementation of measures to manage and minimize social risks. The Agency assumes that Sberbank places special focus on adhering to human rights in its labor practices and when interacting within the supply chain; the Bank does not allow any kind of discrimination and violations of labor laws when hiring personnel within the framework of labor practices, and does not resort to unethical labor practices. The Code of Corporate Ethics and Business Conduct, Personnel Policy for Remuneration and Qualification Requirements for key Employees, and the Policy in the Field of Social and Environmental Responsibility, Corporate Governance and Sustainable Development regulate these risk factors.
Sberbank has a Compliance Hotline that employees of the Bank or any third parties may contact should they have any issues regarding prevention of corruption, conflicts of interest, unlawful use of insider information and market manipulation, as well as if the Code of Corporate Ethics and Business Conduct is violated in the indicated areas.
The Cybersecurity Risk Management Policy and the Technology Risk Management Policy regulate risks related to insufficient protection of clients’ personal data and information security, as well as the risks of insufficient digitalization of services. The Bank provided the Agency with measurable performance indicators for all risks in this block, part of which are disclosed in the Bank’s 2022 Annual Report and its 2023 Strategy.
Matters of social responsibility, similar to environmental matters, are a priority for Sberbank, and approaches to their solution generally match best international practices. The Bank has a Corporate Ombudsman Service, keeps records of the number of staff complaints, and tracks statistics on their processing and settlement in reporting periods. In its annual reports, Sberbank discloses the gender distribution of employees. The Bank conducts training sessions for employees, including managers and top managers involved in sustainable development and ESG projects; it pays special attention to training employees and the public on a pro bono basis (on ESG topics and financial literacy). At the same time, ACRA notes that the Bank has no sexual harassment regulations, procedures, or training programs.
The Bank has developed policies and procedures for identifying and managing social risks in lending operations, as well as industry guidelines. Sberbank ensures access of low-mobility and disabled customers to financial services: as of the end of 2022, 43,000 of the Bank’s ATMs (95% of the network) had an audio aid function for visually impaired people.
ACRA applied the following positive modifiers in the Social Responsibility block:
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The Bank’s significant contribution to the development of the social sphere in its regions of presence;
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Presence of a strong and verified responsible supply chain;
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High percentage of women in the Bank’s management (66% as of the end of 2022);
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Training coverage of the Bank’s employees exceeds 100%4 of the average headcount.
The Bank received high scores for the work experience of the Supervisory Board members (all of them have experience in the banking and/or IT industry), information disclosure (non-financial reports compiled in accordance with international standards are published annually), and management strategy. Moderate scores were assigned for the share of independent members in the Supervisory Board (50%), the Supervisory Board’s membership (the average length of a member’s stay in the Supervisory Board is five years), and the concentration of shareholding (50% plus one voting share belong to the Russian Federation represented by the Russian Ministry of Finance).
The Agency also applied the following positive modifiers to the Bank’s corporate governance quality assessment:
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Presence of a third-party expert opinion on non-financial reports;
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Presence of a publicly available Code of Corporate Conduct;
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Presence of reports on compliance with the Code of Corporate Conduct.
The Bank received the highest score for most corporate governance risks. In the Agency’s opinion, Sberbank strictly adheres to responsible business conduct principles and does not permit corruption in any form among its employees. The current regulatory document in the field of anti-corruption is Sberbank Group’s Anti-Corruption Policy. The Policy is disclosed in the Compliance section on the Bank’s official website.
Business ethics risks are regulated by the Code of Corporate Ethics and Business Conduct, Policy on Social and Environmental Responsibility, Corporate Governance and Sustainable Development, Code of Corporate Governance, Anti-Corruption Policy, Conflict of Interest Policy, and the Compliance Risk Policy. Most of these regulations are disclosed by the Bank. Sberbank regularly takes measures aimed at minimizing the abovementioned risks.
For the rest of the relevant risks, the Bank also received the maximum score: the Agency was presented with the Bank’s key top-level documents, internal policies, a description of activities and KPIs (some of them were disclosed in the 2022 Annual Report).
Among the best corporate governance practices adopted by Sberbank, the Agency notes the presence of a Code of Corporate Ethics and Business Conduct, Code of Corporate Governance, and Dividend Policy. The Bank has an Audit Committee, Corporate Secretary, Compliance Administration, and a Risk Management Service. Information about risks is disclosed in the Bank’s annual reports. To conduct an independent assessment of the Supervisory Board, the Bank engages a third-party advisor once every three years (during the last three reporting periods, the Bank conducted a third-party assessment of the Supervisory Board in 2021). Currently, the Bank’s integrated 2023 Strategy is in place, which has a sustainable development section. The Bank is also developing an ESG Strategy, which will be included in its strategic documents until 2026. Presence of a non-executive director in the Remuneration Committee has a constraining effect on the corporate governance quality assessment.
3Task Force on Climate-related Financial Disclosures
4 If an employee takes more than one training course or program, all of them are taken into account and therefore the number of employees trained within a year may exceed 100%.
key assumptions
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Data indicated by Sberbank in ACRA’s questionnaire is reliable.
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As part of the assessment of environmental and social risks in the asset portfolio, the Agency reviewed 92.4% of the industry structure of the corporate loan portfolio as of March 31, 2023.
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Risk levels for 75% of the Bank’s corporate loan portfolio were assigned based on the approaches outlined in Appendix 1 to Supplement 25 of the Methodology for Assigning ESG Ratings, but with certain analytical adjustments.
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The share of SCPs is 7% of the Bank’s portfolio reviewed by ACRA.
5 https://www.acra-ratings.ru/upload/iblock/meth/20230324_ESG%20Methodology_Appendix_Financial.pdf
RATING components
Final ESG rating: ESG-B.
Final level: ESG-2.
ESG rating determination: very high assessment in the field of environment, social responsibility and governance. Increased attention is paid to the environment, social responsibility and governance matters.
additional information
The ESG rating has been assigned in accordance with the Methodology for Assigning ESG Ratings and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
An ESG rating has been assigned to Sberbank for the first time. The ESG rating is expected to be revised within one year from the publication date of this press release.
The ESG rating has been assigned based on data provided by Sberbank, information from publicly available sources, and ACRA’s databases.
The ESG rating is solicited and Sberbank participated its assignment.
In assigning the ESG rating, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodology.
No conflicts of interest were discovered in the course of the assessment process.
The assigned ESG rating is not a credit rating.
