ACRA has assigned the ESG rating ESG-B, level ESG-2 to PJSC “MMC “NORILSK NICKEL” (hereinafter, Nornickel, or the Company), 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.
The ESG rating is based on the Company’s moderately negative indicators in terms of environmental impact, favorable social responsibility indicators compared to peer companies, and high quality of corporate governance. In addition, the Company has policies, procedures and measurable performance indicators for managing key industry ESG risks, as well as a moderately high level of compliance with the best practices.
Nornickel is a Russian mining and metals company, the world’s largest producer of palladium and high-grade nickel, and a leading producer of platinum, cobalt and other metals. The Company’s production cycle is fully integrated — from ore mining to refining; the Company has its own energy, transport, support and R&D assets.
KEY ASSESSMENT FACTORS
Nornickel demonstrates a positive (low) indicator of energy consumption per unit of revenue in monetary terms compared to the companies from the sample. In terms of specific greenhouse gas emissions, waste generation and wastewater discharge per unit of revenue, the Company received a moderate assessment because these indicators are close to or exceed industry averages. The Company received the most conservative scores for water consumption and emissions of harmful substances per unit of revenue. At the same time, ACRA notes a positive dynamics of most indicators of environmental impact (reduction of specific indicators) for the period under review; the only exception is the specific waste generation. The Agency believes that, all other things equal, if the observed dynamics in the environmental effects is maintained, the rating may be upgraded.
ACRA applied positive modifiers for the high shares of recycled water supply in the Company's total water consumption and regulatory-clean wastewater discharges, for the computerized environmental monitoring and control system, for training its suppliers in environmental, social and managerial aspects, for the Company's significant contribution to maintaining biodiversity in the area of its operations. The Agency also applied an additional analytical adjustment for the disclosure of information on greenhouse gas emissions (Scope 3). It is worth noting that today, such information is disclosed by an extremely small number of Russian companies.
At the same time, ACRA notes that in 2020, due to the Company's fault, a fuel leak occurred at the Norilsk CHPP-3 (Kayerkan District), which led to contamination of river waters and soil with oil products. This fact, along with the accumulated negative impact on the environment, served the basis for the application of a negative modifier. However, the Agency notes that at the time of the assessment, the Company has fully compensated for the damage, taken measures to clean up the area and informed the public about the progress of the containment, recovery and reclamation work.
In general, the Company is characterized by a relatively high level of environmental risk management. For most of the industry risks, which, in the Agency’s opinion, are relevant, the Company has received maximal scores.
In terms of compliance with the best practices, the score is also maximal. Nornickel regularly assesses environmental risks, has created relevant competence centers and divisions, has established mechanisms for external communication on environmental matters, has adopted a public environmental strategy, as well as programs to improve energy efficiency and water efficiency.
The Company is characterized by a favorable level of gender equality, low rate of injuries, and high level of social investment per unit of revenue. The indicators of staff turnover and average wage in the Company correspond to the industry averages. Fatal injuries exceed the industry average, which resulted in a restraining effect on the assessment.
Additionally, ACRA applied a number of positive modifiers for the Company's significant contribution to the social development of the regions of its presence, the use of automated safety systems, an expanded social package to employees, a high coverage of employees with training, and annual indexation of wages of all employees. At the same time, ACRA applied a negative modifier for the public response and effects on the living conditions of local inhabitants caused by the abovementioned incident of 2020. The Agency notes that this modifier may be withdrawn after the expiration of a four-year period.
The Company received the highest score for managing the majority of relevant social risks due to the availability of top-level and internal regulatory documents, risk management and minimization measures, and measurable performance indicators.
Nornickel received the highest score for the compliance with the best practices in the field of social responsibility. The Company discloses information on gender composition on a regular basis, conducts personnel trainings, has formed certain mechanisms for protecting the rights of employees, has certified its occupational health and safety management systems, and has adopted the Supplier Code of Corporate Conduct. Moreover, the Company was the first major Russian company that published its Human Rights Report and Responsible Supply Chain Report. In addition, the Company has developed and adopted various maternity support programs, housing programs for employees, and a transparent personnel evaluation and incentive system, including the Digital Investor program for employees.
As of December 31, 2022, major shareholders of the Company were Interros Group (37%) and EN+ GROUP IPJSC (26.4%; A-(RU), outlook Positive). In accordance with the Methodology for Assigning ESG Ratings, Nornickel received moderate scores for the stability of the board of directors, as well as for the share of independent directors in the board. In addition, the Company received high scores for the industry experience of directors and for the degree of information disclosure, as well as moderately high scores for the shareholding concentration and the quality of strategic planning.
The Agency additionally applied positive modifiers for the presence of an external opinion on the Company’s non-financial reports, publicly available Code of Corporate Conduct and Business Ethics, a report on compliance with the principles and recommendations of the Code of Corporate Governance, and the absence of the CEO in the board of directors.
There are regulatory policies and internal regulatory documents for all corporate governance risks in the Company, and appropriate measures are being taken. For most corporate governance risks, Nornickel received high or maximal scores.
ACRA assesses the Company's corporate governance policies and procedures quite highly. Most of the corporate governance practices applied at Nornickel correspond to the best international practices. The Company has adopted a code of business ethics, a dividend policy, and a stakeholder policy; the corporate governance practices are strictly monitored, and there is a risk management and compliance service. Presence of non-executive directors in the remuneration committee and the lack of public information about the ultimate beneficiaries caused a restraining effect on the corporate governance quality assessment.
KEY ASSUMPTIONS
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Companies from the Diversified Metals and Mining Industry were selected as benchmarks (i.e. peer companies).
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Data specified in the questionnaire and the Company’s social responsibility and corporate sustainability report is reliable and comparable to benchmarks.
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.
E assessment: ESG-2.
S assessment: ESG-2.
G assessment: ESG-1.
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 PJSC “MMC “NORILSK NICKEL” 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 was assigned based on data provided by PJSC “MMC “NORILSK NICKEL”, information from publicly available sources, and ACRA’s databases.
The ESG rating is solicited and PJSC “MMC “NORILSK NICKEL” 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.
