ACRA has assigned ESG-B, level ESG-4 to PJSC Samolet Group (hereinafter, Samolet, the Company, or the Group), which corresponds to a very high score in the field of the environment, social responsibility and governance.
According to the Methodology for Assigning ESG Ratings, a very high score in the field of the environment, social responsibility and governance means that increased attention is paid to these issues.
The rating is driven by the Company’s favorable specific indicators in the areas of waste generation, wastewater discharge, social investment and gender equality compared to peer companies, as well as the high quality of corporate governance. In addition, the Company is characterized by the presence of policies, procedures and measurable performance indicators for managing key industry ESG risks, as well as a relatively high level of compliance with best practices.
Samolet is one of the leaders of the real estate market in the Moscow and the surrounding area (New Moscow and the Moscow Region). Most of the Group’s projects are integrated development projects. According to the Unified Registry of Developers, the Company’s current construction portfolio amounted to 4.67 mln sq. m as of November 1, 2023 (second place in Russia).
KEY ASSESSMENT FACTORS
The Company’s environmental impact indicators are generally at an acceptable level. The Agency notes the positive dynamics of such indicators as waste generation and wastewater discharge (decrease in indicators) over the past three years. At the same time, the estimates for indicators of greenhouse gas (GHG) emissions and emissions of pollutants, as well as for energy consumption, are moderately conservative.
ACRA additionally applied a positive modifier due to the high share of partially clean discharged wastewater (100%). The Agency also took into account the fact that the Company was able to address the consequences of a situation related to the local population’s enquiries regarding environmental issues.
Samolet has a rather high level of management of environmental risks. The Company received the highest score for most of the relevant risks because it has documents that regulate these risks, risk management measures, and measurable performance indicators.
Developing individual key performance indicators (KPIs) for the following risks is an area of improvement for the Company: Environmental Conflicts with the Local Population, Transition to Other Types of Fuel/Electric Transportation, and Irrational Use of Energy Resources. The Company has not yet developed regulatory documents for managing Physical Climate Risks, however, the Agency notes that Samolet plans to approve its Climate Policy by the end of the year.
The Company has a high level of elaboration of environmental issues in terms of compliance with best practices. The Company regularly assesses environmental risks, has a Sustainable Development Policy, discloses in public reporting information on GHG emissions (Scope 1 and Scope 2), has formed a strategy and investment committee within the board of directors that oversees environmental and sustainability issues, and has also developed mechanisms for external communications on environmental issues. The Company plans to approve an ESG strategy that runs until 2030 by the end of 2023, which will include a section on the environment and climate.
At the same time, potential areas of improvement for the Company include the presence of a functioning and regulated environmental feedback mechanism, as well as energy efficiency programs with specified performance targets and environmental management system certification (ISO 14001).
Samolet performs more favorably than peer companies in terms of such social impact indicators as social investment, gender equality and average salary. Agency notes the positive dynamics (decrease in indicators) for staff turnover over the past three years. The fatal injury rate at the Company’s subcontractors has a moderately negative impact on the assessment.
ACRA also applied positive modifiers for the Company’s use of automated safety systems, the provision of an extended (compared to other players in the industry) social package, and for the high level of employee training.
The Company received the highest score for most of the relevant social risks: Samolet has policies and associated measurable performance indicators, while procedures and actions taken provide for the management and minimization of these risks.
However, the Agency notes that the presence of relevant KPIs for the risks Absence of Effective Interaction and Conflicts with the Local Population, Health and Safety of the Local Population, and Absence or Outflow of Qualified Personnel is an area of improvement.
In terms of the use of best practices in the field of social responsibility, the Company also received a high score, and its approach to resolving these issues is generally in line with best global practices. The Company has approved a Human Rights Policy, as well as a Diversity and Inclusiveness Policy, which aims to combat discrimination when hiring and ensure equal opportunities for career growth and remuneration. The Company regularly publishes information on its gender composition, holds personnel training, has formed a system for protecting employee rights, and also has a practice of supporting motherhood, which includes adaptation programs for women after returning from maternity leave, as well as additional payments for them.
However, ACRA notes that Samolet does not publicly disclose quantitative targets for hiring employees from the local population and for the share of purchases from local suppliers, and there is also no certification of occupational health and safety management systems or a Supplier Code. In addition, less than 100% of employees are covered by a transparent personnel evaluation system. These are areas of improvement for the Company.
As part of the quality assessment of corporate governance, the Agency highly rated the industry experience of members of the board of directors, as well as the quality of strategic planning and the level of information disclosure. At the same time, the score for concentration of shareholding, in accordance with the Agency’s methodology, is moderate. The Company received a moderately negative score for the factor Stability of the Board of Directors. ACRA applied a positive modifier during its assessment of the quality of corporate governance due to the Company’s report on adhering to principles and recommendations of the corporate governance code.
The Agency highly assessed Samolet’s actions to minimize corporate governance risks. The Company has regulatory policies and internal regulations for all of these risks, and carries out special monitoring. However, the scores for most of these risks are limited by the absence of information on measurable performance indicators in corporate governance documents.
Risks Associated with the Use of Financial Resources of Dubious Origin and Strategy Risks received the highest score from the Agency.
In ACRA’s opinion, most corporate governance practices applied by Samolet comply with best global practices. The Company has a Code of Corporate Ethics and a Dividend Policy, monitors adherence to corporate governance practices, operates a risk management and compliance service, and the remuneration committee is only membered by independent directors. In addition, the Company discloses its ultimate beneficiaries. Samolet plans to approve an ESG strategy that runs until 2030 by the end of 2023.
At the same time, ACRA notes that the Company does not disclose in public reporting a description of its risk appetites and does not appraise the performance of the board of directors.
KEY ASSUMPTIONS
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Companies from the Residential Real Estate Construction and Development sector were used as benchmarks.
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Data provided by Samolet in the questionnaire and social responsibility and corporate governance report is reliable and comparable to benchmarks.
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The draft ESG Strategy presented to the Agency will be approved by the Company without any major amendments.
RATING COMPONENTS
Final ESG rating: ESG-B.
Final level: ESG-4.
ESG rating determination: very high assessment in the field of the environment, social responsibility and governance. Increased attention is paid to the environment, social responsibility, and governance issues.
E assessment: ESG-6.
S assessment: ESG-5.
G assessment: ESG-2.
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 Samolet Group for the first time. The ESG rating is expected to be revised within one year following the publication date of this press release.
The ESG rating was assigned based on data provided by PJSC Samolet Group, information from publicly available sources, and ACRA’s databases.
The ESG rating is solicited and PJSC Samolet Group participated in 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 methodologies.
No conflicts of interest were discovered in the course of the assessment process.
The assigned ESG rating is not a credit rating.