ACRA has affirmed ESG-AA, level ESG-2 (ESG-B on the scale valid until March 25, 2024) to PJSC “MMC “NORILSK NICKEL” (hereinafter, Norilsk Nickel 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.
Norilsk Nickel is a Russian mining and metals company, the world’s largest producer of palladium and metallic nickel, and a leading producer of platinum, cobalt, copper, 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
Specific indicators of pollutant emissions and energy consumption at Norilsk Nickel exceed industry averages. In terms of specific waste generation, water consumption, and wastewater discharge per unit of revenue, the Company received moderate scores because these indicators are close to industry averages. The Scope 1 greenhouse gas (GHG) emissions per unit of revenue in US dollars (used by the Agency as one of the basic indicators of environmental impact) is estimated conservatively1. At the same time, in terms of the total volume of Scope 1, 2 and 3 GHG emissions, according to data provided by the Company, Norilsk Nickel demonstrates a significantly lower indicator than most peer companies2. The Company received the most conservative scores for emissions of harmful substances per unit of revenue.
The Agency did not apply adjustments to account for the dynamics of specific environmental impact indicators due to the absence of significant changes in the aggregate over the past four reporting years (with the exception of the waste generation indicator). The specific indicator of waste generation has shown negative dynamics over the past four years (increase in the indicator). The Agency notes that the main increase in the waste generation indicator for 2023 is associated with an increase in the generation of waste of the fourth and fifth hazard classes. ACRA believes that, all other things equal, if the observed dynamics in the environmental effects is maintained (taking into account the decline in gross indicators for the first six months of 2024), the rating may be upgraded.
In the Environmental Impact block, ACRA applied positive modifiers for the computerized environmental monitoring and control system, including monitoring of GHG emissions, and 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 GHG emissions (Scope 3). This information is disclosed by an extremely small number of Russian companies.
In general, the Company is characterized by a very high level of environmental risk management. For most of the industry risks, which, in ACRA’s opinion, are relevant, the Company received maximum scores. The only risk for which the Company’s assessment was high (but not maximum) was the risk of Risk of Excessive Land Withdrawal. The Agency notes that the management of this risk is an area for improvement for Norilsk Nickel in terms of the implementation of measurable performance indicators.
The level of elaboration of environmental issues at Norilsk Nickel is high and generally corresponds to the best international practices. The Company regularly monitors and assesses environmental and climate risks, has its own environmental policy and climate change policy, has created the necessary competence centers, developed external communication and feedback mechanisms for environmental issues, and has adopted a program to improve energy efficiency, preserve biodiversity and improve water efficiency with specified targets. The Company carries out external verification of GHG emissions data (Scope 1, 2 and 3), calculates and verifies the carbon footprint of its products, and conducts a scenario analysis of the impact assessment of climatic factors. Norilsk Nickel has a public strategy in the field of the environment and climate change.
The lack of a certified energy management system and carbon footprint compensation has a constraining effect on the assessment for the compliance with best practices block. At the same time, as ACRA notes, the Company has developed its own approach to using waste from primary production to absorb GHG emissions. However, at the time of the rating assessment, the Company’s methodology for accounting for the absorption capacity of waste had not been verified by an external auditor.
The Company is characterized by a favorable level of gender equality, low injury rate, and a high level of social investment per unit of revenue. The indicators of staff turnover and size of average salary at the Company correspond to the industry averages. The assessment is constrained by the fatal injury rate, which exceeds the industry average.
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, high coverage of employees with training (in 2023, coverage of employees with training was 93%), and annual indexation of wages of all employees, the presence of a corporate university, the presence of human rights officers at all major assets of the Company, as well as for the high share of women among senior management.
The Company received maximum scores for almost all the relevant social risks due to the presence of high-level documents, internal regulatory documents, risk mitigation measures and measurable performance indicators. The only risk for which the Company received a high (but not maximum) score due to the absence, in the Agency’s opinion, of key performance indicators was the risk Lack of Effective Interaction and Conflicts with the Local Population.
Social responsibility issues as well as environmental issues are priority areas for the Company, and approaches for resolving them are generally in line with best global practices. The Company discloses information on gender composition on a regular basis, has formed certain mechanisms for protecting the rights of employees, has certified its occupational health and safety management systems and externally audits them, and has also adopted the Supplier Code of Corporate Conduct and surveys suppliers. In addition, Norilsk Nickel has developed and adopted various programs for supporting parents beyond government guarantees, housing programs for employees, and a transparent personnel evaluation and incentive system. The Company has a human rights compliance program, which includes employee training, and a comprehensive human resources development program (including the Norilsk Nickel Academy educational platform). The lack of inclusive employment and women’s leadership programs had a constraining effect on the assessment of the best practices compliance block.
The Company received high scores for the level of information disclosure, as well as moderately high scores for the share of independent directors on the board of directors, the industry experience of directors, and for the shareholding concentration and the quality of strategic planning.
In the course of assessing the quality of corporate governance, the Agency additionally applied positive modifiers: for the presence of experience in matters related to the environment (including climate)/social activities of individual managers of the Company, for the Company having a report on compliance with the principles and recommendations of the Corporate Governance Code, for publishing the results of the audit of quality control systems, conducting training for suppliers on environmental, social and management aspects, as well as for the presence of a remuneration system for members of executive bodies and other key management employees of the company (this system includes key performance indicators that create material incentives for achieving the Company’s priority goals in the field of sustainable development).
There are regulatory policies and internal regulatory documents for all corporate governance risks at the Company, and appropriate measures are being taken. The Company received high or maximum scores for all the relevant corporate governance risks.
ACRA highly assesses the Company’s corporate governance policies and procedures. 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. Norilsk Nickel has formed the Board of Directors’ Committee on Sustainable Development and Climate Change. The Company’s strategic priorities in the field of sustainable development are supplemented and expanded in the Strategy for Ecology and Climate Change until 2031, and in 2023 the Company approved the Strategy for Socially Sustainable Development until 2030.
Presence of non-executive directors in the remuneration committee and the lack of public information about the ultimate beneficiaries had a constraining effect on the corporate governance quality assessment.
1 As part of the assessment using data from peer companies included in the Agency's standard sample (Diversified Metallurgy and Mining sector).
2 For these calculations, the Company independently determined the sample of similar companies.
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 by the Company in the questionnaire and its sustainability report is reliable and comparable to benchmarks.
RATING COMPONENTS
Final ESG rating: ESG-АА.
Final ESG 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-3.
S assessment: ESG-1.
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.
The ESG rating of PJSC “MMC “NORILSK NICKEL” was published by ACRA for the first time on September 19, 2023. 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.
