ACRA has affirmed the ESG rating of PJSC Polyus (hereinafter, Polyus or the Company) at ESG-AA, level ESG-2 (ESG-B on the scale that was valid until March 25, 2024), 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 score in the field of the environment, social responsibility and governance means that increased attention is paid to these issues.

The assessment is based on the Company’s favorable indicators in the fields of environmental impact and social responsibility compared to peers. In addition, the Company has policies and procedures for managing certain industry ESG risks, as well as a high level of compliance with best practices.

Polyus is the largest gold producer in Russia with the second largest gold reserves in the world (the Company’s proven and probable reserves amount to 109 mln ounces). The Company’s main operations are located in the Krasnoyarsk Krai, the Irkutsk and Magadan Regions, and the Republic of Sakha (Yakutia) and include five operational mines and a number of projects under construction and development.

key assessment factors

The Company demonstrates positive (low) indicators for water consumption and wastewater discharge per unit of revenue in monetary terms compared to the companies in the sample. The indicators of emissions of harmful substances, greenhouse gases (GHG), and energy consumption generally correspond to the average specific value for the industry. The amount of generated waste per unit of revenue constrains the environmental impact assessment (mainly due to a significant share of overburden rock and tailings in waste, which accounts for the most of waste generated by the Company). At the same time, the Agency applied positive adjustments for the dynamics of specific indicators of water consumption, emissions of harmful substances, greenhouse gas emissions, and wastewater discharge (reduction in specific values).

The Agency applied positive modifiers in the area of environmental impact for 93% of water consumption with recycled water, a high share (100%) of regulatory clean wastewater, as well as the 100% use of renewable energy sources.

The Agency also applied an additional positive analytical adjustment for the Company’s disclosure of information on GHG emissions (Scope 3). This information is disclosed by a very small number of companies in the Russian Federation.

The Company demonstrates a high level of management of environmental risks. The Company received high scores for most of the risks that ACRA views as relevant. Insufficient information about measurable performance indicators has a limiting influence on the assessment of a number of risks.

Compliance with best practices was awarded a high score in view of the fact that that Company regularly carries out monitoring, assesses environmental and climate risks, carries out several biodiversity conservation projects, and has disclosed its environmental policy, Climate Strategy, and energy efficiency programs. Polyus maintains external communication with stakeholders on environmental issues, has certified environmental and energy management systems, as well as a competence center and an environmental division. In addition, the Company has external verification of data on Scope 1, 2 and 3 GHG emissions, carries out a scenario analysis of the impact of climate factors on its activities over different time horizons, and also offsets its carbon footprint by purchasing carbon-free electricity certificates.

The lack of a water efficiency program and the fact that the Company does not calculate or verify the carbon footprint of its products had a constraining effect on the assessment for the best practices block. All of these are potential areas for improvement for the Company.

Among the key indicators of social impact, the indicators of gender equality among employees, social investments and the injury rate have the most positive impact on the assessment of the Company in this area. The average salary (in US dollars, taking into account purchasing power parity, PPP) is generally equal to industry averages. The salary is assessed by the Agency according to PPP: the Company’s calculated indicator is adjusted by the corresponding coefficient. Since the average salary in all regions of the Company’s presence is twice the official average salary in these regions, the assessment for the indicator was improved by one notch and, taking into account the positive dynamics, increased to the maximum level. The assessment was constrained by the Company’s fatal injury and turnover rate indicators. In addition, the Agency applied a positive adjustment for the positive dynamics of gender equality among employees and a negative adjustment for the injury rate.

The score for social impact of Polyus was additionally increased in view of the Company’s substantial contribution to the development of the social sector in its regions of presence, the use of automated safety systems, and annual indexation of wages.

The Company demonstrates a high level of social risk management. The Company received high scores for most of the risks that ACRA views as relevant. Since the Company has no key performance indicators, a moderately high score has been assigned to the following risks: No Effective Communication and Conflicts with the Local Population, Health and Safety of the Local Population, and the Lack of a Responsible Supply Chain.

Polyus has adopted a Supplier Code; in addition there is a separate section titled “Preventing Discrimination and Harassment” in the Code of Corporate Ethics. The Company regularly publishes information on its gender composition, holds personnel training, has established certain mechanisms for protecting employees’ rights, conducts external audits of labor protection and industrial safety, and has a transparent personnel assessment system, a program for cooperation with universities supporting the corporate labor force sustainability, as well as housing provision programs.

However, ACRA notes that Polyus does not have: a collegial body for human rights, quantitative targets for the share of purchases from local suppliers and/or SMEs, which the Company discloses publicly, women’s leadership programs, parent support programs in excess of the best market practices, and inclusive programs. These are all areas for improvement.

The Agency highly assess the degree of information transparency of Polyus, as well as the quality of its strategic planning and the industry experience of the board of directors. Shareholding concentration is assessed as moderate. The most conservative scores were assigned for the factors of independence and stability of the membership of the board of directors.

The score was additionally improved thanks to the presence of a report on adhering to the principles and recommendations of the corporate governance code, the disclosure by the Company of audit opinions on the quality control systems, as well as the existence of a remuneration system for members of executive bodies and other key managers, which includes key performance indicators that incentivizes them to achieve the Company’s priority goals in the field of sustainable development.

The Company demonstrates a high level of risk management in the field of corporate governance. For most of the risks that Agency views as relevant, the Company received the highest scores for the risk management system. Given the lack of key performance indicators, a moderately high score was assigned for the following risks: Risks of Shareholder Conflicts, and Control over the Business Reputation of Management and Shareholders.

The Agency notes that Polyus has a code of corporate ethics and a dividend policy, discloses information on risks in its annual reports, has clearly defined the role and responsibilities of the internal audit service (internal audit department), and effectively manages interaction with stakeholders.

The score for the quality of corporate governance is constrained by the lack of some best practices at Polyus — a separate ESG strategy and a separate public policy on related-party transactions. Moreover, the Company’s ultimate beneficiaries are not disclosed, assessments of the board of directors are not public, and the Audit Committee and the Remuneration Committee have no independent directors. These are areas for improvement.

KEY ASSUMPTIONS

  • Companies from the Diversified Metallurgy and Mining sector were chosen as benchmarks.

  • Data provided by Polyus in the questionnaire and the report on sustainable development is reliable and comparable to benchmarks.

RATING COMPONENTS

Final ESG rating: ESG-AA.

Final ESG category: ESG-2.

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-1.

S assessment: ESG-3.

G assessment: ESG-3.

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 Polyus was published by ACRA for the first time on December 20, 2022. 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 Polyus, information from publicly available sources, and ACRA’s databases.

The ESG rating is solicited and PJSC Polyus 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.

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