ESG banking: changing priorities in Russia

Abstract

The article examines the issues of applying ESG banking in the Russian banking system. It is noted that despite the widespread implementation of this banking model among the Russia’s largest banks, recently there has been a decline in the interest of bankers to support the development of this concept. This is associated with changes in the global geopolitical situation and the sanctions imposed on the largest banks. The other factors include the denial of access for Russian banks to global financial markets, and the Russian Government’s permission to publish financial reports, as well as the decrease of environmental controls. We can consider these events as factors in reducing the cost of maintaining ESG principles in the form required to participate in the international capital turnover. At the same time, the article substantiates the need to keep implementing ESG banking principles as risk protection instruments. When analyzing Russian banking activities, the paper applies a model for assessing risk factors based on the least squares method. As a result, the author identified high-risk areas in the banking activities and a set of risks with regular manifestation. To substantiate these protective methods, the author conducted a structural identification of the mechanisms included in ESG banking and proved their positive impact on minimizing the manifestation of risks and reducing losses. The analyzed hypothesis proved that ESG banking mechanisms can serve as protection for banks against risks arising in the crisis conditions of the Russian economy’s development. The studied model also ensures that their activities become more sustainable and supports their competitiveness in the global financial system.