Стратегии адаптации: как горнодобывающие компании стран БРИКС управляют климатическими рисками

Anastasia

00:00:00

Dear colleagues, hello. We have a very unusual webinar today. We will have it in English and we have some guests today in our studio. This is Alexey Bogomolov today is with us and I want to read his all… with the position that he's taking. He's Director of Partnership Programs Development of Analytical Department in Russian Agricultural Asset Management, a member of Financial Services Working Group for Russian Chamber of BRICS Business Council, expert in financing and investments related to ESG and climate change, head of the master's program and climate finance laboratory of the School of Finance of Faculty of Economic Sciences, High School of Economics. So he will be moderating today's event.

Alexey Bogomolov (модератор)

00:00:56

Thank you very much, Anastasia. Welcome to all participants and speakers, wherever they are and participants ranging from China to South Africa and to Brazil. So we're practically a global webinar today. Thank you for my introduction.

Introducing me, I confirm that these are my roles and they are united by important theme of sustainability and climate change and climate finance. I've just returned from New Delhi from BRICS Business Council Business Forum which was very important and well organized by Indian side and important that during this forum we discussed many interesting ideas and also new organization within our financial services working group and now we have sustainability development network the platform which enables experts to prepare their ideas to exchange and find common ground for cooperation. You know that in Rio de Janeiro 2025 there was a very important document approved.

This is framework agreement of leaders on climate finance and this document envisages also a harmonization of various approaches in verification, in disclosure information, and of course in ratings as well. So this is a practical step today. Thank you for Rights Analytics for this initiative and for inviting me. And first I'll give floor to Anastasia.

Just to present findings and research of this company, which is specializing in ESG, sustainability and climate as well.

Anastasia

00:03:37

So I will briefly present our research, the main conclusions. So I hope you can see. So this year was the year of significant changes. Seabourn has entered its definitive phase and there were some changes in Chinese legislation as well. So Chinese Environmental and Nature Conservation Fund came into force. And we've decided to look at how the companies are facing these changes, whether they assess the climate-related risk and opportunities. And we, as an agency, are already assessing climate indicators. So we've decided to see aggregated numbers for mining and metal companies. I will present that. And in addition, we had a small interview with them, companies from this sector, which are Norilský Nikel, Folius, Rusal, Vibraz, Silverstal and LMK. They provided their replies to the questions submitted. So, first of all, I would like to start with, so we'll present the conclusions.

So, the analysis conducted indicated that CBAM has not yet a significant impact on the climate strategy of Russian companies, mining and metal companies. However, it may have a delayed effect on certain degree of pressure long term.

International internal regulations and corporate policy are the main drivers for mining and metal companies. Among the risks associated with the changes in climate regulations, companies are most concerned about rising costs for production. Mining and metal companies recognize the opportunities presented by the Russian carbon market and are inclined to invest in it.

Considering decarbonization measures, companies are mostly focused on energy efficient measures and technological processes. So, to begin with, I will give some quantitative We've assessed, as I said, we have some aggregated numbers and unfortunately we see the increase in the CO2 emissions. It's not gross numbers, these are specific numbers, which means CO2 emissions divided by revenue and they are increasing and similarly increasing the energy consumption. But on the positive side, we see that the share of renewable energy use in total energy consumption is also increasing, which is kind of the companies are able to offset the CO2 emissions through that.

And we've checked the credited carbon units, carbon credits, and we see that in the markets they've been… So there are more carbon units credited recently. So there is an increase in that. And we hope the companies would use the opportunity to offset their carbon footprint through that. So we've been asking companies the question, so which climate regulations and mechanisms have the greatest impact on companies? when they develop their climate strategies and the answers show that the federal law is the most important and the internal company policies. Seed balm is somewhat important, they still seed but maybe not as high as national policy regulations.

So we were also asking about what risks do they see from introducing the cross-border carbon regulations, how this would affect their companies. And they say that they see the main risk in the increase in prices for the products. But we have our companies today, so they will probably add some words to that, describe this. Speaking about carbon market and decarbonization measures, we see that the companies are willing to invest in the carbon market and develop this agenda. And when speaking about different decarbonisation measures, the most popular is energy efficient measures and process optimisation. So these are just briefly the main findings and I will give the floor to… Alexey and to our colleagues from India.

Alexey Bogomolov (модератор)

00:09:01

Thank you, Anastasia.

Of course, it's very important to see development of our metals and mining companies and their position in terms of CO2 reduction as well as their cooperation not only with Eastern counterparts, but the global as well.

And as we see, there is less influence so far on CBAM. I would draw your attention again that this year China introduced ecological code, and we don't know yet whether requirements of Chinese requirements will be stricter than CBAM or not. And this is an important element still, to see. Of course, India and metals sector in India is very important and leading sector in Indian economy. It's major supplier of metals to international markets and at the same time, of course, India is taking huge efforts in terms of climate change reduction in terms of mitigation as well as adaptation to climate change in events in India as well. So Nick, could you elaborate further on your research and findings towards how Indian companies are feeling a sea-bomb? fans, I would say, in terms of their exports to European counterparts.

Nikunj

00:10:56

Hi and good evening to everybody and thanks for joining. I would like to share a presentation of our findings through which we would be able to, you know, get a deeper understanding as to what we are doing. I just hope if you can tell me the screen is visible.

Anastasia

00:11:19

Yeah, we can see.

Nikunj

00:11:25

Okay.

Anastasia

00:11:26

Yes, now better.

Nikunj

00:11:29

That wasn't slideshow, right?

Anastasia

00:11:37

You need to use Ctrl L to make it the full screen.

Nikunj

00:11:44

You can see this as a full screen now?

Anastasia

00:11:46

No, no, not as a full screen. It's just together with the sidebar.

Nikunj

00:11:54

Okay, one second. Let me just check.

Alexey Bogomolov (модератор)

00:12:10

Meanwhile, I would advise that all questions will be answered at the end of our presentations. Don't hesitate to put them in chat. Okay.

Anastasia

00:12:46

Nipun Stup is representing KH and he is the chief analyst and done similar study on his part. So he will present the results as well.

Nikunj

00:12:55

So you can see the stuff.

Anastasia

00:13:01

Now it's even smaller than it was. We have your video on the video of the presentation. I don't know how you did it.

Alexey Bogomolov (модератор)

00:13:14

Okay, visible now?

Anastasia

00:13:30

Okay, we can see it.

Alexey Bogomolov (модератор)

00:13:32

Maybe you share a couple of words about your companies as well as your interaction with RxAnalytics.

Nikunj

00:13:50

Yeah, okay.

Anastasia

00:13:58

It's okay, no worries. The most important is what you say.

Nikunj

00:14:04

I am hoping it is not running on slideshow, but it is visible, right?

Anastasia

00:14:09

It's visible, yeah. It is not very big, but visible.

Nikunj

00:14:14

Yeah, Nikunj, you can continue. We can see very well. Yeah, please. Now you can see my full… Now you can see my slide, right?

Anastasia

00:14:24

Yeah, we can see your slide, right.

Nikunj

00:14:28

And not anything else?

Manoj Kumar

00:14:30

No.

Nikunj

00:14:31

Okay, fine. Anyways, so I'm Nikunj. I represent KREG ESG Ratings, India's premier ESG rating company. Now we are… And I'd like to take you through this presentation that we conducted on the metals and mining sector of India. Now, if you look at this starting slide, and we have two subsectors within this metals and mining, where, you know, both of them, the metals and the mining, they are trying to different opposite directions. So let me show you how and what is happening.

So if you look at this, India being now the second largest producer of crude steel and the sector contributing to 2% of the GDP across. There's a significant amount of emissions that also gets contributed to this industry sector. Now, on the current trajectory, what we see, the emissions, the way the capacity is being developed on basis of the rising demand, the expected emissions could actually double by 2030. Today, at 2.5 tons of carbon dioxide per ton of crude steel production, this average emission intensity is like one of the highest in the majority producers across the world. And the demand is definitely not slowing in any way. So what is happening?

We have a national policy here that is putting up a target in terms of what is the kind of mining that we need to do, the kind of capacity expansion that is happening in within the steel sector there are the top of the top five of the largest steel makers they have already come up with their net zero targets and yet most of them you know do not have emission intensity we have seen that it has you know only increased rather than coming down. So what is there is that, you know, ambition has already started running ahead of capital allocation. So coming down, so how did we did our study and research? So we went ahead and looking after certain companies within the sector of metals and mining.

We looked after them for a period of FY23 till FY25 because some of them are still yet to come up with their FY26 numbers. So we looked after things from three angles. One was basically in terms of, you know, scope and scope to emission intensity, which we anyways was normalized basis to the revenue figures so as to become comparable across industries. We also looked after how various disclosures being made across various multiple kinds of sustainability reports and reporting mechanism and also looked after how the assessment across policy related exposure was happening.

So we look at from this we have two one is metals and mining and ferrous metals if you see the metals and mining has actually shown reduction into their intensity whereas the metals production sector has actually shown increase. Now this is how the way it is happening is roughly steel is 14 times more carbon intensive per dollar of revenue than mining. Now revenue based intensity also moves approximately along with the commodity prices so you know there are sharp fi 25 step in the mining is also you know something which is yet to be kept under watch it may not be the right reflective figure because of the commodity prices but still at least the trend shows that you know mining sector has you know shown a decline in terms of the emission factors. Similarly, now on the energy split, mining's energy fell by 72%, ferrous metal rose by 20%. This is again, we have the decarbonizing challenge in the sector is at its core, you know, a challenge because part of the ferrous steel increasing is simply volume. Production is going way faster.

And hence, this is the requirement where, you know, catching up of the capacity is necessary due to the demand, resulting in the current increase. For India as a country, the same thing is supposed to plateau down over after FY32 or FY35, where the emission intensity could actually be seen slowing down. Now, the obvious question then comes out is, mining energy demand is largely electrical and mechanical. On the steel, it is very different. The coal, the DRI process makes it much more carbon intensive and emission making. So steel cannot offset its way to net zero just like that. I mean, that is why there is a long trajectory for India as well. Now from the initiative fronts, the things that have been happening, renewables have actually grown 14x from its low base and there is a genuine momentum that is going on over there.

In the real long term, you know, green hydrogen is also being incorporated, though it is currently at a costlier way of implementation of that technology. But this is something where we believe could be the future in how decarbonization within the sector is bound to happen. We all know this part in terms of, you know, the CBAM coming in and then what kind of price gaps currently exist where India we've calculated somewhere anywhere between 9 to 10 euros per ton of CO2. EU ETS basically is pegging at anywhere between 65 to 85. So there is a significant gap at where the Kryban pricing is actually being deferred from. These are all those external pressures that are currently happening and because of which I think the entities are taking retrospective measures in terms of how to come to this. The encouraging signal definitely is there that the entities which are the steel entities which have already showcased low emission factor have actually seen increment in their volumes of exports to Europe. Whereas the ones which the higher volumes of the higher intensity levels have actually seen their export volumes go down.

So this is one actual nudge that the market is understanding and the companies here are gearing up to in terms of decarbonizing themselves. Now, from a policy angle, what is what clearly visible is that currently the strategies are majorly overwhelmingly policy driven. But because of the other external pressures, there is significant impact in terms of the organization taking initiatives themselves. Now, already a quarter of them have net zero targets for 2050, which is earlier than India's target. And though CBAM preparedness is actually very less amongst majority entities. But again, there is very clear direction in terms of how the companies are managing today's rules as well. And a long term vision of transition is very quickly emerging in India. If you look from the angle of how risks are seen, which were missed and where, you know, some upside still exists.

So, 9 out of 10 companies have already identified risk related to climate change and three quarters already flag regulatory and reporting related risk. CBAM is disclosed mainly by exporters such as Stata Steel and Jesus to Blue Steel, which are major producers. Now, Though this could be a blind spot because domestic phase companies may not have an indirect exposure but because of the value chain they might and hence they are also now being asked by their entities or the customers domestically which are there asking them to also get aligned with CBAM related guidelines as well. The companies have already seen early decarbonization, competitive advantage has already risen. But of course, there are a lot many that need to do bring their initiatives much more fast forward, leading towards a much more sector wide decarbonization. The encouraging part of our research that came was, you know, we already identified entities that are doing right. The sector in terms of mining that has already achieved something. So we have companies that are moving generally towards leading, you know, Tata has already invested into base-stated recovery, energy efficiency, renewables across, you know, by selling low carbon steel in Europe and targeting basically 1.8 tons of CO2 per steel by 2030.

JSW is already also incorporating electric arc furnaces, re-slag recycling. So they have moved there. Kalyani Group has already started producing steel at an intensity of 0.9 tons, though the volume of production could definitely be low as of today, but it is getting escalated. On the policy ecosystem, which is anyways maturing, so we have our own carbon market, which is already there, and multiple sectors are already notified within the carbon trading scheme. So hence the foundations have already now begun and the task is now going to go up to scale. So what are basically pathways from doing risk to advantage? We already have green hydrogen mission that has been established, which has now been already incorporated by a few of the companies. The domestic carbon trading mechanism is already there and certain carbon pricings are being discovered.

The digital MRV systems are being very aggressively developed so that there is a seamless data monitoring on the circularity angle. Scrap-based EAF emits roughly half the current average and needs no hydrogen, so that is one good factor. And already on the collaborations with the various different economies, you already have a compact where diversifying into markets where carbon bottom measures are yet not into force. So India is now also trying to expand their market in those kind of geographies. So, for me, the key takeaways that have been there is that, you know, there's a significant effort that is happening from these both sectors within India. Quantifying of the emissions to CMBAM grade standard is already now being developed and companies are working towards that. Verification will follow by through digital MRV systems. And, you know, the carbon price discovery, I think, will lead to further escalations into our trading mechanisms as well. So that was all from my presentation site. Happy to take any of the questions. Thank you, Nikunj.

Alexey Bogomolov (модератор)

00:25:44

I would like you to elaborate on the following influence of investors on this element of decarbonization in India, what sources of financing used by those companies, issuance of bonds and etc.

Nikunj

00:26:09

So, see, if you look at from the steel sector or mine sector, which is ideally a hard to obey sector. So from bond market, significant traction yet not has happened into the industry because transition bonds is something which has yet not come here. We are still looking at sustainability linked bonds, which the likes of Tata's or JSW have already raised in the market. But for other entities which are there and players within the sector, they will still find it difficult to raise any international bond currently into the market for two reasons. One is that the investors who are wanting to invest into transition bonds need to actually first come here. They have yet not participated into the capital market.

The other is that from a demand supply scenario, the bond prices today are running at a significantly high time. Now the bond yields being at this high, it makes it very non-lucrative for the domestic entities to go internationally and borrow today considering the hedging costs. So domestically definitely there are raising bonds and domestic banks and domestic investors certainly taking participation into their bond activities. But from an international bond perspective, I think there is still time to go for the a bond yields to come down and the transition bond related investors to also start investing into the Indian market. But very significant appetite has already been there in green bonds, but steel sector ideally does not qualify as per ICMA principles. And sustainability linked bond, I think is something where steel entities may not want to take the first mover advantage within the SLB framework.

Alexey Bogomolov (модератор)

00:28:09

Are there any incentives for investors in green bonds locally in India? Reduction of taxes or any other?

Nikunj

00:28:20

So in India, we have two basic jurisdictions. One is India and the other is in the International Finance Zone, IFC, which is in the state of Gujarat. People who want to borrow international finance, they ideally should go to the gift city, which is, you know, the international finance zone jurisdiction. And there they can actually go and get themselves listed and avail the taxation benefits, which is there where the reserve benefit of withholding tax.

And there are other concessions also being given for entities operating from that gift city region. Domestically, what has been done is by the regulator is that all these green activities have now been classified. Few of the green activities have been classified under the priority sector for the banks. So that is where they get the impetus of the banks to actually go ahead and do increased funding to these sectors, irrespective of any kind of a tax benefit. The entities, so investors domestically are financing it from the angle of building their own green book.

Whereas in the international finance zone, the few of the entities have gone for availing the tax benefits and withholding tax benefit. But that has only happened for sectors which are not, I mean, hard to await sectors are not there. We have very few issuances that have happened from a steel sector or an animal and production sector. That is a phase of the capital market where the sustainable finance is yet to take up significantly fast.

I think over the last one year, because of the bond yields being high, the traction there has been slow. But that is expected to significantly boost up as well once we see bond yields a little lower.

Alexey Bogomolov (модератор)

00:30:21

Thank you.

Nikunj

00:30:22

The regulator here is definitely working on in terms of how added incentives can actually be given to both the issuers of bond as well and to the investors of bond as well, so that there is a good meetup of minds in terms of the investing into these instruments.

Alexey Bogomolov (модератор)

00:30:39

We have similar incentives from the Central Bank of Russia for institutional investors, for banks, in particular with the lower reserve requirements, if they invest in such instruments. We also have, by the way, a code for investors, which was introduced last year, and more and more institutional investors are joining.

Nikunj

00:31:13

As I said, for domestically, what is happening is because of the bond yields being high and the domestic borrowing rates are almost matching. So there is very low incentive for a company like Tata or JSW or anyone for that matter to actually reach an international investor when they're actually able to borrow at the same rate, which is also at a very good time low considering their credit ratings. Even despite the domestic related incentives which the regulator already has brought in and still trying to revive furthermore, the domestic issuances will certainly continue and increase. I'm much more interested in looking at foreign issuances of bonds to actually escalate much more faster for us.

Alexey Bogomolov (модератор)

00:31:59

I know that similar incentives are in Brazil and within BRICS, of course, we need to harmonize these approaches as to develop issues of climate bonds domestically. For example, Indian company could borrow not only in India, but also in Russia or in Brazil, and invest in decarbonization projects and receive not Brazilian reals or carbon credits on maturity. And then exchange carbon credits and take them into account on their balance sheet. That's the idea in the end. But for this we need, of course, to have very close cooperation between various entities like rating agencies, ESG rating agencies. Verificators, disclosures should be similar. Otherwise, we are measuring different things like apples with oranges and so on.

Nikunj

00:33:02

I totally agree on that. I mean, yes, I mean, there is certainly a need in terms of harmonization of the assessment standards as well so that, you know, there is a proper interoperability between the different frameworks and different rating methodologies as well.

Alexey Bogomolov (модератор)

00:33:17

That's the purpose of this webinar is to start this open discussion. You see how many, participants are today and they're asking us to do this more and more at SDN platform. From India on participants today and I'm sure that you'll have discussions in Indian language as well afterwards yeah.

Nikunj

00:33:46

I mean we do need to take this forward. I mean this is like a month. I mean quarter end and all listed entities and then they are publishing results so a lot many couldn't participate we did reach out to them we. Generally also what happens is that. I think for somewhere where a policy level discussion is supposed to happen. I think they might need to do a closed room.

Alexey Bogomolov (модератор)

00:34:07

Your experience in CBAM is very important. Nowadays we don't have interaction with European buyers, but that would come for sure later. Unfortunately, today we do not have colleagues from South Africa for technical reasons, but they prepared very interesting…. Research and analysis which is more in academic style it would be on the website after this webinar and we will have chance to uh to look at it and now we will have our russian speakers from major company of Rusal, Alexey Malmiv, and he will speak about Rusal and Lua's climate policy and their achievements in reduction of CO2 and their way of doing other ways of reduction of CO2 for the group. Alexey, floor is yours.

Alexey Malmiv (Rusal)

00:35:25

Hello, hello everyone. Thank you for inviting me. And today, so I would like to talk about climate risks, but not transitional as previous speaker about physical climate risk, and how it influence. And let me just share my presentation. Is it full screen? Yes. Okay. Right. So just a few words about the company. And plus, and so Rosal is a part of EN plus and plus is a big integrated company. We are greatest producer of low carbon aluminum and renewable energy. So annual, mean annual aluminum production is about 3.9 million tons. And the bigger part of our assets is located in Siberia, in Russia, where aluminum smelters take electricity from hydropower, big hydropower cascade on Angara River and Yenisei River. So Angara is flowing out of Baikal, Lake Baikal. And total installed capacity of our hydropower plants is around… 15 gigawatts.

Anastasia

00:37:07

Sorry, excuse me. I'll just speak a bit louder. I'll be closer to the microphone. I do not hear you well.

Alexey Malmiv (Rusal)

00:37:15

Okay. So EN Plus is the world's biggest producer of hydropower and have total installed capacity of hydropower about 15 gigawatt. It makes us the hydropower producer. Is it okay?

Alexey Bogomolov (модератор)

00:37:44

Yes, better, of course. Okay.

Alexey Malmiv (Rusal)

00:37:52

And in recent years we have analyzed the climate physical risks of our production facilities and we see that the bigger part of them is exposed to climate risks. And if we look at Rusal facilities, one of five, on average, climate risks are associated with electricity infrastructure. So they come from electricity supply, transition lines and so hydropower. And so hydropower plays a crucial role for the carbon footprint of the aluminium, that's why we are focused on more deeply focused on climate risks for hydropower and so my speech will be about that using historical data we can see that climate trends on the region of Siberia where our hydropower plants are located. We see that from 1990s the trends has begin in temperature, air temperature and in river runoff. So we see that linear trend of changing air temperature is about 0.3 degrees Celsius per decade. And what it means for hydropower.

So runoff decrease. We see the trend of 4% per 10 years. So the annual volume of runoff is decreasing. And so the generation of electricity on hydropower plants also decreasing with the runoff. It's about 5% per decade. This is really make sense. Next slide.

And here you can see that just I show you the climate projection. We recently conducted the scientific work with the Russian Institutes for make, climate projections for the future for that region and we see that above mentioned trends will be in the future too and the aridity in that region will will remain so about two three percent will in air humidity we see decrease in it so the climate risks depending on this, is forest fires. And so they will run the risks with runoff next. Yes, and particularly about our projection for runoff on the River. We see that in different climate scenarios, the analysis show decrease, about 11 to… 14 percent by 2050 and by the end of the century the decrease in runoff of Angara River will show 17 to 20 percent so what we can do with that of course measures for mitigation, to mitigate CO2 emissions from production. It is very good, but we need to adapt to existing and ongoing climate change and risks. So what we can do with that? Actually, there is not much measures we can do, but there is one very good, as I see.

And it is scientifically based. It is a nature-based solution for planting trees in the river basins. So now we are looking for the project where we can plant trees on the south and the southern part of the Selenga River watershed. And we hope that that would help us to gain water there and stop or even change the trend of run of decretion, how it works. So in Soviet Union, there was great actions to plant trees, was initiated by Stalin. And 15 years, 50 years of, in previous century, there was some shelter belts, forest shelter belts were made, and the effect was very good. So how it works, it is, it stimulates precipitation. It reduces moisture evaporation from the land. It can retain snow cover and promote recharge of groundwater aquifers.

So we would like to do this project to maybe come up with something like that, in Soviet Union and so we found the scientists and the scientific academic institution which has the experience of such activities and this is Institute of Agroecology from Volgograd and from Mongolian side because southern part of catchment is in Mongolia. From Mongolian side there is Institute of Geography and Geoecology and we just recently signed the agreement between those two institutes to conduct scientific work, finding good places to plant trees on the Mongolian side. And so the scientists already decided which parts of which places in the watershed must be studied for the future, plant, trees planting. This is just a brief plan of our project, so it's been for three years and so in the end we would like to gain the project of protective shelter belts, forest belts, and to calculate economic effect from that to have opportunity to invite investors to that project. So that is all from my side.

Alexey Bogomolov (модератор)

00:47:08

Thank you very much, Alexey, for this interesting approach and plus adaptation to climate change. Indeed, it's a very complicated situation, with Baikal and Angara River, which has its birth in Baikal Lake. It's more complicated by the situation of tributary of Baikal, which is Selangor River. Of course, Mongolia is developing and they're increasing the agricultural production. They need… irrigation of these lands and construction of reservoir in Mongolia would impede runoff of Selenga to Baikal and so on and it's trans-border situation and it's good that you signed this agreement on planting trees but it's beyond planting trees I will say.

As a hydraulic engineer, I know this situation very well because Baikal was under our supervision as all lakes in former Soviet Union. And at that time, it was a different situation. We were designing irrigation system in Mongolia ourselves, because it was not part of russia but very close soviet union but very close so here as we know transborder situation with the rivers are getting more and more complicated, including countries of BRICS, some countries in Africa and so on. I'm not going to elaborate further. And I would say reservoirs are more complicated than launching outer space and cosmonauts, big task, and we need to find solutions in Russia for these situations.

It's not met only in Rus'al, there are 15 or 20 water users of Angara River and so on.

Not to say about Baikal, but Baikal, as we know, is the treasure of the world, but in the hands of the Russian Federation, let's uh look at this and again this is the uh platform would welcome uh joining of russell and amy of and plus to this platform now we are thank you again and now we are asking to discuss and elaborate on good achievements of Navalny's nickel as a mining and metals company. To my mind, it's one of the best, if not the best in Russia in terms of decarbonization, difficulties in adaptation, which is melting of permafrost in the areas of its activities, but they're coping with this. And besides, they have a long, long history and experience of producing carbon-free nickel. Please, Alihan, the floor is yours.

Ali Khan

00:51:15

Hello, everyone. Do you hear me well?

Anastasia

00:51:19

Yes, thank you.

Ali Khan

00:51:21

Let me just take a moment to share my presentation.

Anastasia

00:51:43

Is it okay now? Yeah, great.

Ali Khan

00:51:45

Well, my name is Ali Khan. I'm in charge of climate adaptation in the risk nickel. Also in charge in some questions regarding decarbonization, but actually today. I would like to speak more about climate research and adaptation because other speakers are proficient in the carbonization field and. I thought that it would be more interesting to show some corporate approaches in addition to what Alexei said, some corporate approaches of NaRiskNikols since our practice is. A little bit different, but we also have some climate risks in common. I will try to do that. Is it better now?

Anastasia

00:52:51

A bit better.

Ali Khan

00:52:53

I hope so. I didn't have a plan to share some slides about our company in general or regarding decarbonization measures, but to be brief in these topics, I would say that our company is a big producer of nickel, copper, palladium and platinum and some other critical minerals.

We have various facilities and infrastructure in Russia in three regions, such as Norilsk, it's on the north of Krasnoyarsk region, Murmansk, Murmansk Oblast, and the Baikalsk region. We also have… facility in Finland but I will mostly focus on things that are happening in Russia. So let me start with what we do observe, what we do see in different regions where we operate. As you see the mean temperature is rising everywhere even in the regional scale. And I would like to highlight the dynamic which is happening in the Norilsk region, the region which is covered with permafrost. Since 1960s up to today, mean temperature has risen from about minus 11 to up to maybe minus 7 degrees Celsius. So the difference is… quite staggering, almost four degrees.

And we are talking about mean values. There are also some other changes in climate, such as seasonal shifts. For example, springs and autumns became much more warm since that time. For example, we do observe some anomalies regarding increasing thunderstorm activity in our region, also there are some anomalies in precipitation which took place in the past and we actually think it can be real in the future also so this is only a brief overview of the historic observations but let me move to the question that is highly anticipated in the in press and expert sphere such as Norilsk and the situation with civil buildings with the city itself regarding permafrost degradation and. I would like to make a disclaimer that. I will not talk about civil infrastructure but mostly about our corporate and regarding civil. I would like to say that we do observe some changes in temperature of the permafrost.

We have one well located in the center of Norilsk. And the dynamic is really correlating with the dynamic of temperature, air temperature. We are continuing the monitoring, but we hope that the temperature will not rise above minus one degrees Celsius, which we think is a dangerous, I would say, borderline for permafrost soils. So the main issue here regarding civil infrastructure is that it was built rather long ago. And the key factor that is responsible for this kind of increasing in temperature is maintenance, maintenance factors and the technical conditions of basements. Because each of the buildings which was built in the city was designed to withstand permafrost, but years go by and just infrastructure tends to… lower its technical conditions. I would briefly touch the things happening in national policies regarding climate change.

For example, on the state level, national level, in the National Climate Adaptation Roadmap, it is stated that the dynamics of temperature rise in Russia is much higher than globally, and in Arctic even higher than that. I think everybody heard about it. But what does this national plan, national roadmap offer? It offers some methodologies and standards regarding climate vulnerabilities. It also includes a number of programs, such as anti-flooding, ecosystem programs and so on and the last one is regarding Arctic permafrost so this program is the utilized here and there is only a draft of this program right now and this program I would say mostly focuses on scientific part of the story and some methodological and talent development aspects. And as an example, I showed the adaptation plan of Krasnoyarsk region. As you see, the monitoring issues of permafrost issues are just slightly covered here.

Almost no information regarding this. But what I would say that the building codes and the building regulation really surprised us recently. For example, one set of rules code regarding soil basis and foundations on permafrost soils was recently renewed, updated, and there is now a mandatory criteria to include in temperature progression in thermal calculations temperature progressions from latest climate model ensembles of CMIP number six so in this regard we were. I would say glad that we have started the journey of climate projections some years ago and by this moment we have something to offer for our colleagues who design infrastructure and build it. Also, I think the progress is the progress in this field of including climate projections into building codes or other regulation will be more and more visible in maybe three to five years. So I would like to highlight the well-known instrument of climate adaptation, which is climate projections. And I would just like to emphasize that regional projections that we had in, for example, three to four years ago have been improved.

And in collaboration with Russian Academy of Science, we have developed fresh, new, more detailed and more suitable for our business processes types of projections. As you see, before we could also only tell about main… Main dynamic of this whole region, but right now the picture is much more relevant for our For our business, for example, as you see the dynamic here in the northern northwestern part is where our gas production and gas transportation systems are located, the dynamic of air temperature and the influence on permafrost soils will be higher than near the city of Norilsk. And as well, right here in the bottom, we have two hydroelectric power plants, which are connected to the city of Narivsk by a number of high voltage lines, electric grid. And the distance is more than 200 kilometers, so it's a pretty vast distance, pretty vast space. And here what I would like to say that we can prioritize some regions in finding best ways to adapt according to the new detailed projections that we have. And I would like to say a couple of words about the scale of the task.

Because, for example, for our Norilsk facility and infrastructure, We understood that we need to prioritize the climate vulnerability assessment because the whole ratio of our buildings, infrastructure, facilities, and so on, we can do it in one time.

I mean, we have to… highlight some vital spots and the vital spots for us in this region are of course the buildings of course but as well electric grids gas pipelines petroleum reservoirs dams and tailings all of which stand on the soil mostly on permafrost soil and this is not a secret that the issue of permafrost is The first one, the major one for this region. But as well as the issue of permafrost degradation, we discovered that actually thunderstorms and some anomalies in precipitation and hydrological types also do have some influence on our operations. And in this regard, I would like to say that if you combine climate projections with the design of this infrastructure and the whole amount of this infrastructure in the region, we believe that it will increase the CAPEX expenditures in the strategic horizon of planning.

So we could elaborate more about and discuss more climate finance in the aspect not of decarbonization but of adaptation. But as I see in the world and in Russia, this topic is not so highly discussed yet. I would like to conclude right now, with just the links to our reports.

Alexey Bogomolov (модератор)

01:06:26

Thank you very much. Hello. Hello. Hello. Do you hear me?

Ali Khan

01:06:40

Yes, I do.

Alexey Bogomolov (модератор)

01:06:42

Thank you very much for your presentation. Indeed, it's very interesting and concerning decarbonization at School of Finance and High School of Economics. We have climate course and Ali Khan is one of our climate finance course and Ali Khan is one of our speaker where he is giving a very detailed information about Norilskyi nickel development in this area. One observation you mentioned several times, soils are used as a word for agriculture, for construction, it's grounds, in Russian it's grunt. It's to be correct, maybe one of our… Thanks a lot.

Ali Khan

01:07:32

No problem. Sorry, I'm a hydroelectric engineer as well as you, so maybe I will fix my wording.

Alexey Bogomolov (модератор)

01:07:42

Okay, good. Very much appreciated. And we have one of our colleagues who participated at BRICS business. Council Forum. And I would like to introduce Manoj Kumar, who would like to add on decarbonization and sustainability in India and globally as well. So floor is yours. Thank you for joining us.

Manoj Kumar

01:08:14

Yeah, thank you so much for inviting me and giving me opportunity. Somehow I'm not prepared with the presentation. So just I'll share my, you know, experience about decarbonization, what all things are happening, especially in India in steel sector. I think one of the person from care rating is already spoken about steel, decarbonization. So I'll put, you know, some of the, you know, recent development, which is enabling decarbonization of steel, especially in India, like green steel taxonomy, which is a recent, you know, guidelines where steel manufacturing companies in India have to reduce their carbon intensity from 2.0, two ton per ton of steel production.

So that is a new definition of green steel, which is now introduced in India. It's called green steel taxonomy. So any steel which is produced and having carbon intensity of less than 2.2, it will qualify as a green steel. And under that, there are three categories has been introduced. The first is three star green steel. Second is four star green steel and last is five star green steel rating.

So based on emission intensity, these ratings are, you know, now introduced to incentivize steel manufacturers to reduce their, you know, product carbon footprint. So under four star, I think it is one point, like if they are between 1.8 ton to 2.2 ton per ton of steel production, so then it will qualify as a four star, you know, green steel. And if it is a lesser than 1.8, then it will qualify as a five star, you know, green steel. And they have also came up with green percentage, you know, certification, like how green that steel is. You know, there could be one is a star rating. But apart from that, there is a greenness proposition also, you know, is very recently introduced, which is based on the baseline of, you know, green steel. Like 2.2 is a baseline of green steel. So how close you are or how lesser from 2.2 you are.

Based on that, your greenness of steel will keep on increasing. So that is a new methodology which has been proposed by NIST, National Institute of Secondary Steel Technology, which comes under Ministry of Steel. So they are the certification body who does steel, green steel certification in India. So they have came up with this new methodology and now going forward, it is expected from 2027 onwards, green steel procurement guidelines also will be starting. Like all the public sector companies who are developing the infrastructure projects, they have they have to have green steel procurement while developing their infrastructure. So special weightage will be given for green steel procurement, like certain percentage of steel, whatever they are procuring, that should be green steel. So the manufacturers who are producing the green steel are going to reduce their carbon intensity. They will be getting incentives and they'll be getting the market also for that. This is a new development which is happening.

Lots of small companies, like I think another panelist have already mentioned, like seven big companies are already working in India onto green steel side. But lots of MSMEs are there who are also working in India. Like if I am not wrong, more than 900 companies are there in India who are into steel manufacturing or steel, you know, secondary steel manufacturing. So that much, you know, those industries also will be getting incentive with this new, you know, policy intervention where green steel off-tech will be assured by the government. So this is a new development. Apart from that, there is a CCTS scheme, Carbon Credit Trading System, which also incentivize, you know, carbon intensity reduction in various industries.

So as on this, aluminum is there in that. So aluminum is very, you know, a highly emission intensive industry. Average is more than 15 ton, you know, of burden of aluminum production, which is quite high. Now, government has came up with under CCTS scheme around 490 high emitting industries from more than, I think, seven sectors have been identified and given the target to reduce their emission intensity from the baseline, whatever, you know, they have declared. So every year they have to now reduce their emission intensity from the specific baseline. And for that, they will be getting carbon credit certificates. And these certificates, they can, you know, sell or they can to, you know, other peers who are not able to fulfill this carbon, you know, intensity target or reduction intensity target.

It's like cap and trade mechanism, which is there in, you know, Europe. So similar thing is now started in India as well, where it is in phase one, around 490 organization have been identified who have been given target to reduce their carbon intensity. Aluminium is there in that. I think steel is yet to come. Maybe in the second or third phase it will come. But apart from that, pulp, paper and other fertilizer and other heavy emission intensity industries are there in that list. Yeah, so this is just an overview about, I don't know how much time I have, but this is just a new update about, you know, what all things are happening in decarbonization space in India. Yeah, I would be happy to have any questions if you have. Thank you.

Alexey Bogomolov (модератор)

01:15:14

Thank you very much for your intervention. It was very important because there is a significant interest in developing green products in various sectors. And this your knowledge and certification of certification is very important, not only for metals, but as you mentioned, fertilizers and so on. Again, this could be another topic for ideas of interaction within SDN platform. And we invited you to our international annual conference, is corporate dynamics and challenges for emerging markets under the higher school of economics school of finance i hope you will speak with your presentation there as well i invite everybody to this conference at high school of economics using this yeah thank you thank you so much I think it's time for the questions and answers.

Anastasia

01:16:23

There is one question in our chat. I think it's addressed to Nikunj. Nikunj, are you still here?

Nikunj

01:16:34

Yeah, I'm there.

Anastasia

01:16:35

You can hear me. Have you read the question? Do I need to read it again?

Nikunj

01:16:40

So there is a question regarding the decrease in emissions of CO2 in the mining. How has it been achieved by the companies? How do you explain it? Is it through the use of renewable energy or some different reasons? Can you comment on that? Yeah no certainly so uh in india currently a majority of the decarbonization that is happening is primarily attributed to incorporation of renewable energy into the operations that has been the pure pure uh you know a quick way of getting things done and that is where the transition has happened right now

When it comes to different technologies as well, which can further lead to additional decarbonization, they are under current phases of development. So the technology and everything are yet to be tested for its efficacy. So those things are initiatives which will take certain time. Current what we are seeing is the incorporation of mineral. India as a country itself has achieved a 50% renewable energy capacity building already, which was targeted by 2030, has already been achieved by 2025. So we were ahead of in terms of renewable energy incorporation within a country level scale.

Anastasia

01:17:55

Thank you very much. So are there some comments on that?

Manoj Kumar

01:18:01

Yeah, so just I'll add on to Nikunj. So renewable energy is definitely one area where Lots of scope to emissions are being taken care by adding renewable energy. But apart from that, energy efficiency is one of the big area where many people are actually working on. So especially on waste heat recovery technologies, where they can utilize a waste and make various, you know, usage of that. So that is being quite popular in the steel industry right now. And lots of savings are there. And here there is no policy incentive is needed. It's basically, you know, economics. Because of that, people are going for energy efficiency measures. So, yeah, so this is an additional thing, you know, apart from renewable energy integration, energy efficiency usage in various processes are also being adopted widely in industry, steel industry.

Anastasia

01:19:01

Thank you very much for the answers. Are there any questions from the audience that we could answer our speakers? So I think we'll give five minutes for people maybe to formulate their question. And I will make a small announcement that we've developed a dedicated platform, which is called BBB, where we will place all the benchmarks or where you can find all the studies and where we aim to continue, contribute additional researches on different other ESG topics.

Alexey Bogomolov (модератор)

01:19:37

So please, i think that will be announced later on our social media so you could uh check later thank you very much for the attention i will give flow to alexander thank you very much first of all for organizers of this webinar i believe it's a very useful and practical uh a way of exchanging views and it's open and frank and it's what we have actually at BRICS business forum and working groups as well and this confirms usefulness of BRICS and such webinars. I am sure that this site plus series of such events will be very very useful and We'll have more and more speakers, of course, and they will be practical and result-oriented in the end. Thank you and all the best to you and your families. Bye-bye.

Anastasia

01:20:43

Thank you very much. See you next time. Please join our webinar. We're happy to see you. Thank you very much.

Manoj Kumar

01:20:52

Thank you so much. Bye-bye.