Development of ESG investments in the Russian market

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Abstract

In Russia, ESG investing is just beginning to develop, the state supports and
promotes this concept, encourages companies with a high ESG rating and introduces benefits
for them - subsidizing coupon income on bonds to cover part of the issuers' expenses.
Regulators also create common standards by which to assess whether a company really follows
ESG principles. Current research is devoted to the developing the indicators (indexes), which enable to evaluate possible ESG- nvestment strategies.
The goal of the research is to suggest the benchmark of the balanced investment portfolio, which is less volatile, than the traditional stock indexes. So, the formation of an investment portfolio consisting of sustainable assets and building on its basis an ESG- nvestment index will enable to develop the principles of individual sustainable investments. The index structure is bases on a number of sub indexes, which consist of three asset classes: stocks of sustainable companies, bonds of sustainable companies and ESG ETFs of Russian companies. Methodologies employed included the investment performance investigation on the basis of created ESG investment index, that, on the one hand, would have moderate volatility, and on the other hand, would include expanded investment opportunities through the integration of ESG assets.
The results and the novelty of the research is to investigate risk/return tradeoff in respect of ESG-investment portfolio structure and to provide the investors additional benchmarks to develop their investment strategies.