Luxembourg

The coronavirus pandemic has dramatically changed the global economy. And investors are “risk on” again. In addition to the pandemic currently sweeping the world the climate crisis remains in the background and investors are increasingly worried about environmental risks. Russian companies, in particular, are worried about being penalised for environment related issues and will have follow the Green Economy trend that is being demanded by retail investors, first and foremost.

The coronavirus pandemic has distracted from the furore created by Swedish climate crisis campaigner Greta Thunberg and her “Friday’s for the Future” youth movement. Nobody seems to care anymore about climate change since the globalization has stalled. People fear losing their jobs more than what the future holds — even on Fridays.

But appearances are deceptive. While governments around the world are busy curbing the pandemic and managing economic loses, a sophisticated green financing infrastructure is being built in the background. Companies, especially in Europe, which has embraced Thunberg’s call to action, taking their ESG (Environment – Social – Governance) responsibilities seriously and including it in their long-term strategies. This trend will not stop, and can be expected to grow in importance.

The pandemic has sharpened the senses to risks among companies’ decision-makers. Coronavirus has clearly demonstrated the fatal consequences of underestimating the risks for supply chains and the disruptive power Mother Nature still commands.

Banks, investors, and regulators re-evaluate risks that go beyond the pandemic. A World Economic Forum (WEF) report on global risks has linked nine out of ten risks directly to ESG factors, the most important of which are the protection of the climate and the environment. Financial players have started to closely monitor companies’ ESG policies.

While the world is fighting the coronavirus, Europe continues its efforts to build up a large-scale financial infrastructure for ESG investors. In 2016, the Luxembourg Exchange launched the Green Stock Exchange (LGX) – a trading platform for securities and Eurobonds of projects that meet 17 UN sustainable development goals (SDGs). Today it is the global leader in the “green bond” market, whose volume doubled to €216bn in 2019. Today less than one per cent of all traded bonds are green, but this market has enormous growth potential.

Investments revaluation

Large investors have already given an impulse to “greenify” the market, and the rest of the investing community is expected to follow. Last summer, the world’s largest investment company Blackrock banned all investments into the traditional energy sector. In October, the Norwegian pension fund Global sold its stake in Russia’s metallurgical titan Norilsk Nickel for environmental reasons: according to the Norwegian Ministry of Finance, the environment is suffering because of the company’s activities, and this violates the fund’s code of ethics (although Global itself made €900bn from oil sales the same year). And Brussels has already banned the European Investment Bank (EIB) and the European Investment Fund (EIF) from investing in oil, gas, and coal industries.

A this trend progresses more and more investors are expected to redistribute funds from fossil fuel producers to green-tech companies. Raising capital in equity markets for green and eco-friendly companies will become easier. Financial institutions will monitor ESG-compliance and make access to credit lines and bank accounts easier. In the case of non-compliance with these standards, credit and capital will become hard to get.

Classical energy companies will be subjected to the neoclassical risks. Why invest in bonds, even a super-profitable oil company, if it is exposed to non-ESG compliance risks or public scandal that could ruin an investment overnight? Neither investors, nor banks, nor regulators are willing to bear responsibility for serious environmental consequences.

Russia has no choice but to follow the trend

“The trend if your friend,” runs the old market adage, but in this case it is a trend with a twist. Falling oil prices have already created problems for the low-liquid waste market, which is still at very early stage of development.

The upshot of the low prices is petroleum raw materials to make plastics is now cheaper than recycled plastic waste. But the large petrochemical producers such as Russia’s Sibur and Nizhnekamskneftekhim remain committed to using recycled plastic in production, thanks to pressure from their strategic partners, customers, investors, and banks as well as their own ESG-compliance rules.

Many Russian companies are actively introducing ESG compliance strategies and officers. For an example, Russia’s major privately owned Lukoil oil producer covers 6% of its electricity needed using renewable sources – primarily solar energy. Shell plans to spend €2bn a year on development of alternative energy sources, and the Norwegian oil major Equinor will invest one fifth of its investment budget in renewables.

Russian petroleum companies are still far from these numbers, though they are already active in environmental protection initiatives. Environmental performance of oil and gas companies is monitored by Transparency Rating of Environmental Responsibility, which has been jointly conducted by Creon Group and WWF Russia (World Wild Fund for Nature Conservation) for seven years already.

The time for large investments into the green economy has come. Now is the time to develop clean renewable energy, reduce burning of associated gas to zero, and increase the share of recycling in the polymer industry. In the new economic order only businesses with a consistent strategy for sustainable development in the social and environmental arena can be profitable. This need has already recognized by many, not just Greta Thunberg.

Florian Willershausen, director of Creon Capital, managing Luxembourg-based fund’s company Creon Energy Fund, which invests in projects of green technologies, renewable energy and logistics projects. The fund is the core part of Creon Group, a strategic consultant in the transition to sustainable development and integration of ESG factors.

This text has been published on Intellinews:

https://www.intellinews.com/opinion-why-the-russian-economy-will-inevitably-become-green-after-the-covid-19-epidemic-is-over-183464/?source=russia

A Russian version is available on the leading Russian online portal RBC:

https://trends.rbc.ru/trends/green/5ea82ca89a79472db412c14a?from=center

Professionalism, experience, transparency – these are the values that Creon Capital stands for in Luxembourg. This is now confirmed by an independent ranking on the quality of Board compositions: Out of 2191 Alternative investment funds under European jurisdiction, whose management structures the London-based consulting firm IFI Global had examined, the Board of Creon Energy Fund achieved a top 50 ranking. The Sicav-SIF Fund managed by Creon Capital is listed in the “AA” category and ranks alongside with well-known funds from 3i, Blackrock and Blackstone.

IFI Global justifies the top placement of Creon Energy Fund with the “broad and impressive range of five individuals acting as directors”. Criteria for the rating were the board members’ professional background, as well as their experience and how one’s knowledge complements to others. The availability and transparence of this information was also crucial. The latter is not a matter of course, according to the findings of the study published in the monthly newsletter “The NED”: “A common feature of fund boards is to include big name directors, presumably to help capital raising”, says the study. However, this does not always mean that these people also play an active role in management.

Transparency is a weak point of many funds. There are funds under European jurisdiction that disclose “the bare minimum” of information about directors, so that the regulatory requirements are met. The researchers of IFI Global’s “The NED Risk and Governance” assessed a large variety of levels of professionalism on fund boards. It is the rankings goal to encourage funds with weak boards to improve them.

For Creon Capital and the Creon Energy Fund, the positive rating result is a confirmation, said Board Chairman Dr. Fares Kilzie: “Since the founding of the fund, we have relied on proven industry and country experts who understand their areas of responsibility better than anyone else. This is the only way we can work together with our partners to bring ongoing investment projects to success and create real value.”

Learn more about “The NED” Risk and Governance: http://nedglobal.com/

For more information please contact:

Creon Capital S.á.r.l.

Florian Willershausen
Director BD & Marcom
Cell: +352 621 235 126
E-Mail: fw@creoncapital.lu
www.creoncapital.lu

When Creon Energy Fund gets invested in a project, the Fund’s managers know how to act in the background: Many energy projects, particularly in the Oil and Gas Downstream sector have been pushed forward towards success by Creon Group’s professionals for almost two decades. Regardless Creon Energy Fund’s investments – Creon Capital’s executive team is capable to assist other investors as an advisor as we know how to mitigate investment risks in Emerging Markets in general and particularly in Russia and CIS countries.

How to protect the foreign investor’s rights and investments? This is a crucial question. And it might keep awake at night any entrepreneur when he is about to decide whether to set up a foreign Joint Venture, to purchase minority shares of a foreign company, or to found a subsidiary abroad. As a Luxembourg-based and -licensed Business Management Consultancy, Creon Capital adopted a new concept how to mitigate the risks, which has been presented during the China Roadshow 2017 to a broader audience in Beijing.

Creon Capital’s risk-minimizing approach is addressed to investors, who are keen to invest in Emerging Markets but don’t like the idea to become subject of the local legislation in the targeted countries due to their lack of stability, transparency, efficiency or predictability. Creon Capital offers to create a sub-Fund within the existing Sicav-SIF structure in Luxembourg, which is monitored by most reputable service providers such as Ernst & Young, Arendt & Medernach and the depositary bank CACEIS. The Sub-Fund, which operates independently from the Creon Energy Fund, will be subject to EU-legislation and regulation.

Structuring the investment via Luxembourg protects the investors on several levels:

Legally, the investment will be realized and monitored by a Luxembourg entity, which is the Creon Energy Sub-Fund. While being under control of the actual investor, this vehicle is subject to Luxembourg laws, regulations and standards. If a legal dispute between investors arises, the legal process will be held in EU. In fact, this reduces significantly the possibility that local businessmen threaten their foreign partners by applying non-compliant instruments.

Structurally, the Luxembourg-based Sub-Fund is being managed by the experienced Creon Capital team and its well-established service-providers. Valuables such as off-take-agreements or EPC-contracts will be held in custody by the depositary-bank CACEIS, which eliminates the risk of raids against single Joint Venture-partners. Besides CACEIS, both the auditor Ernst & Young and Luxembourg’s financial authority CSSF, are conduction a threefold monitoring and evaluation of the assets on the ground. The risk-management and compliance-policy can be subject to regular monitoring as well.

Financially, Creon Capital’s structuring services provide significant benefits. Emitted on Euro-basis, the Sub-Fund itself can be perceived as a “haven” for partners from non-European countries. The Creon Capital management can assist to fund the Sub-Fund’s project with the perfect timing for money transfers as we monitor the usually volatile currencies in the targeted countries. Together with our service partners we also help to transfer capital towards to the foreign entity and back.

Operationally, it’s up to our partners, if they prefer to run an entity on the ground themselves. Creon Capital can use the Group’s network to find the management professionals and business partners to ensure the success of the local subsidiary. Under any circumstances, the project initiator will remain to be the owner with access to revenues and profits, but also with the full economic responsibility

If you have any specific questions, don’t hesitate us:

Florian Willershausen
Director Business Development,
Marketing and Communications
Creon Capital S.à.r.l.
T (GER) +49 151 162 44 591 (WhatsApp)
T (RUS) +7 968 783 84 12
T (LUX) +352 621 235 126
E fw@creoncapital.lu

Why the Russian economy will inevitably become green after the COVID-19 epidemic is over

Transparency Ranking: Board of Creon Energy Fund ranks among the top 50 in Europe

New concept: How we mitigate investment risks in Emerging Markets