According to media reports, Russia’s central bank and finance ministry have launched initial discussions on the possibility of issuing green government bonds. In addition, the City of Moscow has announced it is considering the issuance of its own green bonds this year. For the moment, only a few Russian corporates have issued green bonds in the spirit of testing the waters. Green bonds are typically used as a way to raise funding for projects that help the environment through reducing emissions, e.g. a switch to renewable energy production or low-emission transport. The main purpose of government green bonds, however, is to make it easier to price private-sector bond issues.
Russian policymakers are not heavily focused on measures to mitigate or reduce climate change, and the Russian economy remains heavily dependent on extraction and exports of hydrocarbon fuels (see BOFIT Policy Brief 6/2021, in Finnish only). On international financial markets, however, actions to reduce climate change play an ever-increasing role. Several major financial institutions have announced plans to divest their holdings in the oil, gas and coal sectors. This shift could raise the price of financing for Russian energy firms. For example, the latest estimate from Russia’s Strategic Research Center finds that only 45 % of the external financing of Russia’s large oil & gas firms comes from domestic sources. Thus, pushing forward the green projects that reduce emissions or increase energy efficiency might play a key role in controlling companies funding costs.