Do Emerging Markets Succeed in Implementing Sustainability Principles in Infrastructure Finance? Evidence from Public-Private Partnerships in Russia

Alexey  Kharlamov

doi:10.17323/j.jcfr.2073-0438.17.1.2023.17-26

Alexey Kharlamov PJSC Otkrytie Financial Corporation Bank, Moscow, Russia https://orcid.org/0000-0001-9513-923X

DOI: https://doi.org/10.17323/j.jcfr.2073-0438.17.1.2023.17-26

Keywords: public-private partnerships (PPP), ESG rating, ratings and rating agencies, sustainable development, sustainability investments, project analysis, infrastructure finance

Abstract

This paper is the author’s contribution to existing literature on the evaluation of ways to co-create ESG benefits in the process of implementing a public-private partnership (PPP). The author developed his own ESG rating based on a sound set of indicators and an independent evaluation of publicly available information on sustainable development issues. For the purposes of compiling a rating score, the specific issues relevant to the evaluation of a PPP project’s sustainability con siderations in view of national agenda were analyzed. Based on an analysis of academic literature and publicly available information about similar ratings, the author proposes an approach to measuring these issues and incorporating the results in the integrated ESG rating. The developed ESG benefit evaluation instrument may be used by institutional, private and state PPP market participants for a comprehensive analysis of their investment activity. The case study analysis of two PPP projects from Russian practice revealed sustainability failures in corporate governance practices in the process of investing in infrastructure; in addition, the author proposed potential ways of overcoming some of the failures based on case comparison. This paper provides a new outlook on the methodology of a PPP-adjusted ESG rating that is relevant for evaluating and monitoring of corresponding investments in infrastructure on emerging markets.

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