6.11.Plans, Results and Risks for the Company’s Activities in the Field of Environment, Social and Corporate Governance (ESG) as per Regulatory Bodies’ Plans to Improve the Quality of Corporate Governance and Using Modern Guidelines and Methodologies

Transneft understands the importance of consistent work and improvement of information disclosure in the field of sustainable development.

In order to reduce the risks for the Company’s activities in the field of environment, social and corporate governance, the management is actively working to develop and improve existing practices in the field of sustainable development and to enhance information disclosure on this issue, as well as to analyse the activities and best practices of Russian and foreign companies.

Main lines of work:

  • corporate governance improvement;
  • energy saving;
  • environmental impact reduction.

In the medium term, the main contribution to reducing the risks of negative climate change and minimising environmental pollution is made in the following areas:

  • decreasing the specific electricity consumption from oil and petroleum products pumping by 0.5% per year in 2019-2024 as a result of energy saving measures,
  • reducing the negative impact of operational processes on the atmospheric air with the planned annual reduction of specific emissions by 1% in 2019-2020 and by 0.7% in 2021 as a result of a set of technical measures,
  • completely excluding discharge of polluted water into surface water bodies by 2020 in the course of implementing a set of water protection measures.

As part of the work on improving corporate governance and information disclosure in the area of sustainable development, the following measures were implemented in 2019:

  • The number of independent members on the Strategy, Investments and Innovations Committee under the Board of Directors was increased from 1 to 2;
  • On 20 September 2019, the Board of Directors of Transneft approved the Corporate Governance Code developed in accordance with the Corporate Governance Code recommended by the Bank of Russia. The document is published on the Company’s website in Russian and English;
  • In 2019, the Anti-Corruption Policy of Transneft and the Code of Ethics and Conduct for Employees of Transneft and Transneft subsidiaries were published on the Company’s website;
  • A dialogue on sustainable development was organised between the Company’s management, as well as the Investor Relations Division, and representatives of the investment community. Key trends in this area and investors’ proposals to improve information disclosure were discussed with Transneft representatives, including during a series of meetings in continental Europe with participation of an independent member of the Board of Directors;
  • Presentation materials on sustainable development were published as part of a presentation for investors on the Company’s website.
A dialogue was initiated with agencies specialising in analysis of companies’ sustainable development activities. Before 2019, no work with such agencies had been performed. In the reporting year, Transneft Group’s activities were analysed in detail by the largest and most well-known environmental, social and corporate governance agencies (ESG agencies).
ESG RATING TRANSNEFT
ESG RATING TRANSNEFT

Transneft is actively communicating with ESG agencies, including the following issues:

  • disclosure of ESG indicators, answers to analysts’ questions;
  • discussion of methods for calculation of indicators;
  • analysis and comments on agency publications;
  • comments for agencies on the events covered by the media.

This work resulted in two ESG agencies (Sustainalytics and RA Expert) raising the ratings of Transneft in 2019. In addition, another ESG agency (ISS) upgraded Transneft’s rating in January 2020.

The Company plans to provide and disclose information to ESG agencies considering Russia’s current regulation on disclosure of non-financial indicators against the backdrop of growing regulatory attention to disclosure of information on sustainable development issues.

There are plans to outline the Company’s stance and disclose a list of existing measures and plans that contribute to combating climate change, as well as to further improve disclosure of information on sustainable development.

The Company plans to inform the investment community and interested users in detail on the results of its work in the field of sustainable development, and to analyse the proposals received following the discussion of these issues with representatives of the investment community and stakeholders.

In the field of corporate governance, an external audit of the Board of Directors is planned for 2020.