Sberbank of Russia (SBER) Earnings Call Transcript & Summary

Hi, everyone. Hi to all of the investors and shareholders. Thank you for joining to us today. We are having an unusual event today at the Investor Day, is going to discuss the ESG transformation in Sber. This topic is becoming more and more relevant, and we decided to have a dedicated event for this ESG topic. We have a very -- interesting speakers, the ambassador of ESG transformation. The First Deputy Chairman of the Executive Board, Alexander Vedyakhin, it will be -- his presentation will be followed by the CRO, Dzhangir Dzhangirov, who is going to talk about the integration of our ESG risks and our credit policy. After that, Tatiana Zavyalova, the Senior Vice President, the Head of the [ Directional ] ESG Transformation, is going to talk about the participation of Sber's global initiatives and the structure of the management of ESG transformation. And Stanislav Kuznetsov, Deputy Chairman of the Board, is going to talk about such important ESG areas such as cybersecurity and our own impact. Our presentation will take around 1 hour, followed by the live interactive Q&A session. You can ask questions in a live mode in a broadcast mode using the special features on our website. This is a disclaimer. Please read that. It is -- it can be found on the second slide of our presentation. Another logistical detail, our presentation and our Q&A is going to be recorded live today on the November 29, 2021, and the recording will be available on our website. Hope you will enjoy that. First Deputy Chairman of the Board, Alexander Vedyakhin, please, the first speaker.

Thank you, Nastya. Hi, colleagues. Welcome to ESG Deep Dive. Now Nastya said that I'm an embassador. No, everyone is embassador. All who is going to make the presentation today are ambassadors. And actually, everyone is our ESG ambassadors. ESG transformation is of critical importance for Sber. If I can have the clicker, please? Yes. We have thought for quite a while in terms of the reasons of ESG transformation. ESG transformation spans across the main group of stakeholders Sber has. First of all, we're talking about the customers, retail as well as corporate. Retail customers, especially the young generation wants to be green. They want to be friendly environment-wise, and they do value these products. Corporate customers, we're going to talk about that in detail, have to reshuffle all of their businesses and operations to -- and make sure it is in line with the green requirements. And we are a partner who helps our customers. Now the employees of the bank, we think that we get the best people in the market, but to make sure that they work efficiently and unlock their potential, we have to make sure that their values concur with ours. And the values of the younger generation today, obviously, are in line with ESG and sustainable development goals. This is something that is supported by them. There are thousands of volunteering initiatives in Sber that we support. And it is great and, obviously, everything related to governance, that's huge stream. Communication-wise, there, we share our expertise and skills. And I hope that our colleagues working in authority bodies tap into that potential. So all of the stakeholders, and I hope shareholders, are interested in that. And we're moving ahead. Now first of all, I would like to say that we have started this transformation in our hands. We thought how to make it properly, how to do it better. And the main documents and one of these documents that reflects the main idea how it's going to happen, it's all the ESG policy and our priorities. We have 8 priorities, the development of the climate risk management, the minimization of the climatic impact, supporting welfare and environmental protection, green lending and creation of the good conditions for work, exploring of human potential, ensuring equal access to products and services, support of the social responsibility and improvement of the corporate governance practices. The -- when I talk about ESG, we talk about the goals. There are 17 sustainable development goals. 13 of them are relevant for Sber. And we're going to talk about all of them -- many of them. I'm going to talk about #13, fighting with climate change. I do hope that this should not make you feeling superstitious. Now the climatic strategy discusses this work. It has been approved by the Executive Board. We have looked at Scope 1 and Scope 3. You can see that the Sberbank has for Scope 1, we have 111,000 tons of CO2 equivalent. As for subsidiaries, it's 11,500 tons. We're going down in terms of Scope 1. It's 478,000 tons of CO2 equivalent. We're going down compared with 2019. Subsidiary banks and companies, 84,000 tons of CO2 equivalent. So overall -- yes, actually Scope 3, many have been asking this question. We are calculating this still. And to calculate it properly, we need to include the carbon pressure and impact of our entire portfolio. This is a huge task that depends not only on us, but all our clients who actually also calculate those metrics. But unfortunately, for now, we do not have a lot of customers who were able to calculate that. But I hope that in 2020, the situation will improve dramatically and we will be able to calculate Scope 3 and, together with customers, we would be able to understand how to drive it down. But anyway, we're moving in line with the goals that the President of Russian Federation set for us. He said that by 2060, Russia should become carbon-neutral. A bit more about Scope 1. You can see that our CO2 equivalent emissions is 50%-50%. 50% is the emission from the fuel consumption, the cars, the vehicles and emissions from on-site fuel combustion. Stanislav Kuznetsov will talk about the measures of how we're going to address that. Well, we're going to buy more EVs, green energy and to offset the emissions that we would not be able to decrease. And as for Scope 1 and Scope 2, and it's very important in terms of our operations activity, is we're committed to be carbon-neutral by 2030. We were the first bank, one of the first Russian companies that publicly committed to achieve carbon neutrality for operations in such a short period of time. But -- I mean we are going down. So the dynamics is pretty good. Now this slide shows the benchmark for Scope 1. You see that on the whole, we are in the middle, actually moving closer to leaders. But -- I mean that's for you to decide. But we are, more or less, less than 10 CO2 emission-intense companies. I mean, obviously, we're not an oil and gas company. We do not have these tasks that Yandex and Amazon are trying to address. But you can see this, these are the figures as is, and we're trying to compare ourselves with other banks as well. Now how are we going to achieve net 0 by the end of 2030? Well, everything is on the slide. I'll reiterate, we're decreasing the fuel that is consumed by cars. We're going to purchase more green energy, and we're going to offset the things that we were not able to decrease, the emissions that we're not able to decrease. The blue is the compensation, the offset. And the yellow one is how we're going to decrease our emissions. Now Scope 2, the emissions from the heat, purchased heat and purchased electricity, the figures are on the slide as well. I don't know if I need to comment on them. Now the comparative analysis of Scope 2 greenhouse gas emissions, we have compared that, and we are somewhere in the middle among banks and nonbanks as well. We have good starting stance, but obviously, we need to decrease our carbon intensity. This is what we need to do. Our goal is to move to the far left corner, somewhere that is near 0, obviously, including the offset. Now using the green energy and offsetting the emissions that we're not able to decrease. Same policy here. As for Scope 3, we're using the GHG Protocol, Greenhouse Gas Protocol. We are using this methodology. Scope 3 contains 30 categories. It is a complex topic, methodologically. And again, we have been talking with customers in terms of how do you calculate all that. And the most important thing is what do you do with that after you do all these calculations. And after this calculation, we need to make action plan together with our customers to drive down the emissions. And we plan to give the discounted loans to some of our customers for such a modernization. Now Scope 3, obviously, for us, that's the credit portfolio we're talking about. How do the industries look like? This is a very indicative slide. It is made based on the average statistical data. They report better. So some report better. Some positions are questionable. But anyway, we are going to work on that. To put it into perspective, around 100 companies provide these data, so we cannot really make a representative selection and sample. Obviously in 2022, the picture will change because the customers will be more open. And those who are going to disclose this information will ensure more transparency. The financing, the responsible financing of green lending, more than RUB 75 billion in loans. Our goal is RUB 200 billion. I think that 2021 was the start for this effort. The customers as well as us, we're assessing the situation, and it is obvious that customers, having understood that they need to act, they do engage in large investment projects. And the investment projects take time. Next year, we are going to see the first discussion on the credit committees of the big investment projects. We are working also in our Far Eastern project together with the government of Russia, the Far Eastern Sakhalin project and Sakhalin region, Far Eastern region government as well. We have the pool of green projects. And only Sakhalin will give a great push for the green lending to develop. Apart from Sakhalin, obviously, there are a lot of requests from the largest companies. We think that this market can grow to up to RUB 3 trillion. We think that in 2022, 2023, the green lending will skyrocket. As for the green financing, it's not only loans, of course, we're talking about the responsible financing on debt instrument market. We participated in every green bond placement, green bond issue. This is a very young market. You can see the figures that is going to grow. We have issued our own bonds, RUB 25 billion. The rate was 8.8%. We have the highest level of meeting ICMA requirements. More than 7,500 investors, a lot of retail customers purchased these bonds. And the money that we have collected are going to be sent to -- for the green loans for building 8 solar stations in Russia. Our program for green bonds is around RUB 250 billion. So this is just a start to fill the water, so to speak. But I would like to say that, that was a great experience. It was very exciting. The instrument is fantastic. And based on these modernizations, we will be able to drive down the emissions by 80,000 tons of CO2 equivalent, which is pretty good. Sber is actively developing technologies. And one of the technologies that we are heavily investing in right now is blockchain. And based on our blockchain -- no sound. Yes. sorry, some technical problems. Sber is actively development technologies. And one of the technologies that we heavily invested in is blockchain. Based on our platform, we have 40% of certificates that are issued there. And we're talking about the certificates that confirm that the energy was produced by renewables. There's 629,000 certificates that were sold in 2021, and our largest clients are using the certificates. The potential is pretty promising here. We are going to promote that. We have connected to the European Energy Exchange and Intercontinental Exchange, ICA (sic) [ ICE ]. These are the 2 largest exchanges. And with ICA (sic) [ ICE ], we have made a pilot on carbon unit trading. Now our customers are one of our stakeholders. We have seen and analyzed the customers, what will be the characteristics that would describe an ESG customer. And we can see that already now, 7.6 million of our customers meet the ESG criteria. We engage and involve them. We think that in 2022, thanks to all these efforts, it will be around 15 million. And hopefully, by 2023, 23 million customers will be ESG customers, and this is really great. And it really inspires us because we help people to be better, to help others and to care about nature. Now another thing about retail business, [ 24 million ] customers, we analyze their carbon footprint in Sberbank Online. We're going to develop that green mortgage. By the end of the year, the government of Russia is planning to confirm the green mortgage instruments. We are now actively working with the regulators. So it's still underway. But as it is going to be put in effect, Sber surely will be one of the first banks to give green mortgage. Now working with ESG with retail customers is obviously not on the environmental protection. We ensure inclusive environment. We have 29,000 self-service terminals for visually impaired clients. Our Sberbank Online is fully made for visually impaired customers as well. We have recently had this meeting with such customers, and they showed how they use Sberbank Online. I'm talking about customers with complete blindness. And this is truly heartwarming, I have to admit. There are right around 7 million foreigners in Russia, and 4 million foreign clients are Sber clients. We have translated our application, our ATMs into more than 10 foreign languages. And this is also another step towards inclusivity, towards making it comfortable for people to live in Russia, if, for example, they are here for work. Sber has been recognized with a number of awards in this area. And the biggest awards, the biggest prize for us is the happiness of our customers and seeing how we have been helpful to them. Wealth management and ESG. Here, ESG is an important aspect for our asset funds and investment strategies. We have been undertaking a lot of training efforts on our platform, which is called SberClever. This is financial education and investment education. It's very important to help people avoid financial mistakes. And we are trying to actively combat mis-sale practices, and we've been trying to increase people's financial literacy. And we've been receiving a lot of positive feedback. For advanced investors, by the way, we have entered into this agreement where we issued the first investment instrument, investment products, carbon emissions allowance futures factored in. The securities have been growing pretty strongly, and we've seen a lot of demand. And I think we might issue more instruments to this kind. Sber, of course, is more than a bank. This is an ecosystem of Sber. We have a lot of ESG initiatives in Sber ecosystem companies. Here, you can see just some of the examples. SBER EAPTEKA, 2GIS, SberMarket, Samokat, Citymobil, Citydrive, Soyuzmultfilm. Regarding 2GIS, by the way, there is waste separation. But our family -- at our condominium, we haven't had this waste separation capabilities for a long time. And at a certain point, I was having this problem with where do I get my plastic waste. We talked about it with 2GIS and, now in Moscow, you can see on the map where you can take your batteries and plastic waste and paper waste for proper waste treatment or waste separation. It sounds like a very small thing, but these small things will come together to make up a bigger picture that facilitates our progress. Thank you very much. With this, I'd like to give the floor to Dzhangir Dzhangirov. He will talk about ESG risk management in lending.

Thank you very much. Good afternoon. When you have to talk about ESG risks, the first thing I think about is corporate lending. But at Sber, we are committed to integrated approach to risk management, which is why this year, at the beginning of this year, we did this exercise to identify ESG components in each of our material risk types [indiscernible]. This is our risk map. And in green, we've highlighted the risks that we've identified as risks with an ESG component. These are in our focus of attention, strategic risk, model risk, reputational risk, regulatory risk. And also in yellow, we identified the risks -- the ESG risks that we will be working on very closely next year. So this exercise was clearly very useful. Today, I will mostly focus on corporate lending. And I'd like to start with the corporate credit risks. We have a very extensive front line here, the ESG components in the portfolio risks and the ESG components at the level of individual customers, the ESG components at the level of individual transactions as well. We have talked about some of these initiatives at previous meetings with investors, and I'd like to update you on some of them. This year -- in the middle of this year, we launched the ESG expert assessment for deals and transactions within the risks block and the lending divisions. In all of these things, we have specialists with environmental expertise, not just the ability to correctly read reports, but the skills to assess environmental credit risks and how they will impact the risk profile in general. We also started working on our own model for assessing physical risks, risks of fire or flood, et cetera. And we will be incorporating these models in our risk -- credit risk assessment models. I'd like to talk a little more about some specific risks and some specific issues such as the ESG scoring and the ESG questionnaire. We have put together our ESG questionnaire consisting of 35 questions covering all the ESG components and aspects, 35 questions. So this is a pretty short questionnaire. Of course, we could have made it longer, not 35, but 135. But our goal with this was to make sure that not just our major customers, but also our midsized and smaller customers could fill out this questionnaire and didn't have to spend too much time filling it out. So this is the questionnaire, all 35 questions. We've sent it to 2,000 customers and the response rate was 3/4, 1,500 responses, 1,200 validated. So we validated the responses ourselves. And we got 1,200 completed validated questionnaire. These are the first results of the ESG scoring. This model is still in development, and we plan to finalize it by the end of the year. We'll have it validated by the end of the year. These results show that our biggest -- our major customers, in bright green, they have the highest ratings. Our large customers, saladish green, they have the slightly lower ratings. And our midsized customers, smaller customers in light green, they have worse ratings as compared with the first 2 groups. This is completely understandable. This means that investments in ESG is a lot of investment in expert assessment, in evaluation, in ESG practices and a lot of other things. And for us, this means that our major customers will have to -- speaking of assessing the Scope 3 impacts, they will have to work with their counterparties, with their suppliers, with their customers, their buyers to help them improve their own ESG practices at their own companies. This is the plan. Next year, we plan to have this ESG scoring be a part of our lending policy. Speaking of ESG risks, another important thing. In the corporate segment, of course, we can't help but talk about the fact that ESG risks have -- are very industry specific. They have a lot of industry-based specificity. We have been in tight contact with a lot of our customers. We've had 6 industry-specific risk summits on industries where the exposure to ESG risks is the biggest. And my thanks go to all the customers that participated in the summit, not just the customers, but also public authorities because these summits turned out to be full of insights, and there were a lot of -- they were very valuable to us and I hope to all the participants of the seminars. Based on these summits and also based on our own expertise and its development, we have been improving this year our toolkit, the toolkit for assessment of industry-specific ESG risks. In particular, we divided our portfolio into 180 sub-areas. And in each of these subsegments, we colored the portfolio in green, yellow or red depending on the customer and industry. And now we have a better idea on the level of exposure to ESG risks across the portfolio. In addition to that, we also drew up ESG handbooks for each of these industries so that the participants of the lending process, the underwriters, the risk team so that they knew better what they are dealing with. The industry-specific expertise is something we are going to keep investing going forward. In lending, ESG is, of course, more than just the corporate segment, but there's also the risk segments that we're working very hard on. We have several basic principles that we're guided by. The 2 main principles are responsible lending and inclusive lending. As part of the responsible lending components, our main goal is to ensure that our customers, at no stage of their loan, had no significant problems with the debt service, which is why we evaluate payment to income. And with each transaction, with each customer, we [ complete ] this assessment from the moment of origination all throughout the life cycle of the loan. And we monitor these metrics in addition to developing products, which help customers who find themselves in a difficult situation to refinance pretty easily their liabilities. As part of inclusive lending, we have been developing products, which for one reason or another were unavailable to some of our customers. In particular, this year, we focused on the younger audience and on foreigners who are our customers. Here, the volume is not very big. But the important thing is that the lending products, credit cards and consumer loans, which previously weren't available to some of our customers, they are now available to them. And we will be expanding the product range for these customers in the future. And the last thing I wanted to mention is stress test, the stress testing of ESG risks and specifically the e-component, environmental, ecological risks, the stress testing of our entire loan portfolio. We focus a lot on this particular issue. At the end of last year, we did 2 stress tests, and we've had several more this year already. We used as input data sustainable development scenarios and transitional risk issues, also net 0 2050. We have enriched these scenarios with different European green deal metrics. And by now, we have a pretty clear understanding of how prices will behave and volumes will behave in different industries and how consequently our portfolio will feel. Also this year, we've started developing a stress test for physical risks. This stress test model is in development, and we expect this stress test to be made available at the beginning of next year for analysis. I'll be happy to take any of the questions about the ESG risks during the Q&A session. And now the floor is to Tatiana Zavyalova, who coordinates all his related activities in Sber Group, and will tell you more about these activities.

Thank you very much, Dzhangir. Hello, everyone. I am very happy to take over after Alexander and Dzhangir. And after the detailed presentation of the first year results of ESG strategy implementation at Sber, I'm sure this will make my job of telling you what we did this year much easier. I'd like to begin by talking about how we have transformed the Sber governance system to make sure that the ESG transformation kicks off in a dynamic fashion and to make sure we started achieving the first results. The management system is being transformed across the board. Sber is highly interested in ESG, which means transformation of management across all verticals and horizontals. 2 main vectors for the transformation, 2 main development vectors. The first one is the vertical one, top-down. And as part of this effort, as part of this vector, we'll be transforming the entire management system at Sber. And another vector is bottom-up. This is where we change the corporate culture by introducing new practices, new values, new habits. I'll get back to that in a minute. So regarding the transformation of the management system at Sber, what we have accomplished by introducing ESG vectors in it? The first strategic level is appointing officers responsible for the ESG function at the level of the Supervisory Board and the Executive Board. That is done. Next level, we needed a driver, some factor that would be promoting across our big structure and its very different areas and functions, a driver for promoting projects and initiatives on ESG and sustainable development. The ESG Committee became such a driver. The ESG Committee is a working tool, which gathered together members of the Board, had functional blocks, shares of regional banks. And altogether as a group, we review, consider, coordinate, approve, launch and then monitor the results of our ESG and sustainability programs at Sber. Next level after that, the mythological center, coordination, planning and oversight of our ESG activities. The ESG Directorate became such center. The ESG Directorate was finalized this year. Next level of the management system transformation is appointing responsible officers at the level of functional business blocks, regional banks and our ecosystem companies. This is also done. We have appointed the responsible parties, responsible executives at different levels, and they have a clear area of responsibilities. Next problem that we tackled, organizing our ESG management system transformation is the drawing up of or updating of our main standards and policies and internal documents. Three key internal documents, Alexander and Dzhangir handled that. I will not talk about them in detail. Stanislav Kuznetsov will mention another one in his presentation. I'd like to say a few words about the following. This year, we have launched and we have introduced the policy of corporate governance principles and standards at Sber Group, a very important document, which has a separate section on the procedure for managing the ESG function and for introducing the ESG function in our ecosystem companies. The ESG policy that Alexander mentioned, in order for it to be implemented in the scope that we have defined, in order to do that, we needed a document, a functional document, which would make this practicable and which would allow us to achieve concrete results. What did we do to do that? Together with competent units and blocks, we analyzed our existing current projects. We identified the gaps, compared with our ESG policy goals. And we put together a step-by-step plan where we determined our ESG transformation objectives by 2023. By doing that, we created an internal system for planning and monitoring of our reports, and we formulated in the form of a plan. The plan includes 122 programs decomposed into 340 events. Each one of these programs has its own responsible officer. It is based on a profile block or original bank or subdivision. We understand the time frame for each of the programs. We understand the target results and how we're going to measure these target results. Each program has financial and human resources. This slide shows the example of this decomposition. I'm not going to talk about that in detail. I would just like to say that the logic is identical in terms of building and detail in all 123 programs -- 122 programs, sorry. This is a living organism, this action plan that we're going to review constantly up until we achieve the business strategic goals in 2023. The important thing is that this year, we did not only put up this plan, but we have launched 98 programs out of 122 of them. Now I would like to touch upon the fact that any transformation especially ESG transformation is about people, our employees. Sber has traditionally focused on social issues and understood and appreciated that the social issues are from itself. We started with ourselves. And this year, we have started to commit even more to that end. Now what were the results? Sber has traditionally been open for all employees. This is the company that is open for everyone. And this year, we have been actively developing the additional possibilities and capabilities for employees that need special inclusion. For that, we launched a special platform to find and search for inclusive employees. And within Sber, we launched a special training course for managers who hire people with special needs. And they -- this course helps them understand to form a good and comfortable inclusive environment. This year, the number of inclusive employees grew by 43% compared to previous years. Currently, there are 1,500 inclusive employees in Sber. They mostly work in contact centers and corporate solution centers. The next achievement which I take pride in announcing is about women because Sber this year can be called one of the most attractive companies for professional development of women. Now how were we able to achieve this result? Well, first of all, the share of women and the management positions in Sber is more than 30%. For Russia, that is pretty high. We have also formed and created special conditions for mothers, future mothers and mothers with born children. We received a special award here and Sber was awarded the first place, the best place -- working place for mothers. Now pregnant women can work from home. If the current position does not allow to do that, we suggest they do something else in our company so that they can work remotely, and this is how we protect the health of the mother and the child. Secondly, we -- for women who are on maternity leaves, we suggest them to undergo special training courses so that they feel the connection with the company and they do not lose their skills. And the third step, and the third measure is we give an opportunity for mothers on maternity leaves to work on an ad hoc basis when it's convenient for them. Now we understand that the world changes. So flexible formats is another topic, and our employees can select what formats they would like to engage in with the traditional format working in the office meeting is available to everyone. Also our employees can select another option. I mean, obviously, that goes for only sub categories of employees, but they can work remotely or in a hybrid manner. This year, we were also able to provide an opportunity to our employees to work remotely from another region of Russia for 3 months a year. This is important for Sber employees. Sber is represented in every corner of our country. And Sber employees move to other regions to meet their -- to do their job duties. And this option helps to be closer to your families. Our employees can also take up to 1 year -- and they will be able to save their position. The reasons might be improving the health or resolving some personal issues. We have traditionally been focusing on volunteering work. Alexander has mentioned that. And this year, the number of volunteers increased 2.5 fold. We're also with a special emphasis on creating the environment for unlocking the potential of our employees. The job is not only when you give to the company. The company should also give the opportunities for the employees to grow and develop. And after that, the employees will be able to repay back with their new skills and maybe they will be able to -- they will be inspired for some new streams and projects. And these are the opportunities that we provide for our employees. As a result, our CSI was 78%. It increased by 3 percentage points, if I'm not mistaken. When we talk about working in Sber and the implementation of ESG practices and ESG transformation, we also remember about the fact that Sber is a part of a huge country. And the main job of Sber and Sber team is the job done in the regions. Our ESG transformation is actively engaged in our regional banks for the implementation of specific projects, our regional projects are included in federal level projects. They also build their own cooperation with -- in the regions with the local authorities and communities. On the slide, you can see some of the examples. I'm going to talk about some streams that have been traditionally developed in the regional banks. Obviously, our regional banks are focusing specifically on vulnerable people. And we also work with the challenges that seniors face or people in the families with us one or several people missing from the family and the incomplete families and the Siberian bank, for instance, the Cart of Good. Every week, our volunteers deliver the groceries, according to a list of groceries to the vulnerable categories of the population whose situation exacerbated due to the pandemic. We are also working on ensuring inclusivity and our environment and Podolsky Bank had a great initiative. They for instance, organizing the inclusive ball for young people. More than young people from 16 cities of Russia came there this year, and it is not the first one, by the way. And there, they can make acquaintances and they can find jobs as well. Another traditional project that we have is financial literacies including the orphanages, 30 cities of Russia have joined this program. In 2022, another 11 cities are going to join that as well. And obviously there's a lot of educational and upbringing function that we can spread across the regions. Our employees of regional banks come to these children and orphanages who live without their parents, and they talk about the new possibilities in finance and how to manage your finances properly. And they also talk about the educational opportunities. And obviously, the charity program, which is called SberTogether, where we provide an opportunity for everyone to donate to a list of trusted funds. Currently, this program spans across 170 funds that have been vetted. Now Alexander started today with the following words. He said that every employee of Sber is an ambassador of ESG agenda. Not only Alexander is the ambassador here, and that is absolutely true. We are striving to achieve that. But moreover, as part of our business strategy, we have put an even more ambitious task. We said that Sber as a whole must become an ambassador of ESG transformation in Russia, and we are working a lot to that end. We are spanning across the local community and the society and as a whole in the business community. We are also raising the awareness among the authorities, including local authorities. And I would like to give a few examples of our largest projects that we launched this year. I would like to start with the fact that more than 50 largest summits and workshops and the forums were organized with Sber as a participant and Sber provided some new insightful information about ESG and ESG transformation. This year, Sber has launched a larger audience project, it's called Save the Planet. It's -- this initiative will unite all the initiatives for communities. Another important milestone event. This AI Journey has a huge conference that discusses AI challenges that is organized in Russia, but has an international audience. And it was for the first time when the first day was only discussing ESG issues and more than 9 million people viewed the videos there. Another activity of Sber is that it was for the first time that we have become an active participants of COP26. Not only we participated there, we organized a special day about financial -- responsible financing and about the outlook and the challenges of green financing in Russia. A few words about the global initiatives that Sber joined to and our reporting. Now as for the global initiatives, 2 of them are on the slide, we talked about that at the start of the year. As for the reporting, we're working with it differently right now. And this year, GRI reports and SASB reports become a norm. And from the next year, we plan to disclose the information in line with the TCFD reports and standards. For us, joining the global initiatives is not just the opportunity to use the best benchmarks in this area, but it's also an opportunity to enter the club of companies that think the same and also committed to sustainable development businesses. And in the end of my presentation, I want to show you the results of our work. This is the ranking that I'm showing for the first time. These are the ranking agencies that we have here. 2021 showed great results here. We improved our ratings in 3 ratings, it is related to our climatic activities, risk management activities and social activities as well as in governance activities. We expect our rankings to be reviewed for another 2 positions. We have big -- maybe not that big expectations in terms of CDP. It is for the first time that we have appreciated our approaches and opened our approaches as part of our climate agenda. And we reviewed our climate risk management and climate development. And that is it for me. It is my pleasure now to give the floor to Stanislav Kuznetsov. Stanislav, you have the floor.

Thank you, Tatiana. Good evening, ladies and gentlemen. It is a great honor for me to make a presentation here. I know we have great experts connected to the call. I mostly manage internal life of the bank, administrative management, document flow, construction, supply, operations, maintenance, cash desks, cash collection and security, including complex end-to-end security that includes physical security as well. Internal security and cybersecurity. And I'm going to kick off with cybersecurity. Managing cybersecurity risks and just managing cybersecurity is one of the key factors of successful ESG policy of any large company. At least that is support -- this claim is supported by 70% of our active investors. Please look at the slide and as you go through all these figures, I would like to say that around 5 years ago, we and the level of the Executive Board understood that we need to drastically reconsider our attitude to cyber risks and drastically review cybersecurity management in our corporation. Back then, we went through an audit. And the IBM gave us a bit more than 2 points. This is 4.2 now. But back then, it was a bit more than 2. That was honest, and we decided to look into the global practices, best practices. We have been to the most advanced cybersecurity centers across the world with the IBM team, and we have decided to create our own cybersecurity function in our credit institution. As a result, a big project was underway. And today, we're also addressing the resilience of our cyber systems through the lens of risk -- cybersecurity risk management. Currently, our cybersecurity maturity rating is 4.2. And you know that the average Fortune 500 indicator is 4.0. So we are a bit ahead. In cybersecurity, we mostly focus on 2 big streams, the protection of our own core systems, the protection of the bank. And we have a separate stream, which is the protection of our customers. During that time, we have created a number of solutions. Our platform, for instance, Threat Intelligence platform, was created by our engineers. The platform can analyze the myriad of cyber risks, and it can automatically manage the protection of our systems by ensuring they have the protection solutions that are needed. For instance, if in some country that is far from Russia, like in Brazil, if there is some small virus in a small town in Brazil, infected with -- that is used to infect an ATM, our system should know about that and the protection should been installed in our systems automatically. Today, this platform can already analyze a lot of different cyber risks. When we created our security operations center, which is rightfully so one of the best in the world, we took pride in the fact that it can analyze up to 200 to 300 million operations per day. 3 years later, our SoC, our security operations center can analyze 150 billion risk events per day. This, I think, is an unprecedented result for any security operations center in the world. Second stream work is protecting our customers from fraud, not many credit institutions do this, but we do. We focus on it a lot, the fraud basic points indicator essentially, for payment systems, for example, Visa and Mastercard stands at roughly 6.5. So $0.065 of acceptable losses, "$0.065 per $100." Our metric in this is $0.13 per $100. So this, this is evidence of our efficiency. As for the rest, we have a lot of information about this, in particular, the multiple awards that we have received over the years. The efficiency of our fraud monitoring system is 99%. You may ask, is that possible, 99% efficiency. When we were at 87%, we can't even dream about 99% efficiency 3 years ago. So even when people make mistakes and even if they accidentally coerced into dangerous situation, we now know how to prevent that and how to warn people about fraudsters. This is a whole program. We -- basically, we engaged with the biggest mobile network operators, 5 biggest Russian operators. We integrated them into our fraud monitoring system. And now we can prevent conversations of our customers with fraudsters and we know exactly our fraudsters, of which we know many. Cybersecurity services that, of course, is done for protecting our customers, for enabling our customers to benefit from these services and to increase their own cyber literacy, managing their own cyber risks. If you go to our Sberbank online app, you will see at the very top, the cybersecurity section. In this section, you can check all your incoming calls. And today, for example, a customer receives a fraudulent call. There will be this red circle on your phone screen, alerting you that this might be a fraudulent call. So this is one of the things that we do to warn people about such spamming calls from people who engage in social engineering and other types of frauds. We now also know how to check your e-mails. For data leak, we can check any customer resources, and we can warn our customers about exposed personal data on a certain resource. We can advise them about the plan of action, about how they can handle the situation. The service is so user-friendly and convenient that 30 -- almost 30 million people, 30 million customers use the cybersecurity functionality in our app. Moving on. We do this to improve cyber literacy. The increase of cyber literacy is, of course, has a lot to do with the personal data protection. And in connection with that, we have decided to be really open about what we do. We speak a lot about what we do and how we ensure cybersecurity. We talk a lot about our cybersecurity principles and about how you can manage cybersecurity of your accounts or your account in the mobile app. We do this together with our top management. We do this at schools, at universities. We also hold international contests, olympiads in cyber literacy. This is a very big area of activity for us. Global engagements. We have global cooperation with a lot of institutions, with a lot of partners, and this never stopped even despite some freezing unfortunate events in geopolitical relations, our subsidiary by zone, corporates with Interpol. We are involved in a lot of investigations, cybersecurity-related investigations. For example, one of the top managers of Interpol is coming to the bank tomorrow, and we will be discussing cybersecurity-related engagement. Of course, another big forum that I'd like to mention is Cyber Polygon. We have been holding it annually. This year, the Cyber Polygon Forum was attended by slightly more than 7 million people, more than 7 million people in the audience. Can you imagine that? We can safely say that this forum garnered a lot of well-deserved attention. These are videos from the latest Cyber Polygon that we organized together with the Davos forum with Interpol with a lot of our partners from all across the globe with a lot of cybersecurity teams. Roughly 200 teams participated in the special training segment at the forum, protecting their resources trying to resist attacks and we can say by now that we are at a high degree of engagement and corporation in cybersecurity. Sberbank became 1 of the 6 founding fathers of the World Economic Forum Cybersecurity Center. This means that we are very actively represented in the cybersecurity center. We are actively involved in its activities. We have our own agenda there. We have been promoting together very actively the ideas of efficient cyber risk management. Another topic I'd like to touch upon. Perhaps this is not something that is widely discussed, but we were the first in Russia to say loud and clear that children are exposed to a lot of risks and threats in cybersecurity. There have been different reasons for doing that. We've had employees approach us asking about how they can help their children, children who are glued to their devices, browsing, suspicious resources. They become more aggressive with their parents. One of the biggest reasons was this high-profile case, this tragic case where the daughter of one of our employees committed suicide. She jumped from the roof of a block of flats. She did that -- that was instigated by cyber criminals, and we decided to take action to help find these people. That was a very difficult case. The investigation took more than a month. And together with the law enforcement agencies, we managed to identify who did that and we found those people. They were apprehended and over the time of investigation, we managed to prevent at least 2 similar cases in St. Petersburg and in Krasnodar law enforcement intervened in time to prevent this tragic development. So working with children with school peoples, with students. This is one of the main areas of our attention and our work. And we love sharing with children the basic principles that can help them stay safe online. We tell them about how to protect themselves from phishing, what they should do and what they should not do. Improving cyber literacy among our customers here, I think we have made a lot of progress in several areas. We are of course targeting elderly people very extensively, and we try to look at these issues from the perspective of our customers to understand what exactly we can do to help them and what they need to secure their accounts, their payments and transfers. We have been analyzing the situation very closely because it's the middle aged and the elderly that are the main target audience, so to speak, for fraudsters. We also talk about it on the Internet and on federal television. We have prepared videos, explanatory videos that talk about how to scan cyber risks, how to identify that you are dealing with a criminal, and the results speak for themselves. Since the beginning of this year, and this year was the year where we launched a special program to protect from phone fraud. We have reduced the number of complaints, which means we have reduced the number of customers that fell prey to such criminals, managed to at least half this number, and we keep going. The phone fraud in Russia has increased by roughly 5% since the beginning of the year, but at Sber, the results are completely the opposite. Our protection of our customers forced phone fraudsters to instead target customers of other banks. This is just a hypothesis of ours. And I really have that we'll be able to cooperate with other credit institutions to put an end finally to phone fraud. I'm sure this can be done, this should be done, and we have all the resources, all the expertise to do this. And a completely different stream, how we've been keeping our employees, our teams secure amid the pandemic. On the 5th of March 2020, we created the anti-COVID center. On March 11, the plan of preventive action was adopted, we decided to be proactive with this. And we decided to focus on 2 main areas. The first one is ensuring continuous of all our business processes, making sure there is no downtime in any of our key business processes. We wanted to make sure that our bank stayed consistently efficient and effective despite the pandemic, not stopping for even just a second. And the second area is protecting our teams, protecting our people, helping them and sometimes even saving their lives, saving the lives of those of our employees who were admitted to hospitals. There have been cases where we had to transport our employees from some regional clinic or regional hospital to a hospital in Moscow. We helped them get drugs, get medicine and transport them from remote regions. We try to do this in an efficient and timely fashion. The vaccination rates at the bank is 88% at the moment and factoring in those who have recovered with a high rate of antibodies. If we sum that up, we'll get 93%. And that is a very good result. Our program for managing these risks has been recognized by IPMA, and our application, which our anti-COVID center uses received a golden medal from IPMA. Our center is still running. It's still operational. Every morning, I myself and my colleagues in Moscow and in the regions, we get together to discuss the most pertinent issues, the latest developments. The distinguishing feature of our center is that we make decisions fast together, and we implement them fast. Responsible procurement. We certainly integrate into our procurement procedures, everything related to ESG and environmentally friendly technology. We specifically focused on this in our contracts, and we oversee whether our suppliers comply with these ESG principles. Waste management. 30% of waste is currently recycled. And this [ we did ] in just 18 months, is expected to exceed 40%. Of course, we want to reduce the amount of paper that we use in our processes as much as possible. And since 2019, we have been able to save approximately 2 billion sheets of paper, which equals 160,000 trees or rather 180,000 trees according to our estimates. As part of the Green Marathon, this is a brand of ours, a big program of ours. It includes sports activities, planting trees, a lot of interesting initiatives related to cleaning up our office premises and efficient consumption of power. This year, as part of the Green Marathon, we have additionally planted 180,000 trees. Why 180,000? I think you will guess yourselves because this year, we are celebrating 180 years of Sber. Efficient use of energy. Alexander talked about this. I will just briefly say that our branches have a system of remote energy control, which means we can remotely control the level of humidity or heat or water leakage. We can stop or prevent accidents, respond to deviations. The launch of this system resulted in minus 15% of our energy consumption expenses. Of course, we also employ green standards, green standards in construction, primarily of our data centers and our office buildings. Of course, we also use green energy sources. 9% of our infrastructure facilities are powered from energy -- from green sources. We do this in a purposeful manner. We were the first to open the first branch in Ulyanovsk that was fully powered by green sources and I'm happy to see our regional teams take over the initiative in Siberia, for example, in Barnaul at our administrative building that manages Sber in that region. They installed solar panels. Solar panels in Siberia in Barnaul, this installment managed to help them reduce the power consumption in that head branch in Barnaul by 50%. And in conclusion, you are looking at our current central head office of Sber at the -- in the left-hand picture. And the right-hand picture is where we are at the moment, where we are broadcasting from. This is the building of the new central head office we have started the migration. The building on the right is the new HQ of Sber, the new Sber home, which was, of course, built in accordance with the green BREEAM standards. And that standard awarded us the very good score. Thank you very much. I'd like to give the floor to the one who opened the session. First Deputy Chairman of the Executive Board of Sberbank Alexander Vedyakhin.

Thank you very much, Stanislav, a great presentation. Whenever there is an opportunity, I love listening to Stanislav's presentations. I started this meeting by saying that we are all ambassadors in each of our respective areas. I love how Stanislav is so enthusiastic about what he's working on, and he has very profound expertise on anti-fraud, on security operations center and many, many other things in cybersecurity. And now, the targets are goals. It is important not only to give you some beautiful pictures. But we should answer specific questions and put specific tasks. Sber is a huge machine that delivers on clear-cut KPIs. And on this slide, you can see what KPIs will be set for ESG. Some of them have already been set on the level of the Board. This is the green -- this is the blue figures, and top management team, Board minus 1, is represented by yellow figures. So we are working on Scope 1 and Scope 2 emissions. As for Scope 1, we'll go into -- reduce the emissions by 5%, therefore, Scope 2 by 15%. The responsible financing volume, RUB 500 billion. 100% of loans will be marked based on ESG criteria. This is what Dzhangir was talking about. The share of recycled waste 40%, the share of green energy and the overall consumption 30%. This is exactly what Stanislav was talking about. The share of digital sales to clients, 66%. Customers will be protected by 99% from fraud, 81% of the CSIF customers for individuals and CSIF corporate customers, 74%. As for employees, 75% of employee engagement index and 30% of employees will work in flexible formats. That's it, colleagues, presentation-wise. Before we move to the Q&A session... [Presentation]

Thank you, Gabor. First question about the development of e-commerce, Alexander?

Yes, Gabor. Thank you for your question. I would make a disclaimer. Lev Khasis Is responsible for e-comm. I will tell you the gist of it, maybe the colleagues from e-com will be able to add more information on that in the next session. Now what is e-comm? E-comm is logistics and working with merchants, and these are also the computations. As for logistics, we have seen how this process look like. We saw it on Friday. Actually, we analyzed it on Friday. We decreased the carbon footprint of logistics, thanks to actively optimizing the routes. Secondly, we will transition to low-carbon transport e-vehicles. Packaging, obviously, there's a lot of packaging in e-comm. And in logistics, we're going to use packaging through the recycle -- from recycled materials, and this is a separate stream of efforts of our e-comm. Another topic is working with merchants. There are 3 types of merchants. First are the largest ones, and all the largest Russian merchants have their own ESG agenda. And our task is to level up the expectations and to drive down the carbon footprint like that. Secondly, we're talking about average merchants. We'll have to attract them and to develop them. As for the small merchants, we will have to work with them separately, I guess, but we will have to work with them and to improve their ESG criteria as well. As for the compute, I think there will be more questions about that. It's important to say that AI algorithms that we use being under active optimization will make it to make sure that the compute is done on the edge, on the devices, not on the huge supercomputers. As for the optimization of ML, it gives great effect on CO2 emissions. So basically, these are going to be the -- our major efforts. And I am confident that we are going to decrease our CO2 for e-comm like that.

Thank you very much. The second question from Gabor was about our exposure, our credit portfolio, and its decrease related to Scope 3. I think that's the question for Dzhangir.

Yes, Gabor. Thank you very much for your question. ESG scoring is just one tool that we are going to use for the assessment of ESG risks in credit portfolio. Other instruments that we use include the assessment of the volume of the emissions and comparing the specific emissions with the industry benchmarks, including European benchmarks, a stress testing of cash flow and the inclusion of ESG covenants when we restructure the loan. So we're going to use a set of tools that are going to manage -- that are going to help us to manage and better control ESG risks in the portfolio. As for the specific goals, if we go back to scoring, we are going to roll this out across our credit process, and it's highly likely that on the first stage, we're going to give recommendations to the customers what they need to do to improve their ESG scoring. We're going to do that in an automatic mode. Secondly, it is likely that we make ESG scoring in terms of the pricing when we understand -- when we calculate the rates. And also, we're going to use ESG covenants and stress testing of the cash flow and all the other things I talked about.

Thank you. As for the Scope 3, when do you think we will be ready?

I think I will [indiscernible] in here. It's important not only for us to be ready, but it is important for customers to be ready as well. We will not do that without customers. These are the CO2 footprints of our customers from our portfolio. The largest customers start to calculate these rankings. So we will expect these results to be in 2022. Average business, I think it will be well into 2023. And as for the small and micro businesses, that will be in the late -- no earlier than 2024, 2025. But the first Scope 3 assessment might be seen in the end of 2023. So I'd like to add that the federal law on the reporting on greenhouse gases requires companies to make the information about emissions public. Yes. But in 2022, we'll see some first assessments. So I think that end of 2022, mid-'23, we'll be able to gather all the information. So I think that we'll be able to calculate it fully in 2023. Thank you very much.

Thank you very much, Gabor. Thank you for your questions. Andrzej Nowaczek from HSBC.

Thank you very much for this comprehensive presentation. I have 3 questions, please. First, on the legal framework in Russia. To what extent are you being held back by lack of supported legislation? And is there something around the corner, some new draft law perhaps, that could be progressive from the ESG perspective? But at the same time, could pose risk to your profitability on growth or both? That's my first question. And then on Scope 3, you just touched on it. And essentially, you said that it's up to your customers, right? You prepared the questioner, you've had a good response, you're doing this ESG scoring, but it's up to your customers, and I agree. So I just wanted to ask, what percent of your corporate clients disclose their GHG emissions? And what percent is already ESG-rated by external providers? And how this has been changing over time recently? And finally, on governance. You haven't talked much about that, but I'm just curious what you think your biggest governance challenges are.

Thank you, Alexander. Yes. Thank you very deep and detailed question indeed. Now as for the regulation that we have right now, this year, greenhouse gas law was adopted -- green taxonomy was adopted. It's very important that green economy was developed with our partners from [ VEB ] [indiscernible] bank. We were earlier to adopt our own green taxonomy. After that, the country level taxonomy was adopted. We are improving our own taxonomy as well. There is a small difference. But anyway, our Russian taxonomy does look like -- it's very similar to the international taxonomy in other countries. It's very important that the social taxonomy is being developed right now by the end of the year. It must be adopted. And this is an important part in terms of the ask. So as for EU, you understand the things. But as far ask, in finance, this area is quite opaque, but by the end of the year, it should be adopted. Or in the first quarter of 2022, I hope that the government will adopt it in the first quarter of 2022. Another important thing is what will be the measures that would incentivize the green projects. Currently, we are discussing with Central Bank. The fact that the loans that might be categorized as ESG loans should have the discount in terms of RWAs or in terms of the provisions. That means that the savings on the capital can be shared with the customers. Last week, we had a fantastic meeting for independent directors of large Russian corporations. That was an ESG meeting. And Sergey Shvetsov, he is the first Deputy Chair -- Governor of the Central Bank. He is responsible for ESG. And he made it very clear by saying that this regulation is to be expected. He didn't give any details, but we're looking forward to the consultation report that the Central Bank is going to publish. And after that, we will be able to discuss it in real terms. We do look forward to that because it will positively impact our financial results and the capital adequacy. We hope that in 2022, this issue is going to be addressed. The system of institutions on green financing has been formed. That includes the verifiers, the verifying organization. That's a very important story because, yes, obviously, you can give away the money for some loans, and then whether it's a green loan or not, well, you don't know. You never know. So you need green verifying organizations. You would need the requirements for them. You need the requirements for the green financing. So anyway, regulatory-wise, we are moving ahead very quickly, and it is great. Thank you very much.

We have a question from our digital users about energy efficiency of our data centers. Sber has a lot of -- how do you monitor the power consumption? And what is the carbon footprint of your IT capabilities? What is the footprint?

Thank you for the interest towards our data centers. Unfortunately, we don't have that many data centers. We only have 2 big data centers. 1 in Yuzhny Port built by -- built with our own resources. In 2012, it was recognized as the best data center in the world by its innovative nature and by its use of energy-efficient solutions. And the other data center is in Skolkovo. It's here in Moscow. Both data centers have been certified for LEED and they have Tier 3+ certification. As for the energy efficiency, this is one of our top priorities. And importantly, our engineers have developed a proprietary solution for using data above outside temperature, environmental temperature. We are located in a relatively cool region, and we use minimal amounts of power because we take this cool air from outside. And we know how to cool our racks, our server racks with this air. So the energy efficiency utilization is around 1.1%, 1.2% according to the international standards. And in this regard, we are planning to build our data centers -- our next data centers. We have pretty ambitious plans, but we are currently expanding our data center in Skolkovo. We're adding 2 powerful modules. And we're also building another big data center in Saratov region in the city of Balakovo in order to use energy in the region. We use cutting-edge technology in those data centers. We have our own competence. Our specialized -- specialists are certified by the Uptime Institute, and they develop proprietary solutions for our data centers. Thank you.

Just a quick comment. Stanislav talked in much detail about how it works engineering-wise. I will add a comment about algorithms. The AI algorithm and the super transformers that we use, this algorithm consumes a lot of energy, and it has a pretty significant CO2 footprint. We have opened a separate work stream at the AI Institute. It's called AI for ESG. This is basically a group of young researchers who are very passionate about reducing negative impact on the environment from AI use. And today, together with a number of educational institutions in Russia, they have been developing algorithms, which would allow us with no detriment to productivity to reduce the amount of computations that we need to achieve the same result. This is model distillation, and this helps reduce the amount of emissions by at least 10x.

Also in addition to that, a number of -- a share of computation will be migrating from data centers to separate devices, and we're also searching -- continuously searching for other solutions where we could ensure efficient decision making with minimal CO2 footprint.

Yes. Thank you very much. We are approaching it from all fronts. One solution is where you cool down more efficiently. Another solution is you make sure it heats up less. And our teams are currently working on developing servers, which would produce even less heating.

Next question, please, Goldman Sachs, Mikhail Butkov.

My first question is about this highly relevant topic of cybersecurity. You mentioned that at Sberbank, you have been focusing a lot on this. My question is how has Sber been collaborating with the Bank of Russia to prevent cybersecurity, to combat cyber crime -- to prevent cyber crime and to combat cyber crime at the bank? What is Sber doing as the biggest financial institution in Russia? And question number two, what are the criteria for working with the vendors? What are the ESG criteria for service providers at -- for Sber? And third question, you mentioned inclusive lending, specifically, increasing opportunities for young people, for foreigners. What are the current programs that you have for small- and medium-sized businesses? And should small- and medium-sized businesses comply with the 35 metrics -- 35 questions from your questionnaire?

Let's tackle this one by one. Stanislav, please.

Thank you for the questions. A very good question, very pertinent. About cybersecurity, we believe that we need to step up our efforts, and we have been approaching it from several angles. First, of course, is where we stay in a very efficient dialogue with the regulator to exchange information very quickly. We have this done under the umbrella of the FinFET, a subdivision of the Bank of Russia. The FinFET division has certain rules, particularly rules where we exchange information in real time about cyber risks. This enables us to promptly distribute this information across other credit institutions to help them manage those cyber risks as well. Are we satisfied at this point? Of course, there are areas for improvement because not all credit institutions these days are able to adopt this information and use it because of different stages of technological development. But still we targeting optimized and streamlined work with the regulator. Secondly, the association of banks. In Russia, this association is a recognized solid platform for identifying solutions to manage cyber risks across the entire banking system. The Russian Bank Association has created an Information Security Committee. I am leading this committee at the association. And every quarter, we get together with all our colleagues and we discuss the issues that are the most essential. And third is the digital economy program where the regulator, of course, plays a very prominent role. And we are also actively involved in this program, the digital economy program, because this is a national program that in both creation of centers of competence, one of such centers is the AI Competence Center. Mr. Vedyakhin is the Head of the Center. Another competence center on information security, I am the Head of Information Security Competence Center as part of this digital economy program. So once again, these are additional platforms where we can discuss how we can hedge cybersecurity risks more effectively. The fact that cyber crime, cyber criminals migrate from one organization to another, unfortunately, that is very much the case still, and we need to be on the same page. We need to be aligned to combat such crime effectively. We need a shared platform in order to resist cyber threats and cyber crime including in social engineering, which in Russia is an incredibly relevant and big problem.

Thank you. And about your engagement with the vendors?

I think I've mentioned this already, I'll be very brief. Of course, we incorporate this into our contracts with vendors. We include the requirements that we have related with ESG and, of course, certification. Certification of hardware, of equipment, of construction materials and so on and so forth. This is something that we do very actively. Does it mean this increases expenses? Yes, it does. We have compared the expenditures with the operational costs. We pay 15% to 20% more, for example, for the construction materials that have been certified as eco-friendly. But later on, within the 5-year operation, we will be able to break even. This is our policy. We are certain that this is right, and we will keep doing it. Thank you very much. And about inclusive lending for small- and medium-sized businesses. Inclusive lending of small businesses, you mentioned young people and foreigners. With foreign customers, we have launched a project for lending to foreigners, and we have, so far, seen good results. We'll see how it goes. With the younger audience, we have a rich mortgage agenda, the young family initiative that we do together with the government and the Far Eastern family initiative. Everything that is related to this, because for us, younger people are our separate audience. We also have banking for children, for youngsters. This is where we try to help parents strike this right financial balance in relations with their kids, where children could manage their own funds and get their first experience in this, increase financial literacy. As for small- and medium-sized businesses, we have a lot of programs associated with it. The main program perhaps is the program where 85% of that is where we support small businesses in the most vulnerable industries because of the pandemic, the food industry, restaurants and cafes, there are quite a few industries and 85% of loans within this program is loans dispersed by us. This is the program where salary pool is determined by the head count. And if there is no downsizing, the loan can be drawn down. The program is very popular with small- and medium-sized businesses. And to a large extent, thanks to this program, in particular, a lot of businesses were able to survive despite the very tough situation in Russia because of the pandemic.

A very quick comment, if I may, just to add some facts and figures to what Alexander said regarding our young audience between the age of 18 and 25, we analyzed our customers in this segment, and we saw that more than 400,000 of them have regular income. And it is around those income sources that we try to build our loan products mortgages, specifically more than RUB 1 billion in home loans issued in addition to the consumer loans that have been available for a number of years. Now to young people. Of course, we also issue credit cards to the younger audience. This way, expanding their access to loan products. As for the nonresidents, there are 2 products at the moment that are available, mortgages and customer loans. And the overall volume size of this portfolio is approaching RUB 1 billion. As for the small and micro businesses, you asked about the ESG scoring and whether these requirements will cover these customers as well. Right now, the scoring is mostly adapted for large, largest and medium-sized businesses. For small and micro businesses. Most probably -- after working with this rating in larger segments, we will possibly draw up a similar questionnaire, but a probably slightly simpler one. For example, the gender diversity on the Board. This could be not so relevant for smaller and micro businesses.

Thank you very much. Let's speed up a little bit because we're running out of time. Thank you very much Mikhail for your question. A bit of questions -- very quickly, a question from the website. What is the share of risk? What is the share of exposure in coal mining? What is the share in the loan portfolio of spend? Are there any specific requirements to coal companies?

The coal industry, the mining of energy coal and other types of coal is less than 2% in the portfolio. Last year, first half of the year, it was more interesting considering the coal prices. Right now, we see that coal companies, most of them have normalized their credit metrics. And in addition to that, they managed to repay part of the debt. So in terms of credit risk, we do not see any specific need to focus on the coal industry. As for the additional requirements across all sub-industries and our credit portfolio, we have defined these requirements related to the exposure of a specific subindustry to ESG factors. And if this exposure is high, we make the metric requirements more conservative. For example, debt to EBITDA. As for longer-term projects, we do stress testing or transitional risks. And in some projects where we have observed higher sensitivity to transitional risks, we have added ESG covenants or restructured the deal in a way that makes it more safe for us.

Thank you very much. Next question, Alan Webborn, Societe Generale, please.

Can you hear me?

Yes. Please go ahead.

I'm not sure you can. Can you hear me?

Yes, we can hear you. Please ask your question.

Good. I wonder, when you're looking at the Scope 3 analysis that you're doing, okay -- can I -- what I wanted to ask you was when you're looking at the Scope 3 analysis that you're engaging on, are you looking along -- are you looking at external partners? Or are you developing it yourself? There clearly are a number of different ways that European banks are moving in terms of how they are going through that process. And I wondered what Sber's view and processing intentions were in terms of getting to the results that other banks in Europe are looking at? So is it a stand-alone process? Or is it a collaborative process with some of the groupings that are already emerging? That was the first question. The second question was, I guess, this is the start of a process that between now and 2060, that you will be having interim targets as we go forward. I mean, the idea that you have a 2023, Scope 1, Scope 2 target would suggest that later on, there will be more. So should we expect that once the mapping of Scope 3 is there, that Sberbank will be looking to do more than the '26 target that the Russian state is looking at? That was the second question. Third question, is your approach going to be exclusionary? Or is it going to be working with the energy companies, working with companies with higher ESG risks in order to reduce their footprint? I mean, you've talked about telling companies what they need to do. I just wondered how collaborative your approach is going to be? So that was the third question. Two more...

Alan, can we please start answering your questions one by one?

Board in relation to ESG risks. Is it a definable percentage? And lastly, in terms of your things like the Scope 1 waste reduction, for example, is it all about they're not being sufficient facilities in order for you to go faster? Are you constrained by what the environment outside the Sberbank is?

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[Foreign language] As for Scope 3 -- yes, we need to measure Scope 3. That's a very good question. But you need to measure it first. And after that, we can discuss it with the customers in terms of how we're going to move along and driving down our Scope 3. Currently, we need to work on this question. Recycling waste, not a lot of facilities to recycle the waste properly. How do we address that problem? Should I answer that? Yes, I'll try to be very quick. We can go much quicker. I have shown in my presentation that 30%, 40% of all of our waste can be collected separately, and we now are able to organize the recycling. Unfortunately, not all regions of Russia can handle that. I mean, that's the honest answer. We are working with the administrations of these regions so that these regions have proper waste sorting and waste recycling facilities. We are quite active here, and we're pushing different regions to build these facilities.

Thank you. And the last question that Alan asked how the remuneration and a goal of average of manager and every Board member is linked to ESG strategy goals. It's linked. You had a detailed slide as far as I remember?

Yes, we had a detailed slide about that. So I'm going, for instance, to be responsible for all of the figures that were highlighted blue. These are my goals. Mr. Kuznetsov will have different goals specific to him. His team will have specific goals, and it is going to be cascaded to lower grades. So basically, our bonuses are linked to that. So I'm responsible. So yes, the answer is yes. In a nutshell, yes, absolutely. And another question of Alan about the approaches to credit strategies. So positive negative selection. We're trying to use that. Or we're talking about integrating approaches and ESG integration. How -- when we're going to work with companies to help them transform? What is the policy here? Well, I think all 3 of them, we have screening for companies. We have an acceptable high ESG risk. We have determined what is that risk already in 2019, and companies who meet this criteria cannot receive loans in terms of our credit policies. Well, actually, [indiscernible] we do not have companies like that in the portfolio. And this approach -- I just want to say that we do not have these companies -- such companies in our portfolio. And even the companies that are Sber customers without having loans in Sber are not our customers. We do not have [indiscernible] companies, yes. So we have positive screening and then integration of the things we like, we're committed to. Especially the integration, we are committed to helping the companies in transforming themselves when they need financing for that. So obviously, we're going to bet on integration mostly, but other tools are -- will be used as well.

Yes, thank you very much. That was last question. We received other questions through our app and on our website. We will certainly answer all shareholders, analysts and investors who ask these questions. I would like to thank all the participants, all the viewers and everyone who spend these 2 hours with us, thank you for your presentations, and thank you for putting all that information for the investors, making it available. In terms of ESG, on 15th of December, we're going to have a bigger event. That will be the event where we're going to talk about the first year of our '23 strategy, and we invite all participants of the market to join us. So we are going to send you the information after. [Statements in English on this transcript were spoken by an interpreter present on the live call.]