Assessment of ESG factors and their impact on venture capital investment and market in different sectors of Kazakhstan
research
ESG assets exceed $35 trillion in 2020, representing one-third of total global assets under management. Companies that integrate ESG principles are more successful in attracting investments and demonstrate financial stability.
President of Kazakhstan Kassym-Jomart Tokayev emphasized the need to develop a green economy. A new Environmental Code and the Strategy for achieving carbon neutrality until 2060 have been adopted. The volume of the sustainable finance market in Kazakhstan reached 228.9 billion tenge by December 2023. Kazakhstan has made national commitments under international agreements such as the Paris Agreement (2016) and the Sustainable Development Goals (SDGs), and seeks to assert its role as a Central Asian center for clean technologies.
President of Kazakhstan Kassym-Jomart Tokayev emphasized the need to develop a green economy. A new Environmental Code and the Strategy for achieving carbon neutrality until 2060 have been adopted. The volume of the sustainable finance market in Kazakhstan reached 228.9 billion tenge by December 2023. Kazakhstan has made national commitments under international agreements such as the Paris Agreement (2016) and the Sustainable Development Goals (SDGs), and seeks to assert its role as a Central Asian center for clean technologies.
Research methodology
To assess ESG factors and their impact on venture capital investments and the market in different sectors of Kazakhstan, representatives from 11 sectors of the economy were selected.
It is assumed that the degree of consideration and implementation of ESG factors varies among companies in different sectors of Kazakhstan. Companies that actively implement ESG principles may have advantages in attracting venture capital investment and improving their competitiveness.
Questionnaires, interviews and open source analysis are used to obtain data. Questionnaires allow to survey both public and non-public companies to obtain information on the implementation, development and publication of ESG reporting.
Questionnaires, interviews and open source analysis are used to obtain data. Questionnaires allow to survey both public and non-public companies to obtain information on the implementation, development and publication of ESG reporting.
- General issues
- Questions about environmental responsibility
- Questions about social responsibility
- Questions on corporate governance
Companies are categorized by the level of disclosure of ESG factors:
The collected data is analyzed to identify common trends and differences among companies in different industries. This process allows to determine the degree of implementation of ESG principles and identify key trends and best practices in different sectors of Kazakhstan's economy.
- Preparing information on ESG factors
- Disclosing information on ESG factors (as part of the Annual Report, on the corporate website, a separate report, GRI, KASE)
- Not disclosing information on ESG factors
The collected data is analyzed to identify common trends and differences among companies in different industries. This process allows to determine the degree of implementation of ESG principles and identify key trends and best practices in different sectors of Kazakhstan's economy.
Two questionnaires were developed for manufacturing and non-manufacturing companies including:
ESG information disclosure index
ESG information disclosure index showed that the highest level of disclosure is observed in the companies Zhaiykmunai LLP, Qazaqstan Investment Corporation, NAC Kazatomprom JSC, Tengizservice LLP and NC KazMunayGas JSC.
Key findings of the survey
- 82% of companies are ready to further develop and improve their ESG practices.
- 75% of companies have targets to reduce greenhouse gas emissions or achieve carbon neutrality.
- 65% of companies have an approved environmental and climate change document.
- 50% of companies have a green office program in place.
- 65% of companies have social programs for employees.
- 70% of companies provide ESG education and training.
- 66.67% of companies include ESG aspects in risk management.
- 45% of companies have a resource diversification document.
- 60% of companies apply the best available technologies.
Average scores
The survey, in which 38 companies participated, showed an average score of 12.6 (with a maximum score of 18.6) points. 65% of companies recognized the implementation of the ESG Principles as significant for venture capital investment.
Standards used
- 60% of companies use the GRI standard for ESG reporting.
- 15% of companies follow TCFD recommendations.
- 5% of companies apply ISO 14001 and ISO 45001 standards.
- 10% of companies use other standards.
- 10% of companies do not apply ESG reporting standards at all.
Environmental activity
- 30% of companies participate in international environmental initiatives.
- 45% of companies have ecosystem restoration programs.
- 80% of companies conduct environmental audits.
- Energy management according to ISO 50001 standard is implemented by 50% of companies.
- Energy-saving technologies are applied by 70% of companies.
- 40% of companies implement waste recycling projects.
- 55% of companies use the best available technologies for waste management.
Reducing environmental impact
- Greenhouse gas emissions decreased by 10% for manufacturing companies and by 8% for non-manufacturing companies.
- Water consumption decreased by 8% for manufacturing companies and 6% for non-manufacturing companies.
- Waste volume decreased by 12% for manufacturing companies and 8% for non-manufacturing companies.
- Energy consumption decreased by 5% for manufacturing companies and 4% for non-manufacturing companies.
- Air pollution decreased by 7% for manufacturing companies and by 5% for non-manufacturing companies.
Social initiatives
Corporate governance
- 90% of manufacturing companies and 85% of non-manufacturing companies have a corporate governance code.
- Regular audits are conducted by 85% of manufacturing companies and 80% of non-manufacturing companies.
- 80% of manufacturing companies and 75% of non-manufacturing companies have corporate governance training for employees.
- 95% of manufacturing companies and 90% of non-manufacturing companies have risk management committees.
Key challenges to ESG adoption include a lack of information and transparency among startups, which makes risk assessment difficult. ESG integration requires additional resources.
The outlook is encouraging: companies with strong ESG scores attract more investment and demonstrate better sustainability. Venture capital funds such as MOST Ventures and Activat VC are successfully investing in environmental technology and social enterprise startups.
Problems and prospects for venture capitalists in the context of ESG
To improve ESG performance, venture capitalists are encouraged to improve corporate governance and standardize ESG reporting. Transparency and standardization of reporting will increase investor confidence and improve risk assessment.
To successfully implement ESG principles, venture capitalists must:
Recommendations for venture capitalists
1. Assess ESG risks and opportunities: Analyze the environmental, social and governance aspects of companies.
2. Integrate ESG into investment strategies: Establish criteria for evaluating companies based on ESG.
3. Support portfolio companies: Train and advise companies on sustainability issues.
4. Monitoring and reporting: Require regular ESG reporting from portfolio companies.
5. Participation in ESG initiatives: Exchange experiences and best practices to strengthen market positions
Successful implementation of ESG in Kazakhstan requires the creation of a favorable policy environment:
Political aspects
- Legislative initiatives: Introducing requirements for the disclosure of information about ESG factors and establishing reporting standards.
- Financial incentives: Providing tax breaks and subsidies for companies implementing ESG.
- Educational programs: Training of managers and employees of companies on issues of sustainable development.
- Public Initiatives: Raising awareness of the importance of ESG through government and public campaigns
The implementation of ESG principles in Kazakhstan contributes to sustainable development and long-term business sustainability. Companies that integrate these standards gain competitive advantages and attract more investment.
The study found that 65% of companies recognize the importance of ESG in venture capital investments. Companies from leading industries are actively incorporating ESG into their strategies. However, the food, construction and transportation industries have low levels of awareness and participation in ESG initiatives.
Further progress requires comprehensive sector-specific strategies, increased transparency and accountability, and an enabling policy environment. The integration of ESG principles helps Kazakh companies improve their investment attractiveness and sustainability, contributing to their successful development and prosperity in the face of global changes.
The study found that 65% of companies recognize the importance of ESG in venture capital investments. Companies from leading industries are actively incorporating ESG into their strategies. However, the food, construction and transportation industries have low levels of awareness and participation in ESG initiatives.
Further progress requires comprehensive sector-specific strategies, increased transparency and accountability, and an enabling policy environment. The integration of ESG principles helps Kazakh companies improve their investment attractiveness and sustainability, contributing to their successful development and prosperity in the face of global changes.
aidana@mostfund.vc
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