An agreement was signed at the Eurasian Intergovernmental Council in Yerevan on the procedure for exchanging information within the EAEU that is part of credit histories in November last year. The purpose of the document is to provide the banks with tools for a fair assessment of the credit risk of potential borrowers. It is expected that citizens of the Union countries will receive equal opportunities when applying for loans throughout the territory of the integration association.
At the same time, if earlier integrators talked about the need to create a monetary union and even about the introduction of a single currency, then at this stage it is considered more realistic to focus on increasing the share of national currencies in mutual trade, without which there will be no fullfledged integration. Dependence on a third currency leads to serious conversion costs and currency risks, and, in turn, the price and overall competitiveness of Eurasian goods depend on them. The currencies of all the EAEU countries are volatile, and strategic attention should be paid to solving the above task. With the correct alignment of the settlement system, a platform will be formed for a certain accumulation of national currencies in the form of liquidity, and this, in turn, can serve to create stimulating instruments within the EAEU. This will play a big role in terms of cooperation processes and trade promotion.
The Eurasian Development Bank (EDB) is one of the potential platforms on which this strategic initiative could be launched and developed. The Bank has taken enough fundamental steps to prepare for such a mission, and, according to our information, is preparing to offer the capabilities of its payment and settlement infrastructure as one of the options for making payments in the EAEU space. By the way, within the EAEU, national currencies currently account for 70% of trade.
Nevertheless, if you ask representatives of even the most advanced, systemically important banks of Armenia today whether there are any concrete changes in terms of Eurasian integration, so to speak, from the "window" of a single combank, the answer will be negative. The desire of everything to become a part of something bigger is, I must say, a natural phenomenon, but, apparently, there are still many achievements ahead of the EAEU countries on this path.
However, along with the integration agenda in the Eurasian space, we must not forget about the global agenda. The world is on the threshold of a global technological transformation driven by the ESG agenda and the reduction of CO2 emissions. ESG (Environmental, Social, Governance – a set of characteristics of company management, in which its involvement in solving environmental, social and managerial problems is achieved) has recently become one of the most popular abbreviations.
A new industrial supercycle is emerging when energy transition, that is reducing greenhouse gas emissions and carbon neutrality, will lead to the re-equipment of production facilities and the widespread abandonment of energy-intensive technologies. These changes bring both new challenges and opportunities. Economic restructuring and investments in technological re-equipment in order to combat climate change will cost states tens of trillions of dollars, and cross-border carbon taxes can significantly reduce the competitiveness of EAEU exporters. In addition, as the President of the Russian Federation Vladimir Putin warned recently, environmental issues can be used for unfair competition. All these risks will have to be borne in mind.
We can say that the "train" of low-carbon development has already started (and this is definitely not a coal-fired locomotive), and for many there is a danger of staying on the platform. The transition to green energy is accompanied by green financing. Green bonds and other green debt instruments have been talked about in the world relatively recently. They are issued for projects aimed at improving the environmental situation or minimizing the harm caused to nature, and are freely traded on international markets. Green bonds appeared against the background of a global approach to responsible investment, which takes into account the factors of companies' influence on the environment, social development and corporate governance, that is, we are talking about ESG projects.
Even today, on the world stock exchanges, you can witness how, for example, traders disassemble aluminum obtained with the help of cleaner technology, although it is more expensive than usual. It is also not difficult to imagine a situation when a long-term investor partner, for example, of a coal mine, refuses to further invest his funds in this "dirty" object, and insurance companies will not insure it.
However, we are all well aware that any transformation requires resources, primarily financial ones. Therefore, it is clear that consolidation around the climate agenda will take place based on financial institutions. By the way, the ESG financing market is already growing rapidly in the world today: in just 9 months of this year, the value of green bonds in the world reached $789 billion (an increase of 55% by 2020). Thus, in order to keep up with global trends, all of us, business and banks, will have to, figuratively speaking, "turn green– – get involved in the current agenda. Moreover, the main question is: how will the real sector respond to this climate agenda, how quickly will it adapt to it, and how will banks and other financial institutions respond to this? At least, it is clear that commercial banks should open environmental departments today, if they have not already done so, and hire young specialists. It is difficult in this place to refuse the opportunity to have fun with a play on words: "green" cadres for a "green" economy…
Banks will have to get involved in the development of mechanisms for green financing and ESG projects, even more specifically, to provide ESG lending and ESG investment within the framework of responsible financing (for example, for projects in the field of renewable energy – renewable energy sources). They constantly increase the share of such loans in their portfolios, buy and place green (including digital) bonds and other similar debt instruments of foreign and domestic issuers, implement the best practical work on organizing the attraction of financial resources for sustainable development projects and achieving the goals of decarbonization of the economy.
Green financing already looks today almost as exotic as panda bonds, for example. Among the trends of 2022, Deutsche Bank announced, in addition to the excess of inventories, the end of the era of free money on stock markets and the emergence of digital currencies of central banks, the transformation of ESG sector bonds into the mainstream.
If we turn to Armenia, the increase in electric cars and hybrid cars has been visually noticeable on the streets of its cities in the last 5–6 years. Even earlier, the main priority of Armenia's energy development was declared to increase the share of renewable energy and the nuclear component. It resulted in decisions on the construction of the Masrik solar power plant with a capacity of 55 MW, the Aig-1 and Aig-2 solar stations with a total capacity of 400 MW, and five other solar stations with a capacity of 120 MW each. Also, by 2040, the construction of wind farms with a total capacity of 500 MW should be carried out. As for nuclear energy, the life of the Armenian NPP, which was extended until 2026, is nearing completion, and negotiations have already begun with Rosatom on the construction of new nuclear power units.
We must admit that humanity has failed to live in symbiosis with nature. But what turned out great is to mercilessly parasitize on it. Now many countries, including the EAEU states, will have to solve many tasks related to the Green economy EURASIAN FINANCIAL & ECONOMIC HERALD | #1 (15) 2022 61 global green agenda. Meanwhile, the importance of switching to clean technologies is often underestimated, although this may be the next giant step in the development of mankind. A step similar to that made by civilization in its time, when a Cro-Magnon dressed in animal skin with a bow and a spear supplanted a Neanderthal with a club, who was warmed only by his own wool. To give another analogy, it seems that green technologies are a kind of iron hatchet that replaced the stone one.
Alien in fantastic fiction are depicted in a variety of life forms: from the debut Martians-invaders of H. G. Wells – shackled in combat tripods of "large grayish round carcasses the size of a bear", who probably would not have resisted COVID-19 today (once they died from much less pathogenic terrestrial microorganisms), to black boxes or the company of Clifford Simak bowling balls rolling sedately along the roads. However, it is probably no coincidence that intelligent strangers from other planets are often depicted in science fiction as green humanoids, which is in tune with current trends. Nevertheless, at the same time, the same Saimak in his works warns against too hasty and ill-conceived energy transition, which can lead to severe energy crises, which we have already witnessed today. Perhaps, Europeans and Americans do not read carefully the works of one of the best science fiction futurists of our time…
The use of digital assets for the transformation of economic sectors and social life is another issue of the new day. One of the main trends today is discussions about launching digital currencies and piloting international settlement platforms based on them. For example, that the Central Bank of the Russian Federation and the Ministry of Finance of Russia have very different positions on this issue, but technological progress is irreversible
Digitalization of the financial sector is an integral feature of the development of the modern world economy. In order for financial market actors to be successful and competitive, it is necessary to keep up with global trends in the introduction of advanced technologies and be "digital". The fulfillment of this task determines the transformation of traditional business models to meet the challenges of the modern world. Credit institutions, insurance companies and other institutional investors are making significant changes in improving their activities under the influence of digital technologies.
The evolution of the digitalization of the financial system took place from the appearance and distribution of bankcards and the use of ATMs to the emergence of a special ecosystem of fintech at the intersection of financial services and technology sectors. All this has turned advanced banks, including in Armenia, into high-tech companies, and, I must say, the pandemic of the new coronavirus infection has done more for the digital transformation of financial institutions in terms of accelerating this process than long-term conferences and symposiums on this subject. However, the formation of a new society should take place within the framework of digital transformation, and not a simple digitization of business processes.
Therefore, it turns out that if we summarize the trends in the development of the EAEU financial markets – integration, ESG development and digitalization – then a bright digital evergreen future awaits us.