Responsible investment

The responsibility of Sistema as an investor is the effective management of portfolio assets and funds to create shared value for shareholders and a wide range of stakeholders in the long term.

The Corporation aims to build competitive businesses with high added value that meet the principles of social and environmental responsibility and contribute to the sustainable development of industries and regions of operations and to the steady growth of socioeconomic and technological potential, human capital, quality of life and social well-being.

Sistema follows the international concept of responsible investment, which implies integration of environmental, social and governance (ESG) factors into the practice of making strategic decisions; ESG factors are applied both to the choice of priority areas for financial investments / valuation of assets and to interaction with key stakeholders:

Shareholders and investors
Government
Employees
Partners and suppliers
Consumers
Local communities and non-profits

Sistema’s strategic approach to responsible investment is solidified in the investment criteria:

  • approved by the Board of Directors, which integrate the ESG factors reflecting the Corporation’s guiding corporate responsibility principles as a part of Sistema’s Sustainability Policy and international ESG standards;
  • in the policies and procedures on corporate governance.

1. Responsible investment principles at the portfolio building stage

Exclusion of «sin stocks»:

  • Manufacturing of tobacco, and pornography;
  • Gambling;
  • Producing or selling products or conducting operations that are considered unlawful in the country of operation or are subject of international bans (for example, ozone depleting substances, endangered plants and animals, use of child or forced labour);
  • Production of controversial types of weapons and components (landmines, biological and chemical weapons, cluster bombs, radioactive ammunition, nuclear weapons).

Taking into account the ESG-profile of the company when making investment decisions:

  • Evaluating governance, environmental and social performance of investees as part of Due Diligence process (covering management systems and policies, management of non-financial risks, ESG indicators, incidents etc).

2. Responsible investment principles at the asset management stage

Baseline requirements for sustainability management in portfolio companies:

  • The recommended share of independent directors on the Board of Directors — at least 30%.
  • Commitment to the Board of Directors diversity in terms of expertise, gender, social and cultural factors.
  • One of the Board of Directors committees should be charged with responsibility for sustainability matters.
  • Sustainability matters should be included in the recommended work plan of the Board of Directors.
  • Corporate policies (at least a Code of Ethics with clauses on human rights, anticorruption, whistleblower and personal data protection policies) should be in place.
  • As part of asset preparation for an IPO:

    • setting up a sustainability working group reporting to the CEO;
    • developing a sustainability strategy including goals and KPIs for material issues.

Engagement with portfolio companies within the established corporate governance procedures on the following ESG matters:

  • Promoting uniform corporate governance and business ethics principles in the Group of Sistema’s companies.
  • Strategy implementation, improvement of sustainability management processes and ESG performance.
  • Forming a corporate culture based on the corporate responsibility principles.
  • Encouraging innovation and improving operational efficiency.
  • Implementation of the corporation-wide program of social investment and volunteering.
  • Monitoring and corporate sustainability reporting.
  • Supporting engagement between the portfolio companies both on business and sustainability issues.

3. Responsible investment principles at the exit stage

  • Ensuring the company’s sustainability management system is self-sustaining.
  • Preparation of reference materials on sustainability in the company (if necessary).