How does the environmental agenda affect Kazakhstan's industry?

How does the environmental agenda affect Kazakhstan’s industry?

12/10/2023

Image source: pixelied.com / pixabay.com

The adoption of ESG principles, encompassing environmental, social, and corporate governance aspects, is gaining momentum worldwide, and Kazakhstan is no exception. According to inbusiness.kz, major manufacturing companies in the country are actively modernizing their facilities, implementing measures to reduce emissions, and promoting waste recycling practices.

By incorporating ESG principles into their operations, companies can not only improve their environmental impact but also enhance their social and managerial aspects, ultimately leading to improved financial and economic performance. Natalya Lim, a partner at PwC, emphasizes the urgent need for a global and unified approach to address critical issues such as climate change, poverty, inequality, and water scarcity.

Lim believes that the corporate sector plays a decisive role in overcoming these challenges, and organizations in Kazakhstan are demonstrating their readiness to take responsibility and drive positive changes. In the industrial sector, companies like “KazMunaiGaz” are leading the way by adopting their own “Low Carbon Development Program for 2022-2031.” The objective of this program is to reduce greenhouse gas emissions by 15% by 2031 compared to the baseline year of 2019.

Moreover, “KazMunaiGaz” is actively collaborating with partners to develop renewable energy projects with a total capacity of at least 1 gigawatt, along with an energy storage system of 300/600 megawatts. These efforts reflect the commitment of Kazakhstani companies to sustainable development and their contribution to mitigating environmental challenges while driving economic growth.
Another industrial giant, Eurasian Resources Group, is actively working on reducing emissions at its facilities and minimizing their environmental impact. For instance, on August 10th, they showcased a unique ore processing plant for handling the tailings of the Donskoy Mining and Processing Plant to the Prime Minister of Kazakhstan, Alihan Smailov. This plant was built by the multinational company “Kazchrome” (a subsidiary of ERG) in the city of Khromtau, Aktobe region.

Why is this project important? The Donskoy Mining and Processing Plant was founded in 1938 in Khromtau and is the world’s second-largest deposit of confirmed chromium reserves. The ore extracted here is used for the production of ferroalloys in metallurgy, the manufacturing of refractories, and in the chemical industry for producing chromium compounds.

Every year, in the process of crushing and grinding chromium ore at the plant, around 900,000 tons of tailings waste are generated. Currently, there are already 14.5 million tons of accumulated tailings containing up to 35% chromium oxide. “Kazchrome” decided to address this issue by constructing the ERG Green ore processing plant.

This plant will enable the extraction of chromium oxide from the tailings through gravity-based enrichment, and the resulting commercial concentrate can be used in metallurgy for further processing.

The new facility will allow for the processing of approximately 1.7 million tons of tailings annually, both the existing waste and the continuously generated new waste. Consequently, this will not only improve the environmental conditions in the Aktobe region but also enhance the economic efficiency of the plant itself.

“The most important thing is that after processing, the tailings must be properly reclaimed in accordance with all environmental standards to minimize the impact on the environment and public health,” commented Alihan Smailov during his visit to the factory.

In parallel with this, by the end of 2024, as part of the program for processing accumulated tailings, three more initiatives are planned to be implemented. As a result, ERG will ensure the production of 200,000 tons of ferrochrome, leading to an additional revenue of approximately 10 billion tenge in tax receipts annually for the state.

“Following the company’s mission and ESG principles, management must ensure high environmental standards. Therefore, the group has developed an Environmental Strategy as part of our comprehensive ‘Green Metallurgy’ program. Within the environmental strategy until 2030, we plan to invest 228 billion tenge,” noted Shuhrat Ibragimov, Chairman of the Supervisory Board and member of the Board of Directors of ERG, during the project presentation.

Investors are involved in the process
Initiatives like these require substantial investments, and modernizing existing facilities or building new ones is difficult without the assistance of investors.

For example, the total investment in the ERG Green plant project amounted to 96 billion tenge. Part of the funding was provided by the Development Bank of Kazakhstan, which, according to the project list, has actively begun working in the ESG direction.

“We consider supporting projects that adhere to the principles of sustainable development to be important. This project aligns with the Environmental Code’s principles of sustainable development – the preservation of natural resources for current and future generations, as well as the principle of integration – the balance between environmental tasks and economic development,” commented Marat Yelibaev, Deputy Chairman of the Board of BRK.

Like other development institutions, the Development Bank of Kazakhstan is focusing on projects that incorporate ESG principles into their operations. For instance, earlier this year, the bank issued its first “green” bonds, and the proceeds from the bond issuance were directed towards a project by the KEGOC company for modernizing the power grids in Western Kazakhstan.

In the summer, a credit agreement was signed with the “Almaty Power Plants” to convert TEC-2 in Almaty to natural gas. This project will be financed jointly with the European Bank for Reconstruction and Development and the Asian Development Bank.

From the example of BRK and other financial institutions, a clear trend is emerging: ESG initiatives of businesses are of interest to investors. This signals that in the near future, many more environmental projects will be implemented by industrial and infrastructure companies.