The preservation of the European Green Deal is crucial for Ukraine's post-war recovery, making it a central element in the country's reconstruction strategy while addressing modern environmental and climate challenges. The EU's updated growth strategy, aimed at achieving climate neutrality by 2050, focuses on building a resource-efficient and competitive economy, promoting a circular economy, and integrating climate and environmental considerations across all sectors. The strategy also opens opportunities to ensure a fair and inclusive green transition.
For Ukraine's economic recovery efforts to succeed, investments must come from various sources, including the European Bank for Reconstruction and Development, credit institutions, and the development of Ukraine's domestic financial market. There is also a need to introduce new financial instruments that will support long-term sustainable financial flows. It is estimated that achieving the EU's climate and energy goals by 2030 will require an additional €260 billion in annual investments, approximately 1,5% of Ukraine's 2018 GDP [1]. Such extensive financial needs call for systematic, long-term support aims to mobilize €1 trillion in investments under the European Green Deal, involving both public and private sectors. Roughly half of this amount (€503 billion) will come from the EU budget, with national governments expected to contribute €114 billion through co-financing. The remaining funds will be raised through private capital using EU guarantees under the "InvestEU" program [2].
Greena key source of funding for green economy projects, encompasses a wide range of financial instruments such as green bonds, equity, green loans, and venture capital. These are further supported by government subsidies, tax incentives, pollution permits, and green public procurement. Notably, green bonds have seen significant growth and are now a core product in climate finance, contributing to the objectives of the Paris Agreement. According to the Climate Bonds Initiative, the global green bond market has surpassed $2 trillion USD [3].
Socially respoestors in developed economies are increasingly channeling their funds into green projects to address both national and global challenges. In Ukraine, significant progress has been made in developing the regulatory framework for green bonds, taking into account recommendations from the EU and global organizations like ICMA and the World Bank Group. However, for the green bond market in Ukraine to function effectively, action is required in two key areas:
I. Creation of legislative and technical prerequisites for the green bond market:
• Improving the regulatory framework, particularly budget legislation, to enable the issuance of a broader range of green bonds (e.g., income bonds, project bonds, securitized bonds), currently hindered by legislative gaps.
• Developing the institutional infrastructure of the green bond market, involving state institutions (such as the National Bank, the Antimonopoly Committee, the National Securities and Stock Market Commission), municipalities, non-governmental organizations, and private sector stakeholders.
• Active participation of international organizations, especially financial ones, is crucial in supporting the establishment of the green bond market. Key players include the Green Climate Fund, which aids in financing green bond issuance, and the World Bank, providing technical assistance for issuing sovereign green bonds. Additionally, institutions like the International Capital Market Association (ICMA) and the International Finance Corporation (IFC) contribute by developing procedural guidelines and best practices for the functioning of the green bond market.
• Moreover, it is essential to conduct public awareness and promotional campaigns to explain the specific goals of green bonds, highlight their importance in financing environmental projects, and clarify the operational procedures of the green bond market. This will enhance investor and public understanding of the significance of these instruments in promoting sustainable development.
II. Development of tools and measures to drive the growth of the green bond market:
• Designing structural and logical frameworks for the issuance of green bonds by various types of issuers (national governments, municipalities, enterprises, and international financial institutions) in both domestic and foreign markets, tailored to each issuer's specific needs.
• To establish and regularly update a portfolio of nationally significant and pioneering green investment projects, which would serve as the basis for issuing both sovereign and conventional green bonds.
• Additionally, it is essential to develop a dedicated segment within the stock market for green bonds and create a specialized green bond stock market index to track and promote these financial instruments. This would facilitate the growth of the green bond market by providing investors with clear benchmarks and enhancing the visibility of environmentally focused investments.
This approach will help accelerate the integration of green finance into Ukraine's economy, fostering sustainable development and resilience to climate change.
References:
1. Regulation (EU) 2019/2088 of the European Parliament and of the Council (2019, 27 of November) on sustainability‐related disclosures in the financial services sector. URL: http://data.europa.eu/eli/reg/2019/2088/oj
2. European Union. InvestEU. Contribution to the Green Deal and the Just Transition Scheme. https://investeu.europa.eu/contribution-green-deal-and-just-transition-scheme_en
3. Green, Social, Sustainability, and Sustainability-Linked (GSSS) Bonds Market Update – July 2023. https://thedocs.worldbank.org/en/doc/120fd7d4d02fb164e0d5c838dd067701-0340012023/original/GSSS-Quarterly-Newsletter-Issue-No-4.pdf
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