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31ECONOMIC SCIENCES
GREEN BONDS TO FINANCE THE DECARBONIZATION PROJECTS
Petlenko Yu.
PhD in Economics, Associate Professor, Associate Professor of the Department of Finance, Taras Shevchenko National University of Kyiv, Ukraine
Pohribna N.
PhD in Economics, Associate Professor, Associate Professor of the Department of Finance, Taras Shevchenko National University of Kyiv, Ukraine
Abstract
The paper follows an examination of the green bonds issue in the world practice and in Ukraine under an increasingly favourable and supportive conditions. The complex financial and environmental issue is discussed within the logical path - discussing the context of green bonds (definition, environment, involved parties, and the legal support), the principles, types and features of green as the green investment process interacts with the involved parties. The overview of the green bonds issue includes the conditions, implementation, and measures within the defined areas, which results in defining the key points under the context and the possibilities of implementation of decarbonisation projects.
Keywords: green bonds, financing, decarbonisation, environmental friendly projects, green investment, alternative energy.
Introduction. The experience of the world countries in the organization and development of the green bond market proves that their effective application is possible in the development and implementation of a coherent integrated policy, which will be harmonized with international law and which takes into account leading world practices and national conditions, opportunities, needs and priorities. In most countries, this required the development of appropriate national guidelines, the definition of incentive policies and the establishment of new international investment standards [7].
Organization and development of the green bond market is a cross-sectoral task, covering not only the stock market, securities and finance, but also energy, industry, transport, water and housing, agro-industrial complex and land use, conservation and reproduction of ecosystems, decarbonisation projects.
Politically and economically sound decisions on the introduction and development of the green bond market must be made for many sectors of the economy and must be agreed with the major market players. Therefore, in world practice, governments adopt appropriate action plans, which they use as a guide in developing their own strategies for organizing the relevant market and attracting green funding to various sectors of the economy.
Problem statement. According to the 4th Investors Forum "4th Renpower Ukraine Investors Forum 2021" with the support of the State Agency for Energy Efficiency, decarbonisation of the economy is one of the priorities on the path to sustainable development. Ukraine follows global trends, prioritizing low-carbon development and preparing for the challenges of the EU Green Deal, where the main instruments for this are cross-sectoral development of energy efficiency and the development of "green" energy.
According to the International Finance Corporation, the potential of the Ukrainian market for energy efficiency and "clean" energy by 2030 is 73 billion US dollars, 36 billion of which can be raised via the issuance of green bonds. Ukraine has great opportunity in the near future to develop green bonds for the implementation of national projects in the field of alternative energy, energy efficiency and other environmental projects with the help of international funding [1].
Therefore, the "green" transition necessitates the development and launch of tools to finance "green" projects.
Analysis of recent research and publications. In
Ukraine there is a scientific discourse and practical search for the issues in the green bonds establishment in the direction of developing the institutional frameworks [2, 3, 8]. The following researchers raise the issue of green bonds, green investments and green banking: A. Frolov [5], M. Hrytsyshyna, K. Markevych, Yu. Pidvysotsky, O. Veklych. At the state level the key role in this process belongs to the State Agency for Energy Efficiency. However, there is a growing need to cover the possibilities of green bonds financing of the decar-bonisation projects.
In Ukraine the legislature provides for two types of green bonds: those issued by the corporate sector -the green corporate bonds, and those issued by the local authorities, municipalities - the green bonds of local loans. The relevant procedures for issuing and circulating of these two types of green bonds is covered in such legal regulations as the Law "On Capital Markets and Organized Commodity Markets", "Regulations on the Procedure for Issuing Bonds of Enterprises and Their Circulation", "Regulations on Disclosure of Information by Securities Issuers", "Regulations on the Procedure for Issuance of Bonds of Domestic Local Loans
and Their Circulation", "Regulations on Disclosure by Securities Issuers".
According to the legislation of Ukraine, green bonds are bonds whose prospectus (the decision on the issue, and for government bonds of Ukraine - the terms of placement) which provides (secures) the use of borrowed funds exclusively to finance the environmental project or a separate stage. At the same time, the environmental project is a project in the field of alternative energy, energy efficiency, minimization of waste generation, utilization and processing, introduction of environmentally friendly transport, organic farming, conservation of flora and fauna, water and land resources, adaptation to climate change, and another project, aimed at protecting the environment, implementing environmental standards, reducing emissions into the environment [8].
The development of the green bond market in Ukraine is realigned with The European Green Deal, the goals set by the European Commission in the European Commission Action Plan: Financing Sustainable Growth and are as follows:
- Reorienting capital flows to sustainable investment to achieve sustainable and inclusive growth.
- Management of financial risks arising from climate change, resource depletion, environmental degradation and social problems.
- Promoting transparency in finance and the economy as a whole with a focus on long-term gains [9].
There are six environmental objectives provided in the European Union Regulation on the establishment of a framework to facilitate sustainable investment [9]. These are the following: 1) mitigation of climate change; 2) adaptation to climate change; 3) sustainable use and protection of water and marine resources; 4)
transition to a circular (closed cycle) economy; 5) prevention and control of pollution; 6) protection and restoration of biodiversity and ecosystems.
The key features of green bonds are the elements of the green bond model defined by the European Union Standard for Green Bonds (EU GBS) [4] and the Green Capital Markets Principles of the International Capital Markets Association (GBP) [6]. Accordingly, the European green bond standard (EUGBS) is a gold standard on the ways companies and public authorities can use green bonds to raise funds on capital markets to finance huge projects, while meeting tough sustainabil-ity requirements and protecting investors [4]. Its adoption guarantees that both issuers and investors are funding legitimate green projects avoiding greenwashing. The four main requirements under the green bond standard include:
1. Taxonomy-alignment,
2. Transparency,
3. External review,
4. Supervision by the European Securities Markets Authority (ESMA) of reviewers [4].
The International Capital Market Association (ICMA) approved the Regulations - Green Bond Principles (GBP), concerning:
- the selection of a project(s) to be fully or partially financed and/or refinanced by borrowed funds from the placement of green bonds,
- the targeted use of funds raised from the placement of green bonds,
- reporting on the impact,
- external independent control (verification) [6].
Currently the world experience includes four types
of green bonds: Standard Green Use of Proceeds Bond, Green Revenue Bond, Green Project Bond, Green Se-curitized Bond, the definition of which is provided in
Fig. 1. Current types of green bonds Source: developed by the authors using [6].
To achieve the goal of introducing the green bonds in Ukraine, it is necessary to ensure the implementation of comprehensive measures in the following areas: creation of legal preconditions for the introduction of the
Putting the principles of environmental responsibility in the first place attracts investors who would like to finance decarbonisation projects, and here green bonds have created a new way to attract investors to green assets with the necessary advantages of being environmentally friendly and supporting the sustainabil-ity.
Conclusions and discussion.
The world practice has accumulated experience in application of green bonds for the need of society and environment, with the aim of decarbonisation via the relevant projects. These practices include principles, standards and rules of green bonds issuance and place-
green bond market; ensuring the attraction of "green" funding; promoting the development of the green bond market. The relevant preconditions, elements and steps are described in the Table 1.
Table 1.
ment, which are developed by international organizations and authorities. Positive experience of implementation of green bonds in Ukraine can produce additional confidence of investors, guaranteeing the environmental purpose of attracting investment in environmental projects. Ukraine can both create a market for new instruments, implement the European standards, promote the environmental protection, accumulate and direct financial flows to the development and financing of domestic decarbonisation projects. The investments in environmental and social facilities need long-term orientation.
Therefore, the most cutting edge issues in the green bonds establishment cover the questions on the
The comprehensive measures to introduce the green bonds
Areas Measures
Creating legal preconditions for the introduction of the green bond market 1.1. developing a national guide to green bonds in line with international principles;
1.2. establishment of taxonomy, including metrics of environmental projects in accordance with international criteria and standards;
1.3. introduction of national norms and rules on disclosure of information by issuers of green bonds, reporting standards;
1.4. establishment of the accreditation regime for external verifiers and evaluators of green bonds;
1.5. introduction in national legislation of incentives for the development of the green bond market and the development of appropriate government target programs;
1.6. preparation of securitization legislation and secured bonds, which takes into account the specifics of green bonds.
Ensuring the attraction of "green" financing 2.1. raising awareness of stakeholders on the introduction of the green bond market in Ukraine, attracting key players to the market;
2.2. support for the preparation and implementation of pilot projects for the issuance of green bonds by various categories of issuers with the involvement of EU assistance programs, foreign governments, international organizations and donor institutions;
2.3. promoting the creation of domestic investment demand for investment in green bonds by various categories of potential investors, in particular, attracting local people and local institutional investors;
2.4. promoting the promotion of national issuers of green bonds to foreign capital markets;
2.5. involvement of international development banks in cooperation in improving the credit quality of green bonds of Ukrainian issuers and investing in green bonds of Ukraine;
2.6. conducting road presentations of issues (road shows) on foreign capital markets in order to support the attraction of international investors to invest in Ukrainian issues of sovereign and municipal green bonds.
Promoting the development of the green bond market 3.1. removing barriers to the development and functioning of the secondary bond market, in particular, to increase the liquidity of green bonds in the stock market;
3.2. introduction of a system for the selection of environmental projects, including projects of national importance, under which sovereign green bond issues can be issued;
3.3. creation of a register of projects of national importance under which sovereign green bond issues can be issued;
3.4. introduction of a system of verification of environmental projects in accordance with international practices;
3.5. establishing cooperation with international financial organizations, foreign investment companies and donor funds on attracting "green" financing;
3.6. organizing and conducting training programs for green bond market participants and potential players.
Source: developed by the authors using [3].
development by the issuer of its policy on green bonds, selection of projects that can be fully or partially financed and/or refinanced by funds raised from the placement of green bonds, the use of such funds, reporting of the issuer's environmental impact, organization of external independent control (verification), environmental and social risk management, as well as other issues related to green bonds.
References
1. Decarbonization of the economy is one of the priorities on the path to sustainable development // State Agency for Energy Efficiency and Energy Saving of Ukraine. https://www.kmu.gov.ua/news/dekarbon-izaciya-ekonomiki-odin-iz-prioritetiv-na-shlyahu-do-stalogo-rozvitku
2. Decision of the NSSMC "On approval of Recommendations on the implementation or financing of environmental projects through the issuance of green bonds" from July 7, 2021 07493. https://www.nssmc. gov.ua/document/?id=12423398.
3. Draft order of the Cabinet of Ministers "On approval of the Concept of introduction and development of the green bond market in Ukraine" https://saee.gov.ua/sites/de-fault/files/blocks/Kontseptsiya%2016.04.pdf
4. European green bond standard // European Comission. 2018. https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-fi-nance/european-green-bond-standard_en
5. Frolov A.Y. (2019). World experience of the green bond market introduction and the opportunities
of its implementation in Ukraine. Scientific Papers of the Legislation Institute of the Verkhovna Rada of Ukraine, (5), 84-92. https://doi.org/10.32886/in-stzak.2019.05.09
6. Green Bond Principles 2021. International Capital market Association. https://www.icma-group.org/assets/documents/Sustainable-finance/2021-updates/Green-Bond-Principles-June-2021 -140621.pdf
7. Klimenko O.N., Mala S.I. "Green" bonds as a promising tool for attracting investments in environmental projects in Ukraine // Economic Bulletin of the University. Collection of scientific works of scientists and graduate students. 2020. No. 45. https://cyber-leninka. ru/article/n/zelenye -obligatsii-kak-perspek-tivnyy-instrument-privlecheniya-investitsiy-v-ekologicheskie-proekty-v-ukraine (date accessed: 15.07.2021).
8. Law of Ukraine "On Capital Markets and Organized Commodity Markets" as amended by the Law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine Concerning Simplification of Attracting Investments and Introduction of New Financial Instruments" №738-IX of June 19, 2020. https://za-kon.rada.gov.ua/laws/show/738-20#Text
9. Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 https://eur-lex.europa.eu/legal-con-tent/EN/TXT/?uri=CELEX%3A32020R0852
РОЗВИТОК ДЕРЖАВНО-ПРИВАТНОГО ПАРТНЕРСТВА В РЕГЮНАЛЬНИХ КЛАСТЕРАХ
Мщенко В.А.
доктор eKOHOMÍ4Hux наук, професор кафедрu мiжнародного 6i3Hecy та фтанав Hацiональнuй теxнiчнuй утвер^тет «Хартвськш полiтеxнiчнuй iнcтuтут»
Авершин C.B. Заступтк головu правлiння AT «ФЕД».
DEVELOPMENT OF PUBLIC-PRIVATE PARTNERSHIP IN REGIONAL CLUSTERS
Mishchenko V.
Doctor of Economic Sciences, Professor of International Business and Finance National Technical University «Kharkiv Polytechnic Institute»
Avershyn S. Joint Stock Company "FED ".
Анотащя
В статп розглянуто актуальшсть i значения державно-приватного партнерства. Описаш форми його формування й реатзацд. Висвгглеш проблеми розвитку змшаного партнерства. Представлеш основш на-прями взаемодп влади та бiзнес-формувань на регюнальному рiвнi. Вщдзеркалеш особливосп й проблеми кластерного репонального державно-приватного партнерства. Описано значення технолопчних платформ в розвитку кластерiв i репошв. Приведено приклад функцюнування шновацшного кластеру «Мехатро-шка» та його можливi напрямки майбутнього розвитку.
