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Journal of Economic Regulation, 2022, 13(4): 125-137 DOI: 10.17835/2078-5429.2022.13.4.125-137
INSTITUTIONAL DEVELOPMENT OF SUSTAINABLE FINANCE: ITS POTENTIAL AND CURRENT LIMITATIONS
MAKSIM A. KORYTSEV,
Southern Federal University, Rostov-on-Don, Russia, e-mail: mkorytcev@sfedu.ru;
SERAFIM A. MOROZOV,
Southern Federal University, Rostov-on-Don, Russia, e-mail: sermorozov@sfedu.ru
Citation: Korytsev MA, Morozov S.A (2022). Institutional development of sustainable finance: Its potential and current limitations. Journal ofEconomic Regulation 13(4): 125-137. DOI: 10.17835/2078-5429.2022.13.4.125-137
Sustainable finance instruments have invaluable importance for achieving SDGs and mitigation of the global climate change in particular. Despite significant market capitalization, there are some serious challenges for the further growth of this market such as blank spaces in legislation and lack of transparency in evaluation of the real impact ofprojects claimed to be sustainable and companies willing to borrow funds on this market, which confuses investors. This paper analyzes the current state and prospects of the global sustainable finance market and the institutional infrastructure supporting it. A brief overview of the national Russian sustainable finance market is included.
Keywords: institutions of sustainable development, sustainable finance, green bonds, social bonds, sustainable finance taxonomy, ESG
JEL: F38, O13, Q01
ИНСТИТУЦИОНАЛЬНОЕ РАЗВИТИЕ УСТОЙЧИВОГО ФИНАНСИРОВАНИЯ: ПОТЕНЦИАЛЬНЫЕ И ТЕКУЩИЕ
ОГРАНИЧЕНИЯ
КОРЫТЦЕВ МАКСИМ АЛЕКСАНДРОВИЧ,
Южный федеральный университет, Ростов-на-Дону, Россия, e-mail: mkorytcev@sfedu.ru;
МОРОЗОВ СЕРАФИМ АНДРЕЕВИЧ,
Южный федеральный университет, Ростов-на-Дону, Россия, e-mail: sermorozov@sfedu.ru
Цитирование: Korytsev M.A., Morozov S.A. (2022). Institutional development of sustainable finance: Its potential and current limitations. Journal of Economic Regulation 13(4): 125-137. DOI: 10.17835/20785429.2022.13.4.125-137
© Корытцев М.А., Морозов С.А., 2022
Инструменты устойчивого финансирования имеют неоценимое значение для достижения заявленных ООН Целей устойчивого развития, а также смягчения последствий глобального изменения климата. Несмотря на значительную рыночную капитализацию, существуют серьезные проблемы для дальнейшего роста этого рынка, такие как пробелы в законодательстве и отсутствие прозрачности в оценке реального воздействия проектов, заявленных как устойчивые, а также оценке компаний, желающих заимствовать средства на этом рынке, что дезориентирует инвесторов. В статье анализируются текущее состояние и перспективы глобального рынка устойчивого финансирования и поддерживающей его институциональной инфраструктуры. Приведён краткий обзор национального российского рынка устойчивого финансирования.
Ключевые слова: институты устойчивого развития, устойчивое финансирование, зеленые бонды, социальные бонды, налогообложение устойчивого финансирования, ESG
Sustainable development is undoubtedly one of the major concerns of the modern society on which might depend the future survival of the humankind per se. Hence, sustainable development constantly presents on the global international agenda and national agendas worldwide with governments and societies devising necessary institutional structures that remain nascent in most jurisdictions. To boost sustainable development a vast infrastructure system is required including theoretical consensus regarding key notions and definitions, corresponding legislation with transparent incentive and penalty systems, comprehensive taxonomy of financial instruments, a trustworthy assessment system, reliable information channels etc.
Such large-scale challenges as reshaping the entire world including eradication of absolute poverty or mitigation of the climate change require international cooperation, long-term planning and creation of international institutions. Thus, in 2015 the United Nations General Assembly adopted new "2030 Agenda" which ratified a list of 17 Sustainable Development Goals, so-called SDGs, to be achieved by 2030 (United Nations, 2015). In two words, these goals altogether imply covering the needs of the entire humanity in food, education and medical treatment at the same time with securing preservation of the global environment including forest, soil and water resources as well as biodiversity of animal species. The same year at the United Nations Climate Change Conference the Paris Agreement was adopted which declared the goal of substantially reducing global greenhouse gas emissions to limit the global temperature increase in this century to 2 degrees Celsius while pursuing efforts to limit the increase even further to 1.5 degrees.
Today, in 2022, we find ourselves right in the middle of the time interval given to achieve the aforementioned SDGs, thus less than 8 years left before the agreed date. Meanwhile, on the majority of SDGs significant progress has not been made, quite the opposite:
• only for 4 SDGs out of 17 the progress made since 2015 accounts for more than 1,5 percentage points;
• with SDGs № 12 and № 15 the situation has only worsened over the last 7 years;
• 3 SDG including № 10, № 12 and № 17 lack sufficient amount of data to assess the achieved progress which lucidly underlines low attention to these goals.
One of the key impediments of sustainable development is a lack of investment needed in quantity. For instance, just one target, namely, achieving carbon neutrality (the situation when net carbon emissions equal zero) might cost up to 50 trillion doll. in investment (Stanley, 2019). UNCTAD estimated in 2014 (United Nations Conference on Trade and Development, 2014) the lack of investment in sustainable development needed to achieve SDGs in 5—7 trillion doll. annually which represented 7—10% of global GDP or 25—40% of global investment. Since then the situation has improved, yet, by 2025 the size of this gap is projected to be 1 trillion doll. (Kharas and McArthur, 2019). 75% of this shortage will take place in low and low-middle income countries. Obviously, such overwhelming sums of investments cannot be attracted, processed and allocated effectively without efficient institutional systems.
10
2
■
SDG 1: No Poverty I SDG 1: Nood Health and Well-Being SDG 5: Gender Equality SDG 7: Affordable and Clean Energy SDG 9: Industry, Innovation and Infrastructure SDG 12: Responsible Conumption and Production SDG 12: Rife Below Water SDG 16: Peace, Justice and Strong Institutions
SDG 2: Zero Hunger I SDG 4: Quality nducation SDG 6: Clean Water and Sanitation SDG 8: Decent Work and Economic Growth SDG 11: Sustainable Cities and Communities SDG 13: Climate ActiCn SDG 13: Life on Land
Fig. 1. Progress in the World for Each SDG During the 2015—2021 Period, percentage points1
The estimations mentioned above, although, appear rather optimistic since they were published in the autumn of 2019 and could not take into account the impact of the ongoing COVID-19 pandemic that hit foreign direct investment hard. UNCTAD assessed the decrease in 2020 in 35% of the total amount that is now less than 1 trillion doll. against 1.5 trillion doll. in 2019. Financing of new infrastructure projects has been hit severely and has fallen by 42% ((United Nations Conference on Trade and Development, 2021) which is a serious concern since such investments are vital for sustainable development of developing countries. Instead of steadily going forth and augmenting investments, the situation thus went into reverse and has taken a few steps back. This implies that now there is a lot to catch up with and double effort is required to meet the deadlines.
Good news is that despite the drop in direct investments the sustainable debt market is on the rapid increase. Its size reached 1 644 billion doll. in 2021, which implies astonishing 115% growth to 2020 and 175% growth to 2019.
Academic interest to this topic remains high through a number of years as well, what might be illustrated with the literature review.
The PRISMA method was applied to analyze sources relevant to the topic under discussion. Little modifications to the PRISMA method were introduced because of the large number of sources, namely, exclusion of sources unavailable for full-text downloading and exclusion of duplicates between different databases was performed after analysis of relevancy based on skimming through key words, abstracts and conclusions.
1 Prepared by the authors based on the data retrieved from the Cambridge sustainable development report 2021.
1800 1600 1400 1200 1000 800 600 400 200 0
Fig. 2. Annual Sustainable Debt Issuance, billion doll2
Three databases were selected to search sources including www.scopus.com,papers.SSRN.com and scholar.google.com. Since the phenomenon of green finance is multifaceted and embodies different financial instruments, three different terms in English were chosen to conduct the search:
• Green bonds;
• ESG-investing;
• Sustainable finance.
Two terms from the list above were also translated in Russian as "Зеленые облигации" и "ESG инвестирование" to make an additional research in the scholar.google.com database in order to include sources in the Russian language into this review.
Only sources published in 2019 and later were taken into consideration because of two factors. First, the subject area develops rapidly which means that sources more than 3 years old are likely to contain outdated information. Second, the topic appears to be quite popular in the academia so there are more than enough sources published during the 3-year period.
Different databases use different query forms and allow usage of different filters so we should specify the search criteria applied for each database separately.
To carry out the search on the SCOPUS database next criteria were applied:
• Period of publication — 2019—2022 years;
• Subject area - ECON;
• Type of source - an article;
• Publication language — English and Russian;
• The title contains one of the four collocations from the list mentioned above.
Thus, the text of the query for the collocation "green bonds" is as follows: (TITLE (green AND bonds)) AND (LIMIT-TO (SUBJAREA, "ECON")) AND (LIMIT-TO (PUBYEAR, 2022) OR LIMIT-TO (PUBYEAR, 2021) OR LIMIT-TO (PUBYEAR, 2020) OR LIMIT-TO (PUBYEAR, 2019)) AND (LIMIT-TO (LANGUAGE, "English") OR LIMIT-TO (LANGUAGE, "Russian")) AND (LIMIT-TO (DOCTYPE, "ar")).
Such queries have found 86 resources for the collocation "green bonds", 16 for "ESG-investing" and 42 for "sustainable finance" in the SCOPUS database. Total number of publications — 144.
As for the SSRN database, the criteria were:
• Period of publication — the last 3 years;
• Chosen SSRN Networks — Economics, Finance, Sustainability;
• The title contains one of the four collocations from the list mentioned above;
I I
2013 2014 2015 2016 2017 2018 2019 2020 2021
2 Prepared by the authors based on the data retrieved from (https://about.bnef.com/blog/sustainable-debt-issuance-breezed-past-1-6-trillion-in-2021/).
• There is no filter for the publication language, but sources in languages different from English and Russian are later excluded from the selection as irrelevant;
• No filter for the type of source.
The results of the search in the SSRN database are following: "green bonds" - 40 entities, "ESG-investing" — 22, "sustainable finance" — 46. Total number of publications — 108.
Regarding the Google Scholar database, next criteria were applied:
• Period of publication — 2019—2022 years;
• The title contains one of the six collocations from the list mentioned above;
• There is no filter for the publication language, but sources in languages different from English and Russian are later excluded from the selection as irrelevant;
• No filter for the type of source;
• Citations without an access to an article itself are not considered as relevant sources.
The "Google Scholar" database contains much more resources than 2 previous databases: "green bonds" — 533, "ESG-investing" — 201, "sustainable finance" — 706, "зеленые облигации" — 52, "ESG инвестирование" — 7 sources, respectively. Total number of publications — 1 499.
The sources considered relevant for the present study touch upon one of the following topics:
1. Taxonomy of sustainable finance instruments, legal and policy issues (Sundqvist, 2022; Lentfer et al., 2021; Zetzsche et al., 2021; Freeburn and Ramsay, 2020; Mayer and Bergstrom, 2021).
2. Ambiguity of ESG-ratings and the greenwashing problem (Berg et al., 2019; Danilov et al., 2019).
3. The potential and limitations of using sustainable finance instruments to accelerate sustainable development, to mitigate the global climate change or to reduce greenhouse gases emissions (Heine et al., 2019; Sartzetakis, 2019; Tolliver et al, 2019; Rossitto, 2020; Trochon, 2019; Fatica and Panzica, 2021; Guha, 2019).
4. Descriptions and analyses of the national experiences in the field of sustainable finance instruments of such countries as China (Lin and Yanrong, 2021; Wang and Wang, 2021), India (Prakash and Sethi, 2021; Manaktala, 2020), South African Republic (Moyo, 2021), Indonesia (Suzuki, 2021) and Russia (Danilov et al., 2020; Kiseleva and Efimov, 2019; Spiridonova, 2021).
Among the selected sources, a few theses were found including researches of bachelor's (Trochon, 2019), masters (Sundqvist, 2022; Mayer and Bergstrom, 2021; Rossitto, 2020; Ilmarinen, 2021) and PhD (Moyo, 2021; Suzuki, 2021) levels which underlines the relevance of the topic and the profound interest of the global academia to it.
Fig. 3. PRISMA analysis of the relevant sources3 3 Prepared by the authors based on the database search results.
One group of articles sheds light on the huge discrepancy existing between ESG-ratings by different providers (Berg et al., 2019; Danilov et al., 2019; Mayer and Bergstrom, 2021). The community of investors requires sustainability evaluation and certification by an independent third party; however, there are many examples of weak or even negative correlation between compound elements of different ratings, which implies dramatic differences in the calculation methodologies. The same companies might be assessed as having low-risk and high-risk profiles by different providers what cannot but undermine the trust level among investors. Based on this, researchers state that the industry needs a higher degree of standardization in terms of reporting and evaluating.
Another group of publications (Heine et al., 2019; Sartzetakis, 2019; Tolliver et al, 2019; Rossitto, 2020; Trochon, 2019 ; Fatica and Panzica, 2021; Guha, 2019) discusses how effective sustainable finance instruments are for achieving ESG goals, what impediments exist and what could be done to increase their efficiency. Implementation of green bonds in addition to carbon pricing might help to reduce the burden of transition costs at present time by mobilizing funds to invest in necessary projects now with paying the debt in the remote future. Thus, use of green bonds in connection with carbon pricing schemes is modeled to provide a larger reduction of greenhouse gases with less pressure on capitalization of corporations in the long-term.
As for the challenges and limitations of the market, its size is still significantly smaller than needed to meet current needs in investments in order to achieve long-term sustainability and seriously mitigate the global climate change. In addition to that, only relatively big businesses or state institutions can afford bond issuance since necessary procedures such as underwriting, listing, acquiring a rating etc. are rather costly. Meanwhile, considerable part of investments in energy efficiency in buildings, for instance, are conducted by companies of small or medium size, which do not have necessary resources to access this market. Therefore, there is need for instruments that are more flexible and/or reduction of standardization and reporting costs.
One of the cornerstones of the institutional system is a taxonomy of sustainable finance instruments. Although there are more than 20 countries and regions around the world developing their own taxonomies or having already released versions, many authors urge to accelerate the development of international standards considering their absence as the main obstacle for the faster market growth and further development. It is expected that deployment of such standards will clarify benefits of investing in green bonds for investors and tackle the greenwashing problem by making sustainability disclosures more transparent and, therefore, raising the trust level among investors (Sundqvist, 2022; Lentfer et al., 2021; Zetzsche et al., 2021; Freeburn and Ramsay, 2020; Mayer and Bergstrom, 2021). The implementation of the EU Taxonomy Regulation, which defines key notions and sets out legal obligations for reporting on sustainable performance for sellers of sustainable investment products starting from 2022, is a big step in this direction. However, its efficacy and ability to cover blind spots on the market is still to be verified by practice as some market participants criticize the taxonomy as over complicated and, therefore, confusing for investors.
Regarding the classification of sustainable finance instruments, there are following types of instruments, which differ from each other mostly by the borrowing scheme being either bond issuance or traditional loan and the projects to which the proceeds are applied. The last one is the main classification principle according to EU standards and ICMA guidelines.
All the instrument types enlisted in the table below might be used in both business and public sectors.
Thus, issuance of sustainable debt in forms of loans and bonds seems to be a possible solution for the problem of insufficient sustainable development investments especially when the availability of direct investments suffers from the pandemic. Therefore, a question arises: what can be done to reinforce the success and accelerate this market growth even further?
Table 1
Key Characteristics of Different Types of Sustainable Finance Instruments4
Instrument type Use of proceeds Debt repayment conditions
Green bonds Environmental projects Fixed by the initial agreement
Social bonds Social projects Fixed by the initial agreement
Sustainability bonds Combination of both environmental and social projects Fixed by the initial agreement
Sustainability-linked bonds Combination of both environmental and social projects Financial and/or structural characteristics vary depending on whether the issuer achieves predefined sustainability objectives
Blue bonds Ocean-based projects; typically considered as a subtype of green bonds Fixed by the initial agreement
Green loans Environmental projects Fixed by the initial agreement
Sustainability-linked loans Combination of both environmental and social projects Financial and/or structural characteristics vary depending on whether the issuer achieves predefined sustainability objectives
Logically, to attract investment to sustainable development projects two key elements are needed: investors willing to put their money in such projects and an efficient institutional system with appropriate financial instruments. Let us expand on both of them.
Studies show that most investors consider sustainable impact of their investments: over 70% of mainstream institutional investors consider sustainability as central to their investment decisions (Park, 2018) while 77% of personal investors admit that they would not invest in companies that do not support their personal values. Such investors expect companies to be socially responsible, attentive to environmental issues and diversity problems etc. (Shroders, 2020).
At the same time, 23% of personal investors say they would invest in companies whose business don't align with their personal values in exchange for greater returns. Remarkably, this percentage is above average for investors with advanced experience and below average for beginners: 29% and 18% respectively.
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Beginner
Intermediate
Advanced
■ Not ready ■ Ready
Fig. 4. Investors' Readiness to Invest Against Their Personal Beliefs, by Level of Investment Expertise, %5
However, it appears to be insufficient for companies to simply pronounce themselves "sustainable" or "eco-friendly" since 93% of the investors expect to see proof of such a status. While 59% of investors
4 Prepared by the authors based on data from EU Taxonomy, ICMA principles, ISTA principles & World Bank FAQ.
5 Prepared by the authors based on the data retrieved from (https://www.schroders.com/en/sysglobalassets/_global-shared-blocks/gis-2020/theme-2/ schrodersgis2020_t2_full-report_za.pdf).
might be satisfied with data provided by an investment provider itself, 34% want to receive a proper confirmation from a third independent party such as national governments or inter-governmental organizations.
To sum up, to be convinced to invest in sustainable businesses 34% of investors require verification of the sustainable status from an independent institution and 23% of investors expect greater returns on their investments, giving in result approximately half of investors awaiting proper motivation.
There is quite a popular opinion that the situation mentioned above creates the need for active government intervention to this market since the free market is not able, without external impact, to resolve these two issues: develop trustworthy certification institutions and secure higher yields for companies meeting sustainable criteria. The survey results of investors' opinion reinforce this point of view, indicating that 69% investors shoulder the responsibility for mitigating climate change on national regulators (Fig. 6).
120
100
80
60
40
20
Global
Europe
Asia
Americas
Other
Confirmation by an independent third party Regular updates from the investment provider
Self-certification from the investment provider No information needed
Fig. 5. Type of Information Required to Be Confident in the Sustainability of an Investment,
0
Some experts as well doubt that free markets can regulate themselves in this case. "In truth, sustainable investing boils down to little more than marketing hype, PR spin and disingenuous promises from the investment community. Existing mutual funds are cynically rebranded as "green" — with no discernible change to the fund itself or its underlying strategies — simply for the sake of appearances and marketing purposes" (Fancy, 2021).
This citation touches upon a major problem for the sustainable financing market that is referred to as "greenwashing", "impact-washing" or "ESG-washing". Greenwashing, the most popular term among these three terms, was coined in 1986 by the suburban NY environmentalist J. Westerveld. Greenwashing implies corporate practices misleading consumers regarding the environmental practices of a company or the environmental benefits of a product or services (Jeevan, 2014). If there are bonuses of any kind for companies labeled "green", "eco-friendly" or sustainable from either the investor community or governments, then there will be a temptation for corporations to reach these bonuses without actually investing in sustainable projects and altering business practices.
6 Prepared by the authors based on the data retrieved from (https://www.schroders.com/en/sysglobalassets/_global-shared-blocks/gis-2020/theme-2/ schrodersgis2020_t2_full-report_za.pdf).
National government / regulators Inter-governmental organisations Companies Me as an individual Pressure groups and public campaigning Non-governmental organisations Investment managers / major shareholders
0 10 20 30 40 50 60 70 80
Fig. 6. Who People Think Should Be Responsible for Mitigating Climate Change, %7
Moreover, if the institutional system for evaluation of eco-friendliness and social responsibility isn't properly state-regulated and supervised, there might and will appear rating agencies handing out these labels left and right in exchange for a fat check without real verification. This is predetermined by the nature of business per se: business has the only one objective — maximizing its own profit (Rushe, 2021).
In addition to the certification problem, there is another aspect of the greenwashing problem, which requires active interference from authorities, namely, misleading advertising. Markets have become overwhelmed with products labeled "organic", "natural", "eco-friendly" and "carbon neutral" in the last few years. However, many producers do not provide real evidence underpinning such statuses and simply abuse gullible clients eager to pay extra for the noble idea.
Last year European Commission published data based on their study of corporate websites indicating that 42% of green online claims made by businesses were "exaggerated, false or deceptive and could potentially qualify as unfair commercial practices under EU rules" (European Commission,
2021). French authorities have decided to tackle this problem after the recent scandal around the misleading marketing policy of the oil and gas corporation "TotalEnergies" (Mouterde and Pecout,
2022) and on April 13 adopted a decree stating that a company claiming to be "carbon neutral" has to publish results of a real research proving this fact on its website (FranceSoir, 2022).
The greenwashing phenomenon might threat the prospects of the sustainable financing market and compromise the whole idea of it. The scope of the problem is rather significant especially being coupled with the fact that the criteria of assessment differ greatly from one ESG data provider to another and the methodic of calculation stay hidden from the investors. Moreover, various data providers might estimate the same company very differently.
Study of the divergence between ESG-ratings show the total score correlations being between 0,38 to 0,71 with the average of 0,61 for the ratings provided by 6 different providers including KLD, Sustainalytics, Moody's ESG (previously Vigeo-Eiris), S&P Global (previously RobecoSAM), Refinitiv (previously Asset4), and MSCI (Berg et al., 2019). This is significantly lower than the correlation of 0,92 between the credit ratings by Moody's and Standard & Poor, for instance (Gordon et al., 2021). In the meantime, the correlations for the single category scores between 2 providers often appear even negative reaching -0,5 (Berg et al., 2019).
Hence, two questions arise for investors: which rating agency should they trust the most while making investing decisions; and whether they can trust these ratings in general, if some companies claim a company to be highly ESG-responsible while others pronounce it highly risky?
7 Prepared by the authors based on the data retrieved from (https://www.schroders.com/en/sysglobalassets/_global-shared-blocks/gis-2020/theme-2/ schrodersgis2020_t2_full-report_za.pdf).
In addition to the facts discussed above, there are paradoxical examples of non-that-ethic companies receiving surprisingly high scores such as the tobacco producer Philip Morris International Inc. having a higher score than Beyond Meat Inc. producing plant-based meat. These companies took positions 49 and 511, respectively, out of 582 in the "Food Products" category ranking by the Sustainalytics agency (Sustainalytics, 2022).
This altogether cannot but undermine the trust level to ESG ratings among the investor society willing to have a more reliable and trustworthy system of institutions. Good news is that many companies appear to be eager to make a step towards it and implement reporting on the Stakeholder Capitalism Metrics system promulgated by the World Economic Forum (Hillyer, 2021). However, the U.S. Securities and Exchange Commission hesitate with developing a standardized set of rules mandatory for all market participants (Roisman, 2021).
As for Russia, the national sustainable finance market is still nascent. Its capitalization accounted for 192,7 billion rubles (approximately 2,5 billion USD) in 2021 (Official web site of the Central Bank of the Russian Federation, 2022) and, thus, represents only 0,15% of the global market according to the assessment by the Ministry of Economic Development. However, the market has grown 8 times since 2020, and the Ministry announced plans to achieve 1,5 trillion rubles by 2030 in the market capitalization (Banki.ru, 2021). The CEO of the national rating agency "ACRA" said that they expected the market to achieve 300 billion rubles in 2022 and, thus, witness 150% annual growth (Expert.ru, 2021).
The acceptance of the national taxonomy of sustainable development projects in September 2021 is considered as a large step towards this ambitious goal. This document established a number of essential institutions including assessment criteria for sustainable development projects and requirements for the verification system. The new taxonomy is estimated to meet international standards such as ICMA, Climate Bond Initiative, IDFC and the EU Taxonomy up to 95% degree (Shapovalov and Galieva, 2021).
Despite developing institutional system, the prospects of the national sustainable finance market remain vague in the light of the current geopolitical crisis and new economic sanctions imposed on the Russian economy. The access to the western capital markets is practically closed due to the EU ban on providing rating services to Russian clients and other sanctions including the arrest of a significant part of the foreign exchange reserves of the Russian Central Bank (European Commission, 2022). The Eastern public might be more willing to invest in Russian securities, nevertheless, the barriers mentioned above and the risks of secondary sanctions plus highly volatile ruble exchange rate complicate possible cooperation. On the other hand, as the western capital markets are closing for Russian investors, these investors will start looking for alternative investment opportunities within the national borders. Thus, Russian sustainable development projects will have to rely mostly on the inner capital market in the nearest future.
At the same time, there is a risk that the national ecology and sustainable development goals might be pushed into the background in order to compensate the harmful effects of the western sanctions. The Commission of the State Council of Ecology has discussed a possibility to lower exhaust charges by 4-5 times so as to reduce the burden for industry, though, this initiative was opposed by the Ministry of Ecology (Voronov, 2022). Such a measure could not but provoke the increase of emissions. In addition to this, a new amendment allowing construction of pipelines, railroads and highways in reserved areas has been urgently accepted by the State Duma in April 2022 and awaits further approval. Ecologists and the civil society criticize this amendment as detrimental for the environment.
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