Development of green financing and its role in the sustainable development of the banking system

Abstract

The relevance of the study is due to the need to adapt the banking sector of Ukraine to the requirements of the European «green transition» in the context of global decarbonization of the economy, strengthening regulatory requirements for non-financial reporting, as well as the growing role of ESG risks in the activities of banks. Under these conditions, the task of forming institutional principles of green financing, capable of ensuring the coordination of banking practice with European standards and the needs of the post-war recovery of the Ukrainian economy, is becoming more relevant. The purpose of the article is to study the formation and development of green financing in the banking system of Ukraine and to substantiate its importance for the transformation of banking activities and management of ESG risks. The methodological basis of the study is the institutional-economic and regulatory-analytical approaches. The institutional analysis method was used to identify the features of the formation of the green financing system and the role of key regulatory and financial institutions; the regulatory analysis method was used to assess the compliance of the national regulatory environment with the requirements and recommendations of the European Union in the field of sustainable financing; comparative analysis – to compare European and Ukrainian approaches to integrating environmental criteria into banking activities; content analysis of international reports of the European Banking Authority, the Organization for Economic Cooperation and Development and the European Investment Bank – to generalize modern practices of green financing; systematization method – in classifying green financial instruments and identifying barriers to their implementation in Ukraine. Results. The study identified key trends and institutional limitations to the development of green financing in Ukraine, in particular the lack of a national taxonomy of sustainable finance, fragmented regulatory support, insufficient coordination between state institutions and limited access of banks to long-term resources for financing environmentally oriented projects. It is substantiated that the use of green financial instruments (loans, bonds, etc.) and financial products related to the achievement of sustainable development indicators (sustainability-linked products) create the basis for the gradual integration of ESG criteria into banking activities. At the same time, the key problem remains the lack of a unified methodology for quantitatively measuring the impact of these instruments on the financial performance of banks. It is concluded that the financial mechanism of green financing in Ukraine is at the stage of institutional formation and forms the basis for the transformation of the banking system in the post-war period. The further development of green financing requires the formation of appropriate normative and methodological support, the institutional infrastructure of support for ESG-oriented financial solutions, as well as the coordination of national approaches to the classification of green financial assets, the definition of criteria for the environmental compliance of projects, requirements for non-financial reporting of banks and methods of assessing environmental risks with the provisions of the European taxonomy of sustainable financing. Prospects for further research include quantitative assessments of macro- and microfinancial analyses of green financing and the development of tools to assess the impact of climate risks on the quality and profitability of bank portfolios