The role of commercial banks in sustainable finance

Abstract

The market for financial instruments for sustainable finance has enormous growth potential. So far, Ukrainian banks adhere to a passive strategy in sustainable financing, which, in contrast to the active strategy, assigns banks the role of an agent in the implementation of national or international programs. Moreover, ‘green’ financing at the state level is seen as synonymous with sustainable finance. Lending to energy efficiency projects for businesses and households dominates among all areas of sustainable financing. Banks with local capital and especially state-owned banks are losing access to wholesale borrowing markets. The dependence of many Ukrainian banks on the target funds of international lenders for the development of sustainable financing weakens national financial security in the absence of large-scale national programs. It is expedient at the level of the Government of Ukraine to develop a program to intensify sustainable financing, with an emphasis on green and social impact and implementation through state banks. Sustainable financing should not exacerbate structural imbalances due to the curtailment of lending to sectors that have accumulated problems with adherence to environmental standards, social norms and corporate governance. The National Bank as a regulator and supervisor is able to act as a catalyst for the development of sustainable finance in Ukraine, with adoption of relevant standards harmonised with EU taxonomy.