Climate change (0.85 °C – the average temperature of the Earth has increased over the last 100 years), the COVID-19 pandemic, resource depletion – have no limits and force all countries to be more responsible for the environment. In 2015, 195 states discussed how to end the environmental crisis and signed the Paris Agreements. The plan is that the average temperature on the planet should not rise by more than 2 °C. Although the ratification of the agreements does not provide for responsibility, the developed countries take the climate crisis seriously [1].

The consumer approach is being replaced by a conscious one, which aims to save money, reduce damage to nature and be willing to invest in «green» initiatives.

The implementation of environmentally friendly projects requires considerable investment, but due to lack of domestic financial resources, imperfect banking activities do not allow to implement these projects. Changing the world towards sustainable development draws the attention of most governments to the need to mobilize «green» finances, which in turn will allow the transition to a «green» economy, promote the growth of «green» industries and the introduction of clean technologies, and create new workplaces.

«Green» finance includes the following financial instruments: «green» investments, «green» loans, «green» bonds, grants, technical assistance, etc.

According to the Organization for Economic Co-operation and Development (OECD), «green» (in a broader sense: «low-carbon» and «climate-resilient») treats investments as investments in enterprises, projects and financial instruments, mainly in the renewable energy sector, which contribute to reducing carbon emissions, climate change mitigation and the spread of environmental technologies [2].

Some investors believe that the acquisition of shares in a company that conducts business with concern for the environment in the traditionally «dirty» industry, «green» investment. For example, an oil company takes maximum measures to prevent environmental damage during operations, and the acquisition of its shares as a «green» investment may be controversial, as burning fossil fuels makes the largest (negative) contribution to global warming. This blur created the problem of «green camouflage» [3].

Green loans are a tool used by financial institutions in most countries of the world to finance environmentally friendly projects. In most cases, these loans are soft or «flexible» and can thus be repaid at a lower than market interest rate. However, this tool has certain risks for the lending institution, it is necessary to conduct a thorough examination of the financial «viability» of the project and the creditworthiness of the borrower, which increases administrative costs.

Another tool is grants, which provide «no cost» funding for the project developer. However, the use of this tool is the most risky for the investor: they often limit control over the use of capital and there is no possibility of its return [4, p. 92].

An alternative is technical assistance, which is expressed in the transfer of funds, property, equipment, as well as in the provision of services and information, performance of work, training and internship of personnel, transfer of intellectual property. Technical assistance may be provided for a specific project or financial intermediaries-partners implementing a credit line. Non-profitability of technological assistance means that it must be attributed to foreign investment, which aims to achieve a social effect.

The advantage of this tool is that its implementation can contribute to the creation of a successful experience of financing or implementation of «green» projects. Technical assistance is useful for projects and banks and is often an important complement to other financial instruments. The obvious disadvantages of the tool are the high transaction costs due to the need for their individual design in each case.

One of the most effective financial instruments in the capital market used for climate change projects is green bonds.

«Green» bonds are an instrument of raising capital, a type of debt securities that certifies the loan relationship between the issuer and the bondholder and confirms the issuer's obligation to return to the bondholder its face value within the prescribed period and pay income on the bond, unless otherwise provided. Most green bonds are medium-term instruments (7–8 years). The main source of redemption of these bonds is cash receipts from assets. Technically, these bonds are no different from any other debt securities. Investors buy them, like other bonds, and the issuer receives money to implement their project. The main difference is only that such funds are targeted and can be spent only on projects with a positive impact on the environment. Such initiatives are: projects of alternative energy sources, «clean» transport, projects of creating «smart» buildings and developing systems for efficient waste disposal. Funds can be used not only for new projects, but also for refinancing existing ones [5].

Today, the agricultural sector of Ukraine is the most attractive for investment for both domestic and foreign investors. This is facilitated by natural conditions, fertile land, cheap resources, the availability of developed infrastructure and agricultural machinery, the proximity to consumer markets.

Every year, the domestic agricultural sector produces 120 million tons of waste, including green mass, organic animal waste, spoiled food and used water, estimated at the UN. As a rule, these resources are found in the landfill, which harms the environment and provokes conflicts between farmers and agricultural producers or takes it to the landfill, or simply bury it in the fields, saving on fertilizer. But this problem generator can be turned into an additional source of income for farmers – straw can be processed into fuel pellets. The Bioenergy Association of Ukraine (next – BAU) estimates that pellets from agricultural biomass in Ukraine can replace 27 million tons of conventional fuel annually with a total demand of 180 million tons. So far, Ukraine produces only 1.5 million pellets a year, of which half a million are exported to the EU.

EU countries also show another example of the utilization of agricultural waste – 75% of biomass and organic waste are processed by European farmers into biogas. This energy resource has its benefits – one cubic meter of «green» gas is enough to cook lunch for 7 people. The main problem for the conversion of agricultural raw materials into biogas is the expensive construction of such complexes. UAB details: to run one biopower plant you need to spend $ 1 thousand per 1 kW of power. That is, a 5 mW plant costs $ 5 million. Issuing green bonds is the best way to get farmers interested in investing in biogas [6].

As of the third quarter of 2019, the share of energy received from renewable sources is 8.6%. This is not much, but given the rapid growth rates and plans set out in Ukraine's energy strategy, by 2020 this percentage of renewables in final consumption should be 11%. Reaching such a percentage is part of Ukraine’s commitments to the European Energy Society and is enshrined in the National Renewable Energy Action Plan until 2020. According to the same strategy, in 2035 the share of green energy in the total primary energy supply should be 25%.

«Green energy» is a promising direction for development in order to achieve energy independence. This requires appropriate legislation, material and technical base and, of course, funds for the implementation of these projects. The implementation of energy-saving solutions is not only cost-effective, but also helps to increase the efficiency and specificity of production without harming the environment.

Thus, the need to take action in the face of growing climate, environmental and social challenges is beyond doubt, and the financial sector plays a key role in the global economy, and without its participation, environmental projects will not be fully implemented. It is important to create a domestic market for «green» finance, which will direct investment to finance environmental projects and will be a catalyst for sustainable development.

References:

1. Green energy in Ukraine. What's going on? RBC-Ukraine, 2020 [El. source]. – Retrieved from: https://greenenergy.rbc.ua/page-2 [in Ukrinian].
2. R. D. Croce, Ch. Kaminker, F. Stewart. The Role of Pension Funds in Financing Green Growth Initiatives. – OECD Working Papers on Finance, Insurance and Private Pensions, №10, p. 11, http://www.oecd.org/ finance / private-pensions / 49016671.pdf [in English].
3. Tkachenko M. The law on attracting investment: what is wrong with the green bond market [El. source]. – Retrieved from: https://money.comments.ua/ua/article/investments/zakon-pro-zaluchennya-investiciy-scho-ni-dokazati-v-rinku-zelenih-obligaciy-658198.html [in Ukrinian].
4. «Green» investments in sustainable development: world experience and Ukrainian context / head. project K. Markevich; Science. cons. V. Sidenko. – Kyiv: Testament, 2019. – 316 p. [in Ukrinian].
5. Cheker J., Kulinich V. (2019). Environmental investments: will Mind [Mind] green bonds appear in Ukraine? – Retrieved from: https://mind.ua/ru/openmind/20202397-ekologicheskie-investicii-poyavyatsya-li-v-ukraine-zelenye-obligacii [in Russian].
6. «Green» reserve: how Ukrainian farmers are implementing alternative energy [El. source]. – Retrieved from: https://tsn.ua/ru/groshi/zelenyy-rezerv-kak-ukrainskie-agrarii-vnedryayut-alternativnuyu-energetiku-1220526.html [in Russian].