MANAGING GREEN FINANCE RISKS IN UKRAINE

Abstract

As many countries around the world are implementing sustainable development policies and seeking to finance environmental, climate and nature protection measures, the use of new financial instruments is becoming more widespread, with green loans and green bonds being the main ones. At the same time, their use exposes creditors and investors to significant financial risks that financial institutions and financial market regulators have not previously taken into account in their work. Therefore, the challenge is to develop new approaches to assessing and managing the risks of using green finance instruments to ensure sustainable development. On the basis of the recommendations and guidelines provided by international financial organisations, regulatory documents of central banks of OECD member countries for 2017–2022, and recommendations of the National Bank of Ukraine, the main areas of ensuring effective risk management of lending to green projects are determined, coefficients of the probability of default of the borrower in lending to green projects are calculated. A methodology has been developed to assess the concentration level of credit risks associated with green lending. The article proposes a system of liquidity ratios to secure collateral in green lending operations. A methodology has also been developed for calculating the adjusted interest rate of yield for green corporate bonds, taking into account inflation rates and the value of the established inflation target. Considerable attention is given to improving regulatory and supervisory measures by the central bank to manage the risks associated with the use of new green financial instruments. The proposed approaches can be used by domestic lenders and investors to improve the risk management of green finance in the post-war economic reconstruction period. The issues discussed in this paper are relevant to the discussion aimed at implementing balanced approaches to green finance risk management in the process of ensuring sustainable development in Ukraine.