Sustainable Finance: Features and Perspectives

The article provides a comprehensive study of sustainable finance in the context of urban development projects in Ukraine. Research of this topic is important, because modern cities are rapidly growing, and innovative solutions are needed to manage this expansion while addressing environmental challenges. The authors emphasize the importance of sustainable finance in achieving the United Nations' Sustainable Development Goals, particularly Goal 11 "Sustainable cities and communities". Post-war reconstruction gives Ukraine the opportunity to rebuild its cities based on green principles, in line with the European Green Deal and aiming for climate neutrality by 2050. This transformation requires innovative financial strategies, including sustainable finance, which integrates environmental, social, and governance (ESG) considerations into investment decisions. The article highlights the key principles of sustainable finance framework and the main categories of financial instruments used in sustainable finance transactions. The authors studied the progress of sustainable finance in Ukraine, namely the formation and development of the legislative framework, strategic planning, financial instruments and the integration of ESG considerations into financial decision-making. Furthermore, the article discusses the funding sources and mechanisms for sustainable development in Ukrainian cities, including public and private financing, international technical assistance projects, and state programs. The authors also emphasize the importance of strategic planning and donor coordination in achieving sustainable urban development goals. Key tasks include improving financial mechanisms, stimulating private capital, and developing realistic post-war urban plans. Overall, the article concludes that while Ukraine has made progress in developing sustainable finance, there is still work to be done to fully integrate sustainable finance principles into the country's financial sector. The authors emphasize for continued efforts to improve the legislative framework, raise awareness, attract of private investors, enhanced risk management, develop digital technologies, and expand concessional funding to support sustainable urban development in Ukraine. Addressing these challenges will be important for achieving sustainable urban development and aligning Ukraine’s financial system with global sustainability trends.

The study deals with measuring the investment environment transparency for responsible investment, assessing it in Ukraine, and improving it through the rating means in sustainable development. There are ratings, rankings, indices, benchmarks and sustainable development standards as unique markers in responsible investment markets, considering the ESG − criteria for screening companies. The authors prove that ratings are tools for minimizing information asymmetry at the micro and macro levels, which is quite significant, especially in the responsible investment field. Rating is a leading factor in creating a transparent environment for investment decisions and ensuring a favorable investment climate in the world (considering the sustainable development ratings and progress towards sustainable development) and the investment attractiveness of companies (considering ESG − reporting criteria on sustainable development of companies). The authors pay much attention to the world’s sustainable development ratings, which incorporate the transparency component of the investment environment. The authors analyze Ukraine’s position in these rankings and conclude that its status and investment attractiveness are deteriorating in the international arena, particularly due to insufficient transparency of the investment environment, perception of corporate social responsibility and weak progress towards the Sustainable Development Goals. Structural and dynamic analysis of the signatories and participants of the UN Global Compact network in Ukraine confirm this thesis. Despite the positive dynamics of network members, especially in recent years, their number and composition are unrepresentative towards companies, financial sector institutions, NGOs and government organizations as leaders in the values of sustainable development and social responsibility in Ukraine. Consideration of the European countries’ experience embodied in the new EU investment plan, comprising three areas and ten measures aimed at mobilizing 650 billion euros of investment in sustainable development and the investigations made by a supranational organizations network (OECD, UN Development Program, the Sustainability Accounting Standards Board). The Global Reporting Initiative, the International Finance Corporation, the Global Impact Investing Network, and other stakeholders are essential steps in increasing Ukraine’s investment environment transparency. Ensuring environment transparency of the responsible investment by introducing methods of ranking companies and countries considering their social responsibility and achievements in the sustainable development field and its goals, standardization of products, techniques and strategies of responsible investment are key priorities of Ukrainian state investment policy. Keywords: Transparency, Investment Environment, Information Asymmetry, Ranking, Sustainable Development, Responsible Investing.

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The author provides an overview of ESG in the financial markets. She sets out that sustainable finance has been around for years. After publication of the Sustainable Finance Action Plan by the European Commission in March 2018, sustainable finance rose to the top of the EU legislative agenda for the financial markets, as well as the regulatory and supervisory agenda of EU and national supervisors and competent authorities of the financial sector. The author provides an overview of various sustainable and ESG products that have been a feature of the international financial markets, such as green, ESG and sustainability-linked loans and bonds. The author also discusses the current legal framework in which these financial products are issued, with a focus on EU-level legislation, including the Taxonomy Regulation and the Sustainable Finance Disclosure Regulation, and considers legal and regulatory developments on the horizon, such as the Green Bonds Standard and Climate Benchmarks. The author concludes with a few remarks on general trends in ESG and sustainable finance developments in the financial markets.

This chapter is designed to provide insights on the pertinence of responsible investing in both developed and developing economies in light of the international deliberations on sustainability and sustainable development. Responsible investing presents a strong business case for institutional investors to merge ethics with profitability. However, to develop a strong business case, it is imperative to dive deeply into the various forms of responsible investing, and the recent trends, drivers and barriers associated with it. Institutional investors pertain to various environmental, social and corporate governance (ESG) evaluation methodologies, subject to the type of financial instruments and availability of ESG data. These assessments help investors to undertake informed decisions and lead to ESG integration in several asset classes such as listed equity, fixed income, hedge funds and private equity. Although the extent of integration varies considerably across geographical domains and asset classes, there is an increasing recognition of better returns from ESG diversified portfolios. Several asset management companies (AMCs) are adhering to varied ESG integration approaches in developed economies. These approaches clearly cater to different application, research and management levels to be categorized as fundamentalist, believer, cautionary, discretion, statistician and transition-focused. Despite the rising signatories to the United Nations Principles for Responsible Investment (UNPRI), there are several deterrents which affect the growth of responsible investing. The reflective and exploratory approach undertaken in this chapter is likely to benefit students, academicians and professionals working in the domain.

Financial instruments in supporting the sustainable development of cities and regions The main objective of this publication is to present selected instruments of sustainable development financing with a particular focus on cities and regions. The monograph starts with a systematization of concepts and terms related to sustainable development, and sustainable finance and then focuses on crowdfunding in achieving sustainable development goals. Subsequent chapters deal with green bonds, the green transformation of cities, and finally the issue of special-purpose revenues, their contribution to the sustainable budget of local government units, and the issue of financial self-reliance of local government units. The monograph focuses on current research trends and points out stakeholder groups in financing sustainable development. The analyses carried out in the monograph are based on bibliographic and critical analyses and data from public statistics and reports published by professional organizations and institutions. The summary indicates that implementing many activities also depends on the involvement of local communities. Financing small initiatives in cities or regions is an important factor in supporting the achievement of the SDGs. The catalog of financial instruments supporting sustainable development is broad. These include bonds, loans, credits, and innovative forms like crowdfunding. Local government funds spent as part of the budget, and those allocated to initiatives submitted in civic budgets, are also important.

In 2015, the governments of 193 United Nations member states adopted the 2030 Agenda for Sustainable Development, followed by the Paris Agreement. Their detailed solutions assume the inclusion of the concept of sustainable finance into investment decision-making processes, including directing capital towards sustainable investments and stopping climate change. The main subject of the study is sustainable finance, which is one of the pillars of the sustainable development of the global economy, which has also become an important objective of the European Union, enshrined in the Treaty of Lisbon. The main aim of the paper is an extrapolation of risks appearing in the unstable environment of credit institutions, which are increasingly boldly directing their expectations on their inclusion in the sustainable finance concept implementation. The empirical research included in the first stage a questionnaire survey, while in the second one, a quantitative comparative analysis. The research was aimed at verifying the research hypothesis stating that after the global financial crisis, banks meet the new prudential capital regulations, however by their inclusion in the concept of green finance, they will increase a share of mitigation in the bank risk management strategy. The research, carried out in the Polish banking sector, has shown that domestic banks meet all prudential requirements resulting from the new capital norms. However, investment strategies, based on the composition of the portfolio in accordance with the principles of sustainable finance and on high rates of return in the long term, will change banks’ resilience to key risks from the perspective of sustainable development.

In this study, the concept of sustainable finance, sustainable finance elements, sustainable finance instruments and information on the development of sustainable finance in the world and in Turkey are presented to the readers. In the study, the emergence of the concept of sustainability and its applications in the finance world are mentioned. In this context, information is provided on green bonds, social bonds, sustainability bonds, green loans, blue bonds and green sukuk, which are increasingly important sustainable finance instruments in the world and Turkey. In addition, in the last part of the study, the international development of sustainable finance is presented chronologically in the following order: 1987 Brunthland Report, 1992 Rio Summit, 1997 Global Reporting Initiative Institute determining the principles and procedures of sustainable reporting, 1999 global Dow Jones Sustainability Index, 2002 Global Reporting Initiative Institute's first sustainability guide on sustainable reporting, 2008 global financial crisis, 2012 Rio+20 summit, 2015 Addis Ababa Action Plan, 2018 Sustainable Action Plan, 2021 Glasgow COP26 climate summit held between October 31 and November 2. It is noteworthy that especially at the Glosgow COP26 climate summit, the issue of financial institutions acting more sensitively to the climate crisis was put on the agenda for the first time. The development of sustainable finance in Turkey, again chronologically, is as follows: "Sustainable Financing Framework Plan" published by the Treasury in 2021, 'Sustainable Banking Strategic Plan' published by the Banking Regulation and Supervision Agency in the same year, 'Sustainable Working Group' established within the Banks Association of Turkey in 2022, establishment of a 'Green Asset Ratio Working Group' as a financial performance indicator by the Banking Regulation and Supervision Agency and the Banks Association of Turkey in 2022, publication of a green bond guide for Turkey in 2022 and publication of a 'Green Sukuk Study Report' in May 2022.

This chapter assesses the Islamic social financial approach by reviewing the concepts of nature, society, and environment of the current social reporting models such as triple bottom line and environmental, social, and governance (ESG) and integrated (corporate) value reporting. These are examined to analyse the limitations of the capital centric and profit motive focus of shareholder wealth approach. Based on the current ‘responsible investor' and ‘social responsibility investment' principles, the view of environment as ‘externality' has impeded the potential realization of social good from an ‘eclectic paradigm' of integrated reporting. An eclectic paradigm is adopted for the integrated Islamic social financial reporting approach by the internalization of environment as part of socio-economic goals to attain social harmony. It offers an opportunity for higher commitment to a more sustainable Islamic social finance development using the principles derived from Infaq, Sadaqah, Hiba, and Waqf. COVID-19 pandemic is particularly unique and to a certain extent has stalled profit motive commercial efforts to activate social funding responses. A more sustainable response is attainable from social market community-based system rather than market-based system. With Islamic social finance approach to COVID-19 pandemic, a more integrated, inclusive, and sustainable reporting is proposed.

Notwithstanding the highly laudable efforts of the Principles for Responsible Investment and other Environmental, Social, and Corporate Governance (ESG)-related trade groups and organisations, Responsible Investment (RI) has still to be mainstreamed in the financial services industry. Despite hugely increased awareness, implementation still lacks depth across many financial institutions. The major challenge is that mainstreaming RI effectively involves a system change—a paradigm shift that, amongst other things, will require a corresponding culture change within the world of institutional investors and with it a higher degree of knowledge skills and expertise. This is no easy task: at a fundamental level, it is proving difficult to change or redirect the financial services sector. Even following the global financial crisis it would appear that, rather than change, the system has, in broad terms, merely been repaired with largely the same people doing similar things as before, albeit in a tighter and less permissive regulatory environment. Genuine global industry ESG integration and adoption of RI will require additional efforts and a greater diversity and depth of knowledge, skills, and understanding from an employee’s entering or wishing to flourish in the sector. It is in this aspect that business schools and other higher education facilities can play a leading and hugely significant role to address some of the current gaps. This chapter addresses how sustainability thinking can be embedded in finance curriculum.

The international literature shows significant growth in relation to sustainable rural development in response to ongoing problems. The Principles for Responsible Investment in Agriculture and Food Systems (CFS-RAI) enable projects to be aligned with the Sustainable Development Goals (SDGs). In this article, we present an empirically grounded analysis of these RAI principles based on in-depth case studies in seven countries (Spain, Ecuador, Peru, Dominican Republic, Bolivia, Colombia, and Mexico). This experience comes from an international project coordinated by the GESPLAN Research Group at the Polytechnic University of Madrid. The Working with People model is incorporated into the methodological process to analyze rural actors’ understanding of the CFS-RAI principles in different countries and in university–business relation contexts. The results show the effectiveness of the WWP model based on the integration of three dimensions—ethical–social, technical–business, and political–contextual—as an effective method for planning sustainable rural development projects in various contexts. The empirical evidence presented indicates that combining the WWP model with the principles of CFS-RAI in rural contexts allows progress toward sustainable development, balancing economic aspects with human, social, and environmental well-being.

Learning outcomes To understand the motivations for adopting RI practices for institutional investors and asset managers; to understand the different RI strategies available to institutional investors; to understand the impediments to adoption of RI at an organisational level; to debate how financial institutions can drive the growth and adoption of RI among the investment community; and to illustrate the complexities of organisational change and the strategies that institutional entrepreneurs can use to overcome resistance to change from key stakeholders. Case overview/synopsis: The case is set in October 2017 against the backdrop of the pending unbundling of Old Mutual plc into four new independent businesses, and the subsequent relisting of Old Mutual Ltd on the Johannesburg Stock Exchange in South Africa. The head of responsible investment at Old Mutual Investment Group and the main protagonist of the case, Jon Duncan, is considering what the subsequent relisting will mean for the responsible investing programmes that he has set up over the past six years. The case goes on to describe how responsible investment principles were supported through the implementation of ESG integration and active ownership strategies. It also examines recent developments in ESG product innovations and demonstrates another technique available to responsible investment practitioners in the form of best-in-class ESG screening. The case ends with Duncan contemplating the strategic priorities of the RI team moving forward, and how the managed separation might impact on the RI agenda. It provides prompts for students to discuss and formulate a strategy for advancing the aims of responsible investing. Complexity academic level The case is aimed at postgraduate-level students enrolled in a management-related degree programme such as an MBA, and covers both sustainable and responsible finance and institutional entrepreneurship theory. Supplementary materials Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes. Subject code CSS 1: Accounting and Finance

Objective: This study aims to design teaching activities that integrate critical thinking on sustainable finance into finance courses. It aims to develop students' ability to incorporate sustainable finance into investment decisions and promote the United Nations' Sustainable Development Goals (SDGs) through the power of finance. Theoretical Framework: This study designs teaching activities based on Critical Thinking (CT) theory to stimulate students to express their views and opinions on various sustainable finance issues. Method: This study invited a panel of five teachers from finance-related fields to review the curriculum. Results and Discussion: The result of this study adopts a theoretical perspective of critical thinking and builds the concept of sustainable finance based on financial management, aiming to enhance university students' financial management skills and sustainable investment awareness. hence, financial education practitioners need to work together to educate future multinational financial talents in a way that suits their environment and the promotion of sustainable finance. Research Implications: The findings of this study aim to cultivate students' critical thinking and design courses that integrate sustainable finance with subject units, encouraging teachers to explore ways to incorporate sustainable development concepts into their teaching. Originality/Value: Encourage more teachers to design sustainability-related course content to promote the SDGs through education.

Between 2007 and 2016, the European Commission invested € 1.8 billion in a new policy initiative called JESSICA (Joint European Support for Sustainable Investment in City Areas). Since especially European cities perceived a shortage of investment dedicated to urban regeneration projects, JESSICA shall finance more than 2,000 higher risk projects in order to create an economic stimulus. At the same time, JESSICA is part of a general paradigm shift in EU-policy, since its most innovative element is to introduce an alternative to traditional grant funding by providing financial instruments – namely loans, guarantees and equity capital – on a revolving base. This means that instead of financing sustainable urban development projects with grants that are – once paid out – lost for good, revolving financial instruments for successful projects may generate a capital backflow enabling Managing Authorities to reinvest in new urban development projects. In order to channel funds effectively to sustainable urban projects, the institutional framework of the JESSICA-initiative intends to set up urban development funds as financial intermediary. The special challenge of JESSICA is to combine these financial engineering instruments with integrated urban planning issues in a sustainable fund model. Thus, the three main objectives of the JESSICA- initiative are (i) to promote urban development projects as economic stimulus, (ii) to provide cost-effective, long-term financing to support urban transformation in a sustainable fund model and (iii) to mobilize private capital for public-private partnerships. Concerning the latter, the JESSICA-initiative shall attract private investors and banks to finance sustainable urban development by providing catalytic first-loss capital via UDFs that lowers the risk and enhances the return of private investors, therefore making more projects feasible and overcoming existing market failures. However, at the end of the first EU-programming period to introduce revolving financial instruments (2016) it is not yet clear whether the new policy approach is as effective as European decision-makers believe. This is mainly because up to now there is no empirical evaluation available on how successful JESSICA has been so far in achieving its ambitious objectives. Therefore, we first develop a conceptual base to efficient urban development funds. Our succeeding empirical approach is the first one to cover the impact of this innovative EU-initiative in all 28 EU member states by making outcomes of the policy change measurable in monetary terms through regression analyses. Our main findings reveal that absorption of funds to be invested in sustainable urban projects takes far longer than expected due to the complex structure of the fund model, which in return leads to higher costs. Impact measurement of external effects seems to be a great challenge for fund managers, too. Apart from that, no private investors or banks have contributed their own equity/risk capital in the JESSICA-initiative so far. Based on these findings, we develop practical implications on how to reform the JESSICA-initiative in the current EU-programming period. At the same time, our work is the first one to give research implications on how to derive key success factors for sustainable urban finance, especially addressing the challenge of impact measurement and ultra-long financing horizons.

Purpose. The study aims to assess the European experience of funding for sustainable development of rural communities and the possibility of its implementation in Ukraine. Methodology / approach. The research was carried out using the following methods: bibliometric, trend, cluster – to assess the scientific productivity of research, identify key trends in scientific approaches to the issues under study; comparative, systemic, institutional and functional analysis – to determine the functional links between different elements of the European Union (EU) funding system, as well as correlation and regression analysis – to establish the degree of interconnection between different sources of funding for rural communities in the EU member states. Results. The authors conducted a cluster analysis and built a bibliometric map of the distribution of publications by country for the search query “sustainable development” and “sustainable rural development funding” in the Scopus database between countries for the period 2000–2024. This allowed to form a clear scientific picture of the development of the studied issues, as well as to establish the relevance, complexity and interdisciplinarity of approaches to solving the outlined tasks. It has been proved that the common budget is an instrument for implementing policies and programmes that promote economic growth, social cohesion, and stability in the EU, helping member states solve problems and achieve the Sustainable Development Goals. It is emphasised that the EU budgetary policy affects the eligibility conditions and criteria for the allocation of funds and thus reflects the EU’s political priorities, among which sustainable development of rural areas and communities is among the key ones. The composition and structure of financial instruments used for the sustainable development of rural communities in the EU under the Cohesion Policy were clarified. The main funding instruments for rural communities in EU member states, including loans, grants, capital or quasi-capital, and guarantees, are highlighted. It is emphasised that using the EU’s experience in funding sustainable development of rural communities, Ukraine can successfully continue its path to European integration, implementing the necessary reforms and using European resources to modernise and develop both communities and the economy as a whole. Originality / scientific novelty. The study provides a deeper understanding of the funding mechanisms and their impact on the regional development of member states. An empirical study of the integration of various financial instruments, such as grants, loans, capital and quasi-capital, and guarantees, allows identifying new dependencies that have not been previously taken into account in research. The results contribute to scientific knowledge, deepening the understanding of the mechanisms of financial support for the sustainable development of rural communities. Practical value / implications. The results of the study can be used by local governments in developing strategies for the socio-economic development of rural communities, particularly, the European experience of attracting and using financial resources can contribute to the achievement of economic, environmental and social parameters of sustainable development.