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Formation of the green bond market in Russia in the context of best international practices

Green bonds are considered an innovative financial instrument and are designed to facilitate investment in green projects, i.e. those connected with environmental protection, sustainable development, energy efficiency, etc.

In this report, the National Finance Association addresses a range of issues related to the development of the green bonds market. The researchers have conducted a survey of members of the Russian Council for Primary Capital Market with the aim of devising coordinated market-driven strategies for creating green financial instruments in Russia.

Scope of research

The report studies the prospects for the development of the green bonds market in Russia in the context of best international practices. The authors have identified the advantages of this type of bonds, such as attracting new investors, possibility to finance companies that work on environmental issues, and reputational gains.

The main focus of the report is on intergovernmental and international initiatives aimed at green bonds development, such as the Sustainable Stock Exchanges (SSE) initiative and the results of the activities of the working group created on the initiative of G20.

Green financing in the EU and PRC

The report explores the practices of green financing in the European Union and the People’s Republic of China with a focus on development paths and challenges faced when introducing green bonds. For example, the primary areas of green bonds development in the EU include formulating standards and nomenclature of green financial instruments, promoting investment in ecologically sustainable projects, improving the mechanisms of financial reporting and information disclosure for sustainable projects. Some of the pressing problems in the PRC are a lack of state support for green bonds, low awareness among issuers about the advantages of green bonds, absence of long-term strategy or plan regarding green projects, and insufficient participation of institutional investors in green bond offerings.

Prospects for the development of green economy in Russia

Concerning the prospects for the development of green bonds market in Russia, the authors have arrived at the following conclusions.

The Russian green bonds market is still in the process of formation. The results of the survey conducted by NFA show that as few as 15% of the respondents see demand for green bonds among their clients.
Results of the survey of members of the Russian Council for Primary Capital Market about potential demand for green bonds among their clients, % of respondents.
The same number of respondents (15%) have considered offering green bonds on the international over-the-counter market.

Another conclusion is that investment and market drivers supported by state and regulatory policies will have a stimulating effect on the development of green economy in Russia. According to the results of the survey, 100% of the respondents believe that it is necessary to introduce regulatory preferences to boost the development of green bonds market in Russia.

Thus, a collaboration between financial market participants, state and institutional organizations based on international best practices will make it possible to considerably improve the green bonds market structure in Russia and will provide drivers for growth, which will ensure financing for projects connected with sustainable development and environmental protection, and will, therefore, raise the living standards in the country.

This publication has been posted in the Roscongress Information and Analytical System on the recommendation of the Roscongress Foundation expert community.
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