Green finance comprises investments and financial instruments intended to support projects and technologies that advance sustainable development, reduce environmental impacts, conserve biodiversity, and combat climate change. This financing may be directed toward projects involving renewable energy, improved energy efficiency, clean transportation, sustainable management of natural resources, and other sectors related to environmental sustainability. Such projects may be called green projects.
Green finance instruments
Green finance instruments may include:
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Green bonds — bonds whose proceeds are used to finance or refinance green projects.
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Green loans — loans provided for projects that have a positive impact on the environment and climate.
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Green grants and subsidies — funds allocated to support sustainable development projects, generally without a repayment requirement.
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Green investment funds — funds specializing in investments in environmentally sustainable companies and projects.
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Carbon certificates, credits, and allowances — mechanisms that allow companies to finance projects that reduce greenhouse gas emissions or increase greenhouse gas removals. This is a form of financing through the issuance of instruments such as carbon certificates, which are used to incentivize greenhouse gas emissions-reduction projects. They allow companies or countries to finance projects that effectively reduce greenhouse gas emissions. These carbon credits can be traded on national or international carbon markets, where companies unable to achieve their emissions-reduction targets internally can purchase carbon credits to offset their own emissions. Carbon credits thereby encourage the financing of projects that contribute to combating climate change.
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Asset securitization — pooling green assets, such as electric-vehicle loans, into securities.
Criteria for classifying projects as green or sustainable projects.
Criteria for classifying projects as environmental or sustainable are developed by international organizations, regulators, industry associations, and rating agencies. The following are key examples of methodologies for determining project sustainability:
International standards
EU Taxonomy
Developed by the European Union to classify economic activities that align with green transformation objectives.
Criteria:
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Contribution to 6 environmental objectives, such as climate-change mitigation and the transition to a circular economy.
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No significant harm to other objectives (Do No Significant Harm).
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Compliance with minimum social safeguards, such as labor rights.
Example: A wind-power project must reduce CO₂ emissions by ≥ 90% compared with coal-fired power generation.
ICMA Green Bond Principles (GBP)
Voluntary principles for green-bond issuers.
Criteria:
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Designated use of proceeds, such as renewable energy and energy efficiency.
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Reporting transparency through annual impact reports.
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Independent verification through a third-party audit.
Climate Bonds Standard (CBI)
The Climate Bonds Initiative standard for certifying climate bonds.
Criteria:
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Compliance with industry-specific requirements, such as a 50% reduction in the carbon footprint over 10 years for solar energy.
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Mandatory project verification.
Regional and national systems
China: Green Bond Endorsed Projects Catalogue
A national catalogue of green projects approved by Chinese regulators.
Criteria:
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6 areas: clean energy, environmentally responsible transportation, and waste management.
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A prohibition on financing coal-fired power generation since 2021.
United States: SEC Climate Disclosure Rules
Climate-risk disclosure rules for public companies.
Criteria:
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Assessment of a project’s climate impact.
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Reporting of Scope 1, 2, and 3 emissions.
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Russia: Taxonomy of Green Projects under the Ministry of Economic Development.
Order No. 585 of the Russian Ministry of Economic Development dated September 21, 2021 approves the criteria for classifying projects as green, such as emissions reductions, energy efficiency, and waste recycling.
Order No. 1581 dated December 14, 2022 introduces additional criteria for agricultural and industrial projects. It clarifies requirements for water-use and biodiversity-conservation projects. It governs the procedure for verifying green projects through accredited organizations.
Criteria:
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Emissions reductions, energy efficiency, and biodiversity conservation.
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Agricultural example: Drip-irrigation projects must deliver a 30% reduction in water consumption.
Industrial example: A requirement to recycle production waste at a rate of at least 85%.
Industry initiatives
Science Based Targets initiative (SBTi)
A methodology for companies to establish targets aligned with the Paris Agreement.
Criteria:
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A 4.2% annual reduction in emissions to limit warming to 1.5°C.
Global Reporting Initiative (GRI)
Sustainability reporting standards for organizations.
Criteria:
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Disclosure of data on water use, emissions, and workers’ rights.
Task Force on Climate-related Financial Disclosures (TCFD)
Recommendations for disclosing financial risks related to climate change.
Criteria:
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Scenario analysis, such as how a project would be affected by a 2°C increase in temperature.
Green building certification
Certification systems for buildings and infrastructure that aim to reduce environmental footprints and increase energy efficiency:
LEED (Leadership in Energy and Environmental Design). Developer: U.S. Green Building Council (United States).
Criteria:
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Energy efficiency, including a 20–30% reduction in energy consumption.
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Use of materials with a low carbon footprint.
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Water conservation, such as rainwater-harvesting systems.
Russia has the Klever Voluntary Building Assessment and Certification System, clevercert.ru. It was developed by the National PPP Center and the Center for Sustainable Development in Construction and Real Estate Operations together with major developers, property owners, and the expert community, with the support of VEB.RF . The system operator is PPP Institute LLC.
Rating agencies and ESG metrics
Sustainalytics, MSCI ESG Ratings
Assess projects on the ESG (Environmental, Social, Governance) scale.
Criteria:
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For green projects: carbon neutrality, use of renewable energy, and waste minimization.
CDP (Carbon Disclosure Project)
A global environmental-data disclosure system.
Criteria:
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The level of transparency in climate-risk reporting.
2.5 Financial institutions and development banks
World Bank: Green Bond Framework
Criteria:
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Projects must comply with the UN SDGs and the Paris Agreement.
EBRD: Green Economy Transition (GET)
Criteria:
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A 25% reduction in CO₂ emissions over the project implementation period.
Stages for obtaining green finance
The stages for obtaining green finance vary depending on the particular instrument under consideration. In general terms, any project involves the following implementation stages:
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Determining the methodology and criteria for classifying the project as green:
A methodology for classifying the project as green must be selected based on the project’s industry, location, the regulatory framework in the country where the project is located, and the stakeholders involved. -
Setting objectives and developing the project:
After the methodology is determined, clear, measurable sustainability, climate, or environmental objectives are established for the project, such as a 20% emissions reduction. -
Assessing the project against sustainability criteria and obtaining certification:
The project then undergoes a comprehensive review for compliance with the selected methodology or standard. This stage may result in a project rating or certification, for example under the Climate Bonds Initiative methodology or the LEED, BREEAM, WELL, or Klever green building system. -
Determining the green finance instrument:
While the project is being assessed against sustainability criteria, the terms for raising funds through a financial instrument, such as a bond, loan, or grant, may also be examined. -
Applying for green finance:
A package of documents confirming compliance with the financial organization’s financing requirements is submitted to a bank or another lending institution. The package usually includes:
General financial documents (similar to the requirements for conventional financing):
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A business plan describing the project’s objectives, timeline, budget, and expected return.
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The company’s financial statements, including its balance sheet and income statement for the past 3 years.
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A cash-flow forecast with a payback calculation.
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Legal documents, including registration certificates, licenses, and asset lease or ownership agreements.
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Collateral, if required.
Documents confirming the project’s green status:
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An independent auditor’s opinion (Second Party Opinion or Verification Report) confirming the project’s compliance with standards such as the Green Bond Principles, Climate Bonds Standard, or EU Taxonomy.
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Certificates such as LEED, BREEAM, or Klever for construction projects.
Applications for grants and subsidies generally require:
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An application to participate in the program, such as the Green Climate Fund or a national initiative.
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Letters of support from government authorities or international organizations.
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Assessment and approval:
The financial organization then analyzes the project for compliance with ESG (Environmental, Social, Governance) criteria. -
Receipt of funds:
The most eagerly anticipated stage is the allocation of financing subject to the designated use of the funds. -
Reporting:
In most cases, financial organizations require regular submission of monitoring results for the green project, such as annual quantitative indicators of carbon-footprint reductions.
Examples of bank instruments
Many international development banks have an extensive set of programs that encourage the development of a sustainable economy by introducing green finance instruments. Examples include:
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European Investment Bank (EIB)
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Instruments: Green bonds and green loans.
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Benefits: Low-interest loans for projects intended to combat climate change and protect the environment.
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World Bank
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Instruments: Green bonds and dedicated grants for developing countries.
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Benefits: Financing for sustainable development projects with an emphasis on innovation and technology transfer.
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The World Bank actively supports and promotes the use of EDGE (Excellence in Design for Greater Efficiencies) certification as part of its efforts to encourage green building construction in developing countries. EDGE is a certification system developed by the International Finance Corporation (IFC), a member of the World Bank Group, to confirm the energy efficiency and environmental sustainability of buildings.
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Asian Development Bank (ADB)
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Instruments: Green loans, grants, and investment funds.
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Benefits: Support for projects in the Asia-Pacific region that aim to reduce greenhouse gas emissions and adapt to climate change.
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KfW Development Bank of Germany
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Instruments: Green bonds, green loans, and direct investment in environmental projects.
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Benefits: Low interest rates and long-term financing for sustainable development projects.
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These banks and other financial institutions around the world actively participate in green finance, providing the resources needed to support environmentally sustainable initiatives.
Country-level support for green finance in Russia, Uzbekistan, and the Netherlands
At the government-initiative level, countries have various green finance support instruments used to incentivize projects related to sustainable development.
Examples from Russia
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Government subsidies and grants:
The Russian government provides financial support for projects intended to improve energy efficiency and develop renewable energy sources through various federal and regional programs.
Federal and regional budgets allocate funds to implement these programs. This may include direct project financing, government guarantees to attract private investment, and financing through dedicated environmental and energy funds.
Examples of such programs:
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Federal Energy Conservation Program. This program includes a range of measures intended to improve energy efficiency in various sectors of the economy, including industry, housing and utilities, transportation, and government institutions. Its principal objective is to reduce energy consumption and increase the efficiency of its use.
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Renewable Energy Development Program. Under this program, the Russian government encourages the use of renewable energy sources such as solar, wind, hydropower, and bioenergy. The program includes support mechanisms such as tax incentives, grants, and subsidies for projects using renewable sources.
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State Energy Development Program. This program covers a broad range of measures aimed at modernizing and developing energy infrastructure, including the introduction of modern technologies to improve energy efficiency and increase the share of renewable sources in the country’s overall energy system.
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National Ecology Project. Although the principal focus of this national project is environmental protection, it also includes components related to energy efficiency and renewable-energy development. The project provides financing for measures to improve environmental conditions, including through the use of clean technologies.
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Green bonds:
In recent years, interest in issuing green bonds has grown in Russia, allowing companies to raise capital to finance sustainable projects. Information about green bonds and other financial instruments is available on the Moscow Exchange (MOEX) website.
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Tax incentives:
Tax incentives are available to encourage investment in energy-efficient technologies and renewable energy sources. Examples include tax holidays for new projects, reduced corporate income tax for companies implementing energy-efficiency projects, and VAT exemptions for equipment used to generate energy from renewable sources.
Examples from Uzbekistan
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Government support programs:
Uzbekistan is actively developing green finance support programs, including subsidies and concessional loans for the agricultural sector, energy, and water supply.
Renewable Energy Development Program (Resolution of the President of the Republic of Uzbekistan). The program provides the following instruments:
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A green tariff for solar and wind power plants for up to 10 years.
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Concessional loans for private investors through the Renewable Energy Support Fund.
Project examples:
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Nurabad-1 Solar Power Plant (100 MW, Samarkand Region).
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Zarafshan Wind Farm (500 MW, Navoi Region).
Energy Efficiency Program in the Housing and Utilities Sector.
The program includes measures such as:
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Reconstructing heating networks with a 40% reduction in losses.
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Installing smart meters in 500,000 households.
Financing includes grants from the State Energy Conservation Fund.
Project example: modernization of the heating system in Nukus, reducing CO₂ emissions by 15,000 metric tons per year.
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International cooperation:
Uzbekistan cooperates with international financial institutions such as the Asian Development Bank and the World Bank to obtain financing and technical assistance for environmental projects.
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EBRD: €500 million in financing for renewable energy and energy efficiency through 2025. Project examples include financing solar power plants in Navoi and Samarkand https://www.ebrd.com/uzbekistan.html
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Asian Development Bank (ADB): $500 million loan for renewable energy https:// www.adb.org/where-we-work/uzbekistan
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United Nations Development Programme: Support for climate-change adaptation projects https://www.undp.org/uz/uzbekistan
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Development of the green bond market:
The country has begun exploring the potential of the green bond market to attract investment in sustainable projects.
One example of Uzbekistan’s actions is the issuance of its first sovereign green bonds in 2024 in accordance with ICMA (International Capital Market Association) standards. The funds raised are intended to finance projects involving:
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Renewable energy, including solar and wind power plants.
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Energy efficiency, including modernization of housing and utilities and industry.
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Sustainable transportation, including electric buses and railways.
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Water management, including the introduction of drip irrigation
The issue must comply with the Green Bond Principles, international rules ensuring transparency in the use of proceeds and the environmental effectiveness of projects. https://uzdaily.uz/ru/
Examples from the Netherlands
The Netherlands participates in many programs whose development is driven both by European directives and by the country’s domestic sustainable development objectives.
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EU Taxonomy and Green Deal
The EU Taxonomy is a cornerstone of the EU sustainable finance framework and an important market-transparency tool. It helps direct funding toward economic activities aligned with the objectives of the European Green Deal.
All projects must comply with EU Taxonomy criteria https://finance.ec.europa.eu/sustainable-finance/tools-and-standards/eu-taxonomy-sustainable-activities_en
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Government guarantees and subsidies
SDE++ Program https://english.rvo.nl/subsidies-financiering/sde
The program incentivizing sustainable energy production and the climate transition provides subsidies to companies and nonprofit organizations that produce renewable energy or reduce CO2 emissions on a large scale
Green Projects Fund program Financing for cleantech startups https://www.rvo.nl
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Green bonds
Government issues: The Netherlands issued its first sovereign green bonds in 2019 https://www.dutchstate.nl
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Blended solutions
The Smart Energy Grids program https://topsectorenergie.nl/en/ in the Netherlands is implemented under the Topsector Energie initiative, which brings together business, academia, and government to accelerate the energy transition.
The program includes both government grants under the MOOI-SES Program (Mission-driven Research, Development and Innovation Subsidy) and joint investments, with private-sector co-financing representing at least 30% of the project budget.
It is important to meet the program criteria : innovation, scalability, and contribution to CO₂ neutrality.
Conclusions
Green finance is becoming a key instrument for supporting projects aimed at sustainable development and resource efficiency, reducing environmental impacts, and combating climate change. As businesses transform in response to global challenges, this instrument is becoming increasingly popular and sought after .
The experience of leading international banks and government programs in various countries demonstrates the successful application of green financial instruments. These examples confirm that green finance is an effective means of encouraging the transition to a more sustainable economy and reducing negative climate impacts.
Green projects are becoming more visible and attractive to investors and business owners, primarily because:
Investment in energy-efficient technologies improves the quality of project development and reduces the costs of maintaining and operating properties, .
Environmental responsibility increases the trust of clients and partners, helping to improve loyalty and the project’s appeal,
Government support and dedicated financial instruments make it possible to reduce project costs, .
Certification and an environmental focus increase the market value of real estate.
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