УДК 336.7

Green finance development. Case of Russian Federation

Максимов Евгений Сергеевич – магистрант кафедры экономики Санкт-Петербургского государственного университета

Abstract: The aim of this study is to assess the current status of green finance in Russia and develop suggestions for further enhancing its progress. The research is founded on current economic and mathematical methodologies, which enabled us to produce scientifically novel and practically useful outcomes. Our investigation looked into the evolution of scholarly opinions regarding sustainable development and the creation of green economy. The data on green financing in the Russian Federation from 2005 to 2021 has become the object of our analysis. The regression models developed by the authors demonstrates that a 1 million roubles increase in investments in fixed assets for environmental protection will lead to 2 million roubles increase in current environmental expenditures. As well as that such 1 million roubles increase lead to 0,001% decrease in the investments share of total investments. Thought, the Investments growth rate and share Investments growth rate from total has dynamic correlation. The article concludes that, despite the growing of investments and expenditures in same assets having purpose protection of environment in absolute numbers their share of total investments are decreasing.

Keywords: green finance; green economy; Russian Federation.

Introduction

In recent years, there has been a lively debate within the global community about an economic growth model that incorporates both its essential elements (such as technological progress, index of human capital, modernization of economy and production, infrastructure development, and macroeconomic situation and stability) and growth driven by environmentally-friendly measures. The rapid progress of science and technology in the global economy has led to a significant increase in the impact caused by humanity on the environment, resulting in the depletion of natural resources, ecosystem deterioration, and a reduction in the biosphere's ability to regenerate. It is noteworthy that since 1980s, world consumption of natural resources has exceeded the Earth's productive capacity, as well as, the planets ability to absorb it [1, p. 1850-1857]. At present, the total ecological footprint of humanity (demand) exceeds the bio-capacity (supply) of the planet by 50%. In 2019, Earth's bio-capacity was 1.67 hectares per person [2]. Russia ranks among the top ten countries both in terms of the largest bio-intensity reserves and the highest ecological footprint values. Over the past few years, more and more nations, including OECD countries, have embraced the idea of a green economy and transitioning to environmentally-friendly economic growth as a strategic model for national economic development. Russia has also joined this movement, and in 2017, the government developed the Environmental Security Strategy of the Russian Federation for the period until 2025, which reconfirmed its dedication to pursuing green economic growth [3, с. 2356-2372]. However, achieving sustainable economic growth through environmentally-friendly means that do not harm the environment or deplete natural resources requires the establishment of an effective green financing system. The pressing concern for sustainable development in light of global climate change and environmental degradation has led to a new paradigm known as the green economy, emphasizing the need for an effective green financing system. Given the various approaches to this issue, it is necessary to highlight those that address the relationship between economic growth and the environment. Examining publications pertaining to sustainable development and the incorporation of green economic practices divulges various critical features of the green economy, such as diminished carbon and hydrocarbon emissions, conservation of ecosystem services, and safeguarding of biodiversity, the conservation and enhancement of natural resources, improvements in energy efficiency and resource management, and the promotion of higher living standards and increased income for populations [4].

Building a green economy requires the establishment of a reliable green financing system. It is important to underscore that there is no standard definition of "green financing" in current economic literature.. Generally speaking, the term refers to financing that addresses environmental concerns and resource management. Currently, "green finance" is commonly used to describe funds allocated to finance environmental projects. Green finance serves as “the foundation for the green (low-carbon) economic growth concept because it connects financial institutions, environmental protection measures, and economic growth” [5, с. 311-316]. O.V. Bogacheva and O.V. Smorodinov define green finance as “financial services offered to economic entities for conducting economic activities aimed at environmental improvement, mitigating global climate change effects, and more efficient resource utilization” green finance encompasses various financial sector branches and products [6]. According to international researchers, green finance refers to market-based investment or lending programs that consider environmental impact when assessing risks or employ environmental incentives for business decision-making. Therefore, after analyzing existing economic literature, green finance can be understood in three primary aspects: an assortment of financing methods for technological processes and projects related to greening economic activity; as well as green financing typically refers to a group of financial institutions, such as banks and insurance companies, engaged in funding environmental programs and projects..

As per the Russian Federation Federal State Statistics Service, the present level of green investments in the country constitutes a mere 0.6% of overall fixed asset investments, which falls short of the requirement for promoting green development (table 1). Additionally, over the last sixteen years (2005 – 2021), the proportion of green investments in total fixed asset investments has decreased more than in 3 times%. Nevertheless, there is a trend of Russian companies spending more than 5 times on environmental protection.

Table 1. Made by authors.

The authors of the article calculated 3 regression models using empirical data from 2005 to 2021. First one was modelling a connection between investments in fixed assets for environmental protection and current environmental expenditures. You can see them on picture 1. The regression is quite trustworthy, it explains 94% of cases and demonstrate that a 1 million roubles increase in investments in fixed assets for environmental protection will lead to 2 million roubles increase in current environmental expenditures.

Picture 1. Made by authors.

Picture 2. Made by authors.

Another one was trying to find dependence between environmental investments and share of their investments of total investments. This one actually could explain only 23% of cases. But we are not really trying to find a dependence here but to see the trend (pic. 3). The blue line shows how increasing investments in absolute numbers while the dark one shows how its share decreasing. Such 1 million roubles increase lead to 0,001% decrease in fixed assets investments share directed towards environmental protection in the total investment. So, the proportion of green investments in total fixed asset investments has decreased more than in 3 times.

Picture 3. Made by authors.

Picture 4. Made by authors.

And the last one had purpose to research investments growth rate and share investments growth rate (pic. 4). The pink line shows lags of investments while the dark blue line presents the lags of its share. As you can see there are similar dynamic with connected peaks and falls, only 2008 and 2019 actually gets out the trend. In 2008 the absolute number of investments collapsed while its share faced not so big difference. In 2019 the share dropped crucially while absolute number had risen significantly. The model's reliability and accuracy are signified by the coefficient of determination, which shows that 58% of cases are explained by the regression.

Conclusion

Finally, the green economy establishment as well as ongoing transition towards green growth of finance and economy are global trends in socio-economic development. A critical component of this transition is the availability of green financing mechanisms that can mobilize financial resources for environmentally-friendly initiatives. To promote the growth of green economy and financing in Russia, a regulatory framework should be developed to govern the implementation and further development of green financing, a roadmap for its growth should be created, and a green bond market should be established to finance environmental projects. These initiatives can include green transportation, renewable energy and clean energy sources, water, bio and forest resource management, carbon emission and pollution reduction, waste disposal and recycling, and low-carbon production. It is also important to develop measures aimed at increasing share of environment protection investment of total investments.

List of literature

1. Bartelmus P. The cost of natural capital consumption: Accounting for a sustainable world economy //Ecological Economics. – 2009. – Т. 68. – №. 6. – P. 1850-1857.
2. Network G. F. Ecological footprint. – 2019.
3. Shkiperova G. T., Druzhinin P. V. Evaluating the efficiency of the environmental security policy in the Russian regions //National Interests: Priorities and Security. – 2018. – Т. 14. – №. 12. – P. 2356-2372.
4. Cato M. S. Green economics: an introduction to theory, policy and practice. – Earthscan, 2009.
5. Wang Y., Zhi Q. The role of green finance in environmental protection: Two aspects of market mechanism and policies //Energy Procedia. – 2016. – Т. 104. – P. 311-316.
6. Bogacheva O., Smorodinov O. Challenges to green finance in G20 countries. Mirovaya ekonomika mezhdunarodnye otnosheniya = World Economy and International Relations. 2017; 61 (10): 16-24.