Green Finance: Regulatory Regime and Key Trends in the EMEA Region


June 10, 2021

In this article, we provide a high-level overview of the regulatory regime and key trends in green finance in the Europe, Middle East, and Africa (EMEA) region. This Part 1 addresses the European Union (EU), the United Kingdom, Russia, and Kazakhstan; we will continue with other key jurisdictions in Part 2 in a future issue.

There is no single definition of green (or sustainable) finance; the G20's Sustainable Finance Study Group defines it as the "financing of investments that provide environmental benefits in the broader context of environmentally sustainable development."

European Union

In the EU, sustainable finance refers to the "process of taking environmental, social and governance (ESG) considerations into account when making investment decisions in the financial sector, leading to more long-term investments in sustainable economic activities and projects."[1]

As part of the European Green Deal presented in December 2019, the EU Commission adopted on April 21, 2021 a comprehensive package of measures to make the EU a global leader in setting standards for sustainable finance. This "sustainable finance package" includes the following:[2]

  • The EU Taxonomy Climate Delegate Act set to apply from January 1, 2022, which in particular will introduce disclosure obligations and companies and financial market participants
  • A proposal for a Corporate Sustainability Reporting Directive, which could apply from the reports published in 2021 and will extend the EU's sustainability reporting requirements to all large and all listed companies and introduce an EU-wide audit (assurance) of the reported sustainability information
  • Six amending Delegated Acts

This package follows the entry into force of the Taxonomy Regulation on July 12, 2020 and of the Sustainable Finance Disclosure Regulation (SFDR) on March 10, 2021. The Taxonomy Regulation introduced is a classification system, establishing a list of environmentally sustainable economic activities.[3] The SFDR imposes disclosure and transparency on financial markets participants (e.g., investment firms and credit institutions that provide portfolio management, alternative investment fund managers) or financial advisers wishing to market a product to investors or clients in a member state of the European Economic Area.

A renewed sustainable finance strategy is expected to be adopted by the EU Commission in June this year. The EU Commission will also adopt another delegated act specifying the information companies subject to the nonfinancial reporting directive will have to disclose about how, and to what extent, their activities align with those considered environmentally sustainable in the EU taxonomy.[4]

United Kingdom

The UK government's objective set out in its Green Finance Strategy is to "align the private sector financial flows with clean, environmentally sustainable and resilient growth."

It is anticipated that following Brexit, the United Kingdom will adopt its own set of green finance regulations. The United Kingdom launched its Green Finance Strategy on July 2, 2019 and has set up a Taskforce on Climate-related Financial Disclosures (TCFD) led by HM Treasury. The UK government has moved away from a voluntary approach and has announced in a roadmap published in November last year its intention to make TCFD-aligned disclosures mandatory across the economy by 2025, with a significant portion of mandatory requirements in place by 2023.

In December 2020, the Financial Conduct Authority (FCA) published a Policy Statement (PS20/17) and final rule and guidance promoting better climate-related financial disclosures for United Kingdom premium listed commercial companies: Companies would be required to include a statement in their annual financial report which would explain whether their disclosures are consistent with the recommendations of the TCFD and to explain if they have not provided annual disclosures. This new rule will apply for accounting periods beginning on or after January 1, 2021 and is expected to be extended to a broader range of listed issuers.[5]

The UK Department for Business, Energy & Industrial Strategy (BEIS) ran a consultation on requiring mandatory climate-related financial disclosures by large publicly quoted companies, private companies, and limited liability partnerships (LLPs). The new disclosure rules would be finalised by the end of 2021 and would apply for accounting periods starting from April 6, 2022 to

  • all UK companies that are already required to issue a nonfinancial information statement, i.e., the companies having more than 500 employees and having transferable securities admitted to trading on a UK regulated market, banking companies, or insurance companies;
  • AIM-listed UK registered companies with more than 500 employees;
  • UK registered companies that are not included in the above categories, which have more than 500 employees and a turnover of more than £500 million (approximately $707 million); and
  • LLPs that have more than 500 employees and a turnover of more than £500 million.[6]

The United Kingdom Debt Management Office, the agency issuing UK sovereign debt, announced that it would sell at least £15 billion (approximately $21 billion) of green bonds in 2021.[7] The HM Treasury also announced that it would launch its first sovereign green saving bonds for retail investors to back clean energy projects in a hope to enhance the United Kingdom's climate credentials.[8]


Russia has recently seen an increased interest in the green finance from both business and the state.

While green finance initiatives have been somewhat chaotic, in 2020, the Ministry of Economic Development created an interdepartmental working group for development of investment activities and attraction of extrabudgetary funds for sustainable (including green) development projects.

The working group aims to consolidate and coordinate efforts among the various actors involved in the development of green finance initiatives in Russia, including the federal executive bodies, the Central Bank of Russia, development institutions, business, and the professional community.

The Russian Central Bank Initiatives

The Russian Central Bank has been among the first investors that declared interest in green finance. It has set among its goals stimulating favourable conditions for the development of green and social bond markets and green mortgages, as well as facilitating the financial market’s adaptation to climate risks.

In 2019, a special working group within the Russian Central Bank charged with a sustainable finance agenda produced the initial concept for green finance development in Russia.[9] In line with the concept, the Russian Central Bank developed the recommendations for implementing the principles of responsible investment.[10] The recommendations are addressed primarily to institutional investors and establish the basic principles for responsible investment, including the recommendation to take into account the ESG factors in selection and management of investment projects.

In May 2020, the Russian Central Bank issued the updated standards for emission of securities by companies, which included specific regulations for issuing green and social bonds.

The updated emission standards require that a decision to issue green bonds must establish a condition whereby the funds received from placement of the bonds must be used for purposes related to financing and/or refinancing the projects aimed at preserving and protecting the environment and/or projects that have a positive impact on the environment. The Russian Central Bank also established a right of bondholders to demand early redemption of their bonds in case of violation of the target use of funds received from the placement of bonds.

VEB.RF: Russian Green Finance Guidelines and Key Framework Documents

VEB.RF is a Russian state development corporation and the state investment bank that finances economic development projects. It also plays a key role in the development of green finance in Russia.

The Russian government charged VEB.RF with the authority to provide methodological support for Russia’s formation and development of investment in sustainable projects.[11]

VEB.RF produced the "Methodological Guidelines for Development of Investment Activities in Green Finance in Russia" (also referred to as the Russian Green Finance Guidelines).[12]

The Russian Green Finance Guidelines aim  to promote private investment into projects to achieve the Russian national green goals as well as the United Nations Sustainable Development Goals, Paris Climate Agreement targets, and the Organisation for Economic Co-operation and Development (OECD) standards for sustainable development.[13]

The Russian Green Finance Guidelines outline the Russian national taxonomy for green projects as well as the procedures for determining compliance of financial instruments with the guidelines.

In pursuit of the Russian Green Finance Guidelines, VEB.RF produced a number of key documents from March 2020 to May 2021 to create a framework for the Russian national green finance system, which include the following:[14]

  • "Taxonomy of Green Projects"
  • "Taxonomy of Adaptation Projects" (projects aimed at adapting the Russian economy to climate change)
  • "Model Methodology for Verification of Green and Adaptation Financial Instruments"
  • "Standards for Classifying Financial Instruments as Financial Instruments Aimed at Financing Sustainable Development Projects"
  • "Rules for Maintaining the List of Verifiers" (verifiers are those charged to include or exclude legal entities in/from the list of verifiers authorized to verify compliance with the above-mentioned standards)

The documents went through public discussions and were approved by the interdepartmental working group under the leadership of the Ministry of Economic Development of Russia. The documents were submitted to the Russian government for consideration and approval in May 2021.

Moscow Exchange

In 2019, the Moscow Exchange launched the Sustainable Development Sector for bonds aimed at financing projects in the field of ecology, environmental protection, and socially significant projects.

The first green bonds within this framework were issued in November 2019 by Centre-Invest Bank to finance loans for renewable energy and green sources projects.

In December 2020, a new version of the Moscow Exchange Listing Rules came into force, which updated the requirements for the inclusion and maintenance of bonds in the Sustainable Development Sector. Among other things, the updated rules increased the requirements for corporate governance of issuers.


Russia does not yet have any specific ESG requirements or regulations at the state level (except to the extent required by the updated Moscow Exchange Listing Rules). But in Russia, many companies are ahead of the regulator in their ESG strategies. In line with the global trends, many major Russian companies tend to be aware of the ESG trends and are working to improve their ESG profiles in order to become more financially attractive for global investors. In April 2021, Sber, a Russian state-controlled financial conglomerate, released its overview of ESG trends in Russia. The overview contains detailed ESG profiles of 42 of the largest Russian companies from various sectors of the economy ‒ from mining and transportation to finance and ecommerce.


Kazakhstan has adopted the Concept for Transition to a Green Economy until 2050,[15] aimed at the efficient use of resources, as well as the promotion of new "green technologies." The concepts set main targets to increase the share of renewable energy sources to 10% by 2030. Further, the National Plan for Development of the Republic of Kazakhstan was approved until 2025,[16] which would provide for development of "green" finance instruments as one of the goals for creation of competitive and efficient financial market, including through the Astana International Financial Centre (AIFC).[17]

In line with these strategy documents, Kazakhstan adopted a new Environmental Code in January 2021 (effective from July 1, 2021) that introduces the definition of "green finance," launches the Green Finance Centre in the AIFC, and continues to develop supporting legislation.

The new Environmental Code defines "green finance" as investments aimed at the implementation of "green" projects through such instruments as "green" bonds and "green" loans. A green project should be, among other things, directed to increase efficiency for use of natural resources, decrease the negative impact to the environment, energy efficiency, and saving. It is anticipated that the government will develop classification (taxonomy) of green projects and would provide certain support measures to green finance projects.

Further, the AIFC developed a set of policies on green finance, including the concept on introduction and development of green finance instruments and principles, the strategy of ensuring regional leadership of the AIFC in the sphere of green finance by 2025, and the Astana International Exchange (AIX) Green Bonds Rules. The AIX Green Bond Rules provide for requirements and listing rules for issuance of green bonds.

A "Green Bond" is defined by the AIX Green Bond Rules as any type of bond instrument where the proceeds will be exclusively applied to finance or refinance in part or in full new and/or existing eligible green projects with environmentally sustainable benefits and which are aligned with the Green Bond Principles and/or Climate Bonds Taxonomy of the Climate Bonds Standard of the Climate Bonds Initiative.

These categories include the following:

  • Renewable energy (including production, transmission, appliances and products)
  • Energy efficiency (such as in new and refurbished buildings, energy storage, district heating, smart grids, appliances, and products)
  • Pollution prevention and control (including wastewater treatment, greenhouse gas control, soil remediation, recycling and waste to energy, value added products from waste and remanufacturing, and associated environmental monitoring analysis)
  • Sustainable management of living natural resources (including sustainable agriculture, fishery, aquaculture, forestry, and climate smart farm inputs such as biological crop protection or drip-irrigation)
  • Terrestrial and aquatic biodiversity conservation, (including the protection of coastal, marine, and watershed environments)
  • Clean transportation (such as electric, hybrid, public, rail, nonmotorized, multimodal transportation, infrastructure for clean energy vehicles, and reduction of harmful emissions)
  • Sustainable water management (including sustainable infrastructure for clean and/or drinking water, sustainable urban drainage systems, and river training and other forms of flooding mitigation)
  • Climate change adaptation (including information support systems, such as climate observation and early warning systems)
  • Eco-efficient products, production technologies, and processes (such as development and introduction of environmentally friendlier, eco-labelled or certified products, resource efficient packaging and distribution)

The first green bonds were issued in August 2020 on the AIX. The Damu Fund, together with the United Nations Development Program, has placed a security in the amount of 200 million Kazakhstan tenges (approximately $467,000) on the AIX. It is expected that these funds will be directed to small-scale renewable projects in Kazakhstan.

[1] See the European Commission’s Overview of Sustainable Finance.

[2] See Sustainable Finance and EU Taxonomy: Commission takes further steps to channel money towards sustainable activities.

[3] See EU taxonomy for sustainable activities.

[4] See EU taxonomy for sustainable activities.

[5] See FCA introduces rule to enhance climate-related disclosures.

[6]See Consultation on requiring mandatory climate-related financial disclosures by publicly quoted companies, large private companies and Limited Liability Partnerships (LLPs).

[7] See the UK Debt Management Office’s Green gilt issuance.

[8] See UK says it will sell world's first sovereign green savings bonds and U.K.’s Green Ambitions Trail Europe in Sustainable Bond Market.

[9] See Concept for Implementing in Russia of the Methodological System for Development of Green Finance Instruments and Responsible Development Projects, approved by Minutes of the meeting of the Expert Council on Long-Term Investment Market No. ESRDI-5 dated January 28, 2019.

[10] The Informational Letter of the Central Bank of Russian No. IN-06-28/111 "On recommendations for implementing the principles of responsible investment," dated July 15, 2020.

[11] Order No. 3024-r "On coordinating role of the Ministry of Economic Development of Russia in promoting investment and attracting extra-budgetary funds to sustainable (including green) development projects in the Russian Federation" dated November 18, 2020.

[12] See the VEB.RF Green Finance Page.

[13] The Russian Green Finance Guidelines take into account such relevant regulations as the Russian National Project “Ecology”, Russian Industrial Development Strategy for Processing, Recycling and Disposal of Industrial and Consumer Waste―2030, Russian Strategy for Development of Forestry Industry-2030, Russian Energy Strategy―2030 and the Russian National Action Plan for the First Stage of Adaptation to Climate Change by 2022.

[14] See the VEB.RF Green Finance Page.

[15] Concept for Transition to Green Economy approved by the President's Decree No. 577 dated May 30, 2013.

[16] Decree of the President of the Republic of Kazakhstan "On approval of the National Development Plan of the Republic of Kazakhstan until 2025" No. 636 dated February 15, 2018.

[17]AIFC is a financial hub in Nur-Sultan city which operated under a separate legal regime with a special legal status and is aimed at attraction of financial resources.