Sustainable development is the balanced development in economic, environmental, and social areas, aimed at meeting the needs of the present generation without compromising the ability of future generations to meet their own needs. This concept is embraced by the majority of nations worldwide – particularly in Europe – and including Ukraine.
Environmental, Social, and Governance (ESG) factors affect the financial sector, its clients, partners, and other stakeholders. Examples of these factors include access to sources of “green” financing, society’s demand for responsible business practices, climate change, social challenges, and the quality of corporate governance systems.
For the financial sector and the broader economy to achieve sustainable growth, financial players must understand and account for these factors. This includes recognizing the opportunities they offer and risks they pose, as well as the impact that businesses have on society and the environment.
The financial sector serves as a key facilitator for sustainable development. By integrating ESG factors, financial institutions promote the conditions necessary to attract funding for sustainable development projects and ensure that their clients adhere to standards of responsible business conduct and sustainable operations.
The impact of ESG factors is already a reality for the financial sector. Nearly three-quarters of large banks surveyed by the National Bank of Ukraine (the NBU) in May 2024 indicated that climate change is already affecting their operations. Two-thirds of banks surveyed in April 2025 reported impacts from ESG risks in general. At the same time, banks perceive slightly more opportunities arising from environmental changes than threats to their business from such risks.
Overall, adhering to sustainable development principles, managing ESG risks, and leveraging the opportunities created by sustainable development facilitates Ukraine’s EU integration in the financial sphere. For Ukrainian financial institutions and businesses, it opens access to international funding, for which compliance with ESG standards is a mandatory requirement. Consequently, this will foster higher levels of international investment in the real sector of the economy.
russia’s full-scale war against Ukraine has further exacerbated the urgency of ESG risks. The environment has deteriorated due to the contamination of soil, air, and water bodies with combat waste, destruction – primarily of energy infrastructure – and landmines.
The war has intensified social challenges, such as the need to increase the inclusivity of financial services for military personnel and veterans, the necessity of protecting the population, developing civil defense systems, and protecting critical infrastructure.At the same time, priorities in adhering to ESG principles are adjusted for the current challenges caused by the russian military aggression. Specifically, the priority lies in ensuring the country’s resilience and security. This aligns with statements from the European Parliament and the European Commission, which affirm that investments in the defense industry contribute to European resilience and security, and that the EU’s sustainable finance framework is compatible with defense sector investments and imposes no restrictions on their financing.
The NBU evaluates ESG factors and risks for the financial sector, and monitors how financial institutions account for them. While developing its requirements and recommendations, the NBU follows international best practices and is gradually aligning regulations with European standards, while factoring in the challenges and consequences of the war to avoid any unjustified impact on the accessibility of financial services.