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Green Economic Development in Lithuania is Gaining Momentum: Recommendations for Lithuania’s Sustainable (Green) Finance Action Plan

Date

2022 01 17

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The sustainable finance project carried out by the Ministry of Finance of the Republic of Lithuania together with the European Commission (EC) and the European Bank for Reconstruction and Development (EBRD) is on the final straight — the recommendations for Lithuania’s Sustainable (Green) Finance Action Plan, including the proposal for the establishment of a Green Finance Institute in Lithuania, have been drawn up. The project recommendations focus on wider fundraising perspectives for financial institutions to finance Lithuanian companies and will create better conditions for entry for new international investors.

Lithuania aims to become a regional hub for sustainable finance. In order to achieve this target, it is important to create a favourable environment for both sustainable business and financial market participants investing in it.

“Sustainable finance is an important element of both the EU and national political agenda. The implementation of the proposals submitted by the experts would lead to favourable conditions for financing the green economy in Lithuania, attracting a wider range of investors. The achievement of the green transition goals will require significant resources, therefore it is important to effectively mobilise both public and private resources," says Vice-Minister of Finance Mindaugas Liutvinskas.

On behalf of the Ministry of Finance, the EBRD together with partners law firm Sorainen, Richard Kemmish Consulting Limited and Linklaters LLP have prepared a sustainable finance study to answer the key questions about supply and demand for sustainable finance as well as measures that can help Lithuania to become a regional leader in this field. The project was funded by the European Union via the Structural Reform Support Programme in cooperation with the European Commission’s Directorate General for Structural Reform Support, DG REFORM.

Jim Turnbull, EBRD Deputy Director, Capital Markets Development, added: “Promoting sustainable finance contributes to a thriving capital market and greatly expands companies financing options. The advisory project offers a template to accelerate the green agenda at a time when more sustainable projects are required to meet the increasing needs of institutional investors with SRI mandates and most importantly benefits society-at large”.

The project under implementation in Lithuania responds to one of the main policies of the European Union − the European Green Deal, one element of which is − to develop sustainable finance in Europe, i.e. to make private sector investments contribute to the transition towards a climate-neutral economy.

Mario Nava, European Commission’s DG REFORM Director-General said: “Supporting reforms to transition to a sustainable economy is one of our top priorities. We are glad to see today the Action Plan that will be the basis for the further work, so much needed in that area. It is an outcome of many months of joint work of the Lithuanian Ministry, EBRD and the Commission”.

The recommendations for Lithuania’s Sustainable (Green) Finance Action Plan are based on a report prepared by project consultants and presented in May 2021, which makes the assessment of the current situation of sustainable finance in Lithuania, feedback from stakeholders (Lithuanian and foreign investors, issuers, other financial market participants).

In order to coordinate the implementation of the project and to prepare concrete proposals to the Government, the Ministry of Finance has set up an Interinstitutional Working Group. This Group has considered the recommendations made by the project consultants and submitted proposals with regard to them, and will continue to discuss the measures necessary for the implementation of the recommendations and the submission of proposals to the Government.

The public was also invited to contribute to the project through its proposals for specific steps for the Sustainable (Green) Finance Action Plan, following the publication of a public consultation on the website of the Ministry of Finance.

The Plan contains recommendations on how to support the development of sustainable finance in Lithuania, including greater involvement of private financial market participants in financing sustainable projects. Proposals are also made on how to create a sustainable financial ecosystem that ensures a smooth interface between private financial market participants and public bodies. It proposes the creation of new financial instruments to attract larger investors, both private and institutional, at an international level. The establishment of a sustainability database is also recommended. Adequate, complete and as accessible data is an essential element in assessing the compliance of companies with environmental, social and governance criteria.

The analysis highlights the need to establish a Green Finance Institute. Once a decision has been taken on the establishment of such an institute, it would ensure the standardisation of sustainability requirements and dissemination of relevant information in the country. Also, it would consult and perform an analytical function as well as would support the discussion between the representatives of the public sector, private business and science, and also will be involved in delivering green labelling methodology.

The proposals to the RoL Government will be drawn up on the basis of the recommendations (by the first quarter of the current year).

The report is available HERE.