More than five years ago, Ukrgasbank, Ukraine’s fourth-largest bank, embarked on an ambitious journey to differentiate itself from its competitors. This inward look aligned with the Ukrainian government’s call for the privatization of state-owned banks, part of a larger reform strategy to accelerate economic growth and reduce the state’s stake in the country’s banking sector.
To sharpen its competitive edge, Ukrgasbank turned green.
“Green banking offered us a unique opportunity to be a pioneer in a market that was largely undeveloped, that lacked green finance expertise,” said Andrii Kravets, Ukrgasbank’s board chairman.
In 2016, IFC and Ukrgasbank partnered to develop the bank’s forward-thinking climate strategy—an initial step in what would become a long-lasting partnership. Since then, IFC has provided a range of advisory services to help Ukrgasbank become Ukraine's first climate-finance bank.
IFC assisted Ukrgasbank in developing policies and procedures for green loans, identified target markets for green finance, and supported credit managers in project evaluation. This work was done as part of IFC’s Sustainable Energy Finance Program in Ukraine, implemented in partnership with the Austrian Federal Ministry of Finance and the Ministry of Economic Affairs and Climate Policy of the Netherlands.
Under IFC's Global Trade Finance Program, Ukrgasbank has facilitated close to $135 million of cross-border trade-finance transactions. IFC, in partnership with the Swiss State Secretariat for Economic Affairs , helped the bank increase its small and medium enterprise loan portfolio by two and a half times, establishing Ukrgasbank as one of Ukraine's leading banks serving that sector.
To further support Ukrgasbank’s mission to finance green energy, IFC invested €30 million (approximately $36 million), with an equity-conversion option, in Ukrgasbank in 2021. The loan’s proceeds are being used to finance eligible sustainable energy projects in Ukraine. The financing aims to help Ukraine increase the share of green energy in the energy mix and to enhance end-use energy efficiency in different industries.
IFC’s support is expected to facilitate Ukrgasbank’s eventual privatization. This would be the first privatization of a large state-owned bank in Ukraine—and an example for future privatizations in the country’s banking sector. For this reason, IFC has also been working with the bank to improve its corporate governance: strengthening its board functioning, introducing structured strategy-setting and oversight, improving decision-making processes, enhancing investor and stakeholder disclosures, introducing stronger controls and risk management to align the bank’s practices with private sector standards, and integrating environmental and social risk governance into its risk management system.
Since 2016, Ukrgasbank has disbursed more than 650 loans for mid- to large-scale climate projects, providing $1.2 billion in green loans. The projects that Ukrgasbank is financing are expected to prevent about 1.4 million tons of carbon dioxide emissions per year. After IFC began working with Ukrgasbank on its climate portfolio in 2015, a few other Ukrainian banks followed the trend and launched their own green programs.