Impact investment in post-war Ukraine

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Impact investment in post-war Ukraine

Iryna Zamula Iryna Zamula, Doctor of Sciense (Economics), Professor, Professor of the Department of Information Systems in Management and Accounting, State University “Zhytomyr Polytechnic”, Zhytomyr (Ukraine) , Olena Shavurska Olena Shavurska, PhD (Economics), Associate Professor of the Department of Management and Administration of Life Sciences, Interregional Academy of Personnel Management, Zhytomyr (Ukraine) , Maryna Tanasiieva Maryna Tanasiieva, PhD (Economics), Associate Professor of the Department of Accounting, Analysis and Auditing, Chernivtsi National University, Chernivtsi, (Ukraine) , Vitaly Travin Vitaly Travin, PhD (Economics), Associate Professor, Associate Professor of the Department of Finance and Digital Economy, State University “Zhytomyr Polytechnic”, Zhytomyr (Ukraine)



Abstract

To restore the economy of Ukraine in the post-war period, it is expedient to work out applicable communication tools with investors. With respect to the global market, there is a noticeable trend towards an increase in impact investments in 2016-2022 by $ 1,050 billion or in other words, 10.21 times. The rapid growth of impact investing at the global level testifies to the significance of investments aimed at achieving the provisions of the concept of sustainable development.

The purpose of the study is to elaborate theoretical and practical provisions for information support of impact investing in order to attract financial resources to restore the economic activity of business entities in the post-war period in compliance with the sustainable development guidelines.

Having conducted a study of the published non-financial reporting of large and medium-sized industrial enterprises of Ukraine, it was found that only 22.7% thereof prepare a Sustainable Development Report annually. With respect to the selected enterprises group, 91% prepare a management report in an arbitrary form and publish it on their official website.

Having conducted a study of published non- financial reporting of large and medium-sized industrial enterprises in Ukraine, it turned out that only 22.7% of them annually prepare a Sustainable Development Report. In the selected group of enterprises, 91% prepare a management report in any form and publish it on their official website.

However, given the arbitrary form of information presentation, investors cannot fully obtain up-to-date information about the company's social policy and environmental activities. In addition, the formation of reporting on issues of sustainable development and social responsibility has not yet become widespread among Ukrainian enterprises, which hinders the development of impact investing in Ukraine.

Especially with regard to increasing the investment attractiveness of Ukrainian enterprises, the structure has been clarified and meaningful recommendations have been developed regarding the information content of the Management Report, which will contribute to increasing the transparency of reporting and attract influential investors.

Keywords: impact investing, investment project, sustainable development, reporting, financial reporting, reporting on sustainable development, social effect, environmental effect



Анотація

Ефективні інвестиції в післявоєнну Україну

Для відновлення України в післявоєнний період необхідним є створення умов для залучення інвестицій, а саме: врегулювання на законодавчому рівні соціально відповідального інвестування, перегляд адміністрування податків і зборів, розкриття у звітності підприємств інформації про соціальну та екологічну діяльність та її оприлюднення з метою інформування потенційних інвесторів про можливі ризики та загрози, а також формування посередницьких платформ для інвесторів, які бажають здійснювати капіталовкладення в сталий розвиток.

Імпакт-інвестування є інноваційним видом інвестування, спрямованим на досягнення підприємством цілей сталого розвитку. Міжнародні інвестори при виборі інвестиційних проєктів керуються не лише економічними інтересами, а й враховують соціальне та екологічне значення проєкту. За 2016-2022 роки розмір імпакт-інвестицій на глобальному рівні зріс більше ніж в десять разів, що підтверджує його вагомість на світовому рівні.

Метою дослідження є розвиток теоретичних і практичних положень інформаційного забезпечення імпакт-інвестування з метою залучення фінансових ресурсів для відновлення економічної активності господарюючих суб'єктів України у повоєнний період відповідно до положень концепції сталого розвитку.

Прийняття рішення про інвестиційні вкладення є однією з найбільш складних задач управління, оскільки до сфери зацікавленості інвестора входять практично всі аспекти діяльності підприємства, зокрема: майновий стан, ліквідність, доходи і витрати, рентабельність діяльності, податкові умови, вплив на навколишнє середовище, соціальна політика, стан і перспектив розвитку ринку фінансування проекту.

Здійснивши дослідження оприлюднюваної нефінансової звітності великих і середніх промислових підприємств України, з'ясовано, що лише 22,7 % з них формує щорічно Звіт зі сталого розвитку. Доведено, що однією з перешкод для залучення імпакт-інвесторів у повоєнну Україну є недостатнє розкриття у звітності вітчизняних підприємств інформації про їх соціальну та екологічну діяльність. Формування звітності зі сталого розвитку та соціальної відповідальності ще не набуло масовості серед українських підприємств, що гальмує розвиток імпакт-інвестування в Україні. З метою підвищення інвестиційної привабливості українських підприємств уточнено структуру та надано рекомендації щодо інформаційного наповнення Звіту про управління, що дозволяє підвищити прозорість звітності та сприятиме залученню імпакт-інвесторів.

Ключові слова: імпакт-інвестування, інвестиційний проект, сталий розвиток, звітність, фінансова звітність, звітність зі сталого розвитку, соціальний ефект, екологічний ефект



Introduction

Problem statement. The Ukrainian economy is currently experiencing a significant downturn in economic activity that is spreading throughout the economy, and the recession is due to the ongoing military aggression of the Russian Federation. In the context of massive hostilities, business entities cannot operate at full capacity, which led to a decline in the economy by 30% in 2022. During the year of full-scale hostilities, a large number of people were thrown out of work and the unemployment rate increased by 16% and reached 25.8% [1]. In the post-war period, the situation is likely to change to some extent, as the state will be forced to invest heavily in restoring basic life support systems damaged as a result of hostilities. However, the country's economy cannot recover on its own. Therefore, without attracting foreign capital, economic recovery will be problematic and lengthy. Foreign direct investment is one of the sources of financing economic development. In the period 2013-2022, their volume in Ukraine fluctuated significantly (Fig. 1), which obviously depended on political factors, in particular on Russian aggression.

Fig. 1. The dynamics of foreign direct investments in the economy of Ukraine, 2013-2022

Source: elaborated by the authors based on [2]



At the same time, in 2014-2015, the volume of foreign investment fell sharply due to the war in eastern Ukraine. From 2017 to 2020, the volume of direct investment in the economic development of Ukraine had a steady growth trend - by $2,050 million (53.80%) compared to 20І6. In 2022, due to the war, there was a sharp decrease in investment by $6.497 million. USA (97.16%) compared to 2021.

In terms of the investment sphere perspective, state policy should be based on creating conditions for financing the system for ensuring environmental, social and economic security.

It is at this stage of recovery in the post-war period that the possibility of creating such systems of life support as well as production systems, requirements of sustainable development, will open up. Transformational changes in economic relations have caused a change in the priorities of investors when choosing investment projects.

Currently, the emphasis is on the social and ecological significance of the project for the future development of society, which has become the basis for the emergence and development of impact investing.

Impact investing as a type of investment emerged in 2007, when the term was first used by the Rockefeller Foundation [3] and implied the selection of projects for investment with social and environmental impacts to solve pressing problems around the world.

According to financier forecasts, impact investing was expected to grow to $400 billion over 10 years. In fact, by 2022 their volume exceeded the forecast by 2.91 times and amounted to 1.164 billion US dollars (Fig. 2).

With respect to the global market, there is a noticeable tendency towards an increase in its impact investments for 2016-2022 by 1,050 billion US dollars or, in other words, 10.21 times. Analysts predict that the global impact investing market will reach $6 trillion by 2031 [6].

The rapid growth of impact investing at the global level testifies to the significance of investments aimed at achieving the provisions of the concept of sustainable development. In 2021, the majority of impact investments were invested in financial services 20.53%, energy 19.98%, health care 11.68%, food production and agro-industrial complex 9.95% (Fig. 3).

Fig. 2. The volume dynamics of the global impact investing market, 2016-2022

Source: elaborated by the authors based on [4, 5, 6]

Fig. 3. The industry structure of impact investing in the world, 2021

Source: elaborated by the authors based on [5].



For the Ukrainian economy, impact investing is a relatively new phenomenon, which is now quite relevant and necessary for reconstruction in the post-war period.

A survey of impact investors gives us grounds to maintain that the principal obstacles to the development of this type of investment are: insufficient regulation of issues related to foreign investments and foreign ownership at the state level, the complexity and instability of taxation of foreign investments, a high level of corruption, and insufficient disclosure of information on social and environmental activities in the reporting of business entities. Evidently, all these problems are inherent in the economy of Ukraine.

Investors need information about the financial, social and environmental performance of an enterprise in order to be able to invest effectively and responsibly, because it is this information that allows to assess the contribution of a business entity to achieving sustainable development goals, as well as identifying potential risks.

Therefore, it is important to develop reporting that would reveal all aspects of the company's activities and enable the impact investor to make a decision on the advisability of investing.

Analysis of recent research and publications. Impact investing involves returning invested capital with zero or low returns.

Moreover, this type of investment is aimed at achieving sustainable development goals, in particular preserving and protecting the environment, ensuring humanity's access to clean energy, combating climate change, introducing environmental technologies into the production process, developing education and healthcare

Features ofimpact investing are revealed in the works of J. Bloc, M. Hirschmann, K. Fish [7], D. Dumbia, M.L. Lauridsen [8], S. Harzmark, A. Sassman [9] and P. Matos [10].

The issues of impact investing are addressed in research conducted by Y.V. Yelnikova [11], I.A. Lomachynska [12], O.V. Maisterenko [3], Y.M. Polishchuk [13], N.Y. Skorobohatova, O.S. Doroshenko [14]. Environmental aspects of impact investing are revealed in the works of Y.V. Yelnikova [11] and P. Matos [10]. The social significance of impact investing is highlighted in the articles of O.V. Maisterenko [3], O.V. Marukhlenko [29], I.A. Lomachynska [12]. A critical review of scientific articles allowed us to identify three approaches to the interpretation of impact investing (Fig. 4).

Fig. 4. Approaches to the interpretation of impact investing

Source: elaborated by the authors based on [3, 7, 8, 9, 11, 12, 13, 14].

Representatives of the Global Impact Investing Network identified the criteria by which investments can be classified as impact investments.

First of all, from the point of view of defining the goal, this is the specification of the key tasks and goals of the project, highlighting the expected effects. Secondly, when it comes to the return of invested capital over a long period, such projects can entail either negative or zero profitability only if a significant social effect is achieved or a final solution to a certain problem is found [13].

For instance, investing in the restoration of forests, improving sewer networks and treatment facilities, producing organic vegetables and fruits, etc. Impact investments differe significantly from traditional investments, investment programs and venture philanthropy (Table 1).



Table 1

Key differences between impact investing and other types of investing*

Feature	Traditional investmrent	Investment progpams	Impact-investment	Venture philanthropy
Project selection criteria	the highest level of project profitability, the shortest payback period	the highest level of project profitability, its social significance for community development	projects that have social and ecological significance for the prospects of community development	financing by charitable funds of social projects related to education, art, medicine
Type of activity	industry, financial and banking sector	transport infrastructure, energy sector	education, health care, agriculture, forestry	education, health care, agriculture, forestry
Efficiency	Investment return, profit maximization	Investment return, profit, creating a positive image of the investor	are focused on a long payback period; the crucial feature is to achieve a social or ecological effect	investments are not returned, the crucial feature is their social effect
Results	economic effect for the investor	social effect (new jobs, creation of infrastructure facilities, etc.); ecological effect (improvement of the natural ecosystems)	ecological effect (preservation and protection of the environment, providing mankind with access to clean energy, introduction of ecological technologies in the production process), social effect (development of education and health care), economic effect (creation of a qualitatively new product or service)	short-term social effect

*Source: elaborated by the authors based on [3, 12, 13, 14].

The sequence of socio-economic goals in impact investing suggests that when making a decision on the allocation of financial resources, the investor is guided by their profitability and significance for society.

Thus, an investor can invest in projects with negative or zero profitability, provided that they have high social value. The financial goals of impact investors range from return on investment to profit from the project. To achieve their goals, investors choose those enterprises that operate on the principles of self-sufficiency and conduct socially responsible business.

It is important for an impact investor to have information about the social and environmental aspects of a company's activities. Basically, it is this information that is disclosed in non-financial reporting.

Scientific issues of non-financial reporting of companies are studied by researchers: Alfatlah, R. Othman, R. Basiruddin, A. Almagtome [15], S. Bose, H.Z. Khan, A. Calabrese, R. Costa, M. Gastaldi, N. Levialdi Ghiron, R.A. Villazon Montalvan, L. Dagiliene, M. Frendzel, K. Sutiene, T. Wnuk-Pel [18], B.C. de Graaff [19]. M. Yan, F. Jia, L. Chen, F. Yan [20], O. Pask, T. Marenych, O. Diachenko, I. Levytska, Balla [21].

The aforementioned works are devoted to highlighting the procedure for preparing non-financial reporting around the world, and also outline the benefits that a company receives from its preparation.

Currently, research into restoring the economic, environmental and social security of Ukraine in the post-war period, in particular using impact investments, is very relevant.

It emerges that the transformation of the current procedure for publishing reporting information regarding the environmental and social components of activities in non- financial reporting of companies is very relevant due to the fact that these types of activities are not fully disclosed in it. At the same time, the process of making decisions by impact investors about the feasibility of capital investments turns out to be complex.

Setting the research objective. The purpose of the study is to develop theoretical and practical provisions for information support of impact investing in order to attract financial resources to restore the economic activity of business entities in the postwar period in compliance with sustainable development guidelines.



Research outline

The Ukraine situation during the war. The outbreak of war in Ukraine triggered a global energy and food crisis that contributed to soaring inflation, a cost- of-living crisis and pressure on the neediest and most vulnerable in society. Moreover, worsening economic conditions create additional risks that could negatively impact individuals and communities.

The Russian Federation's full-scale invasion of Ukraine led to economic collapse. Needless to say, during the war the country's infrastructure, industrial enterprises and natural ecosystems are in critical condition. As of March 22, 2023, damage in the form of property destroyed during the war amounted to 143.8 billion US dollars (Figure 5), which only worsened the country's economy.

Fi g. 5. Damages due to destruction of property during thr full-scale war on the territory of Ukraine as of March 22, 2023

Source: Elaborated by the authors based on [22].

The fact is that the greatest damage was caused by the destruction of residential buildings (37.27%) and infrastructure (25.17%). Damage caused to enterprise assets amounts to $11.3 billion or 7.86% of the structure of losses.

It turns out that no less significant is the damage caused to the natural environment during 500 days of war, amounting to 2.1 trillion UAH (corresponding to $57.07 billion) (Fig. 6).

Fig. 6. Environmental damage during the full-scale war on the territory of Ukraine as of July, 2023.

Source: elaborated by the authors based on [23].

Figure 6 shows that the environment of the industrialized regions of eastern Ukraine suffered the most from military aggression, in particular (1504.4 billion UAH: Donetsk - 31.73%, Lugansk - 22.71%, Kharkov - 17, 20%). Environmental damage indicates a deterioration in the quality of atmospheric air and drinking water, which threatens the normal existence of society.

It turns out that attracting capital to restore the Ukrainian economy must take into account global trends in the need for capital investment. At the same time, when choosing investment projects, international investors are now guided not only by economic interests, but also take into account social and environmental significance.

Patterns of reconstructing Ukraine in the post-war period. The reconstruction of Ukraine in the post-war period should be carried out taking into account the goals of sustainable development and requires the creation of appropriate conditions for attracting impact investors (Fig. 7).

Thus, investing in sustainable development aims to achieve long-term competitive results and have a positive impact on society and the environment. Notably, doing business on the principles of sustainable development and informing stakeholders about this allows business entities to receive certain advantages. restore ukraine administration investing

Fig. 7. The relationship between the concept of sustainable development and impact investing

Source: elaborated by the authors based on [24].

In particular, such benefits are financial in nature: disclosing information about a company's social activities and its impact on the environment allows potential investors to familiarize themselves with its activities, identify all potential risks and make a final decision on the advisability of capital investments.

Prerequisites for attracting impact investments to Ukraine in the post-war period. Making a decision on investment is one of the most difficult management tasks, since the investor's sphere of interests covers almost all aspects of the activities of a business entity, in particular, those provided for by the guidelines of sustainable development.

Given the above-mentioned, one of the obstacles to attracting impact investors is that the reporting of Ukrainian enterprises somewhat insufficiently discloses information about social and environmental activities. Non-financial reporting is used to satisfy investors' information requests about the activities of a business entity that affect society and natural ecosystems (Fig. 8).

Fig. 8. Types of non-financial reporting

Source: elaborated by the authors based on [16, 18, 19].

As for non-financial reporting, this is a relatively new tool for managing and assessing the performance of companies in Ukraine and the world.

The main obstacle to the preparation of non-financial reporting in Ukraine is the lack of a unified structure for such reporting. On the other hand, some applicable key elements that should be included have been outlined.

At the legislative level, the formation of a management report is mandatory for large businesses in Ukraine [25, 26].

In this regard, large entities are recognized as business entities that meet at least two out of three criteria on the date of preparation of annual financial statements for the year preceding the reporting year, in particular: book value of assets worth more than 20 million euros, net income from sales of more than 40 million euros, and the average number of employees exceeds 250 people [25]. It is noteworthy that small businesses have the right not to generate this report, and medium-sized businesses have the right not to display non- financial information in it.

The preparation of the Management Report is aimed at creating financial and non-financial information that demonstrates the state of the company's development and identifies key risks and uncertainties in its activities, in particular, social and environmental performance. economic subject. Consequently, this allows potential investors to evaluate the main aspects of the company's activities and decide on the advisability of investing.

The management report discloses the following aspects of the company's activities:

- the company's mission, its long-term goals and development prospects;

- the company's social policy regarding personnel remuneration;

- influence on the state of the natural environment;

- business risks and development prospects.

At the international level, the principal elements of the Management Report [26] and the Progress Report have been determined.

According to Practical Report 1 “Management's Commentary” to IFRS, the following requirements are imposed on this form of reporting, in particular: description of the business, company goals and strategies for achieving them, company resources, risks and relationships, key performance indicators, performance results and prospects for further development [27].

The structural elements of the Management Report according to Guidelines No. 982 are: organizational structure and description of activities; performance results; liquidity and liabilities; environmental aspects of activity; social aspects and personnel policy; risks; activities in the field of innovation; investment activities; prospects for the development of the enterprise; corporate governance [28].

Thus, the requirements for drawing up a Management Report under IFRS and Methodological Recommendations No. 982 are somewhat different, although they are similar in content.

The detailing of the structural elements of the Management Report is not regulated at the legislative level, and therefore causes difficulties for Ukrainian enterprises in its preparation. In this regard, it is advisable to study more deeply the experience of countries regarding the content of this reporting form.

The actual state of non-financial reporting of industrial enterprises in Ukraine. To find out the actual state of the formation of non-financial reporting of Ukrainian enterprises, large and mediumsized business entities in Ukraine were selected, which position themselves as those that operate on the principles of sustainable development and social responsibility, and also export their products abroad.

After conducting a study of published non-financial information of the mentioned enterprises for 2020-2022, it was found that only six of them, namely PJSC “Mondelis Ukraine”, LLC “Danone Dnipro”, LLC “Kromberg & Schubert Ukraine LU”, JSC “Concern GANLAFTOGAZ “, JSC “Obolon”, PJSC “Carlsberg Ukraine”, prepare the annual Report on sustainable development (Table 2). Notably, four of them are foreign enterprises.

Table 2

Formation and publication of non-financial reporting of industrial enterprises of Ukraine

Enterprises	Type of reporting
	Management report	Report on sustainable development	Corporate social Responsibility report	Progress report
PJSC «КООТІ»	+	-	-	-
JSC «Zhytomyrski Lasoshchi»	-	-	-	-
LLC «FK «Roshen-finans»	+	-	-	-
PJSC «Kondyterska fabryka «AVK»	+	-	-	-
JSC «Lvivska kondyterska fabryka «Svitoch»	+	-	-	-
PJSC «Mondelis Ukraina»	+	+	-	-
JSC «Zhytomyrskyi maslozavod»	+	-	-	-
LLC «TERRA FOOD»	-	-	-	-
JSC «Molochnyi alians»	+	-	-	-
LLC «Danone Dnipro»	+	+	-	-
LLC «КОМО Ukraine»	+/-	-	-	-
LLC «Milkiland Ukraine»	+	-	+	-
LLC «Kromberg & Schubert Ukraine LU»	+	+	-	-
PJSC «Kremenchutskyi zavod dorozhnikh mashyn»	+	-	-	-
PJSC «Automotive Company «Bohdan Motors»»	-	-	-	-
PJSC «Zaporizkyi avtomobilebudivnyi zavod»	+	-	-	-
PJSC «Ukrainska avtomobilna korporatsiia»	+	-	-	-
LLC «Foxtrot Group of Companies»	+	-	-	+
PJSC «Carlsberg Ukraine»	+	+	-	-
JSC «Concern GANLAFTOGAZ»	+	+	-	-
LLC «Lifecell»	+	-	+	-
JSC «Obolon»	+	+	-	-

Legend:

+ - the reporting form is available

+/- - information is partially provided in the Notes to the annual financial statements

- - there is no reporting form Source: compiled by the authors as well as applicable areas of local social responsibility for the reporting period;

The report on corporate social responsibility was published by two business entities, namely Milkiland Ukraine LLC and Lifecell LLC. These reports provide arbirary- form information about social and personnel policies, working conditions, corporate culture and volunteering. Only one enterprise, namely Foxtrot Group of Companies LLC, is guided in its activities by the principles of the UN Global Compact, which is confirmed in the Progress Report, demonstrating the company's achievements in the social and environmental spheres.

JSC «Zhytomyrski Lasoshchi», PJSC «Automotive Company «Bohdan Motors» and LLC «TERRA FOOD» do not prepare a Management Report. LLC «KOMO Ukraine» does not prepare this report either, but discloses issues related to the main aspects of the company's activities and social responsibility in the Notes to the annual financial statements.

The results of the conducted study of non-financial reporting of industrial enterprises of Ukraine show that 81.8% of the selected population prepare a Management Report in an arbitrary form and publish it on their official website.

However, only from 45.5% of these reports can an investor obtain information about the company's social policy and potential risks in the field of social responsibility. An even smaller percentage of enterprises disclose the environmental aspects their activities (in terms of production of the product, compliance with international quality standards, environmental impact, environmental initiatives, waste disposal, energy saving, etc.) - 36.4%

The quality of the non-financial reporting examined is low. The reasons for this are as follows:

- lack of performance indicators in accordance with the Sustainable Development Goals;

- most reports contain quantitative indicators only on the results obtained,

- the information in the reports is not systematized, its generalization and analysis are problematic.

Processing such reports turns out to be a troublesome and time-consuming task. In order to identify the connection between a company's profitability and its willingness to disclose non-financial information about the compliance of its activities with the Sustainable Development Goals, an assessment of the companies' performance was carried out.

The sample included companies that most fully disclose information about the social and environmental aspects of their activities, as well as about their antagonists (Table 3).



Table 3

Analysis of the efficiency of the researched enterprises that generate non-financial reporting

Enterprises	Indicator	Years	Change 2022 to 2020, +/-
		2020	2021	2022
JSC «Lvivska kondyterska fabryka «Svitoch»	Net profit (loss)	70444	91227	-122567	-193011
	Profitability of activity	3,68	4,48	-5,29	-8,97
PJSC «Mondelis Ukraina»	Net profit (loss)	532060	433365
	Profitability of activity	12,49	10,19
LLC «Danone Dnipro»	Net profit (loss)	290223	165822	-372576	-662799
	Profitability of activity	20,96	11,28	-30,63	-51,59
LLC «Kromberg & Schubert Ukraine LU»	Net profit (loss)	1341	74518	107113	105772
	Profitability of activity	0,15	8,63	10,96	10,81
JSC «Concern GANLAFTOGAZ»	Net profit (loss)	1454645	779455	183481	-1271164
	Profitability of activity	12,69	5,52	1,21	-11,48
LLC «Lifecell»	Net profit (loss)	2586680	603598	961215	-1625465
	Profitability of activity	15,52	3,46	5,08	-10,44
JSC «Obolon»	Net profit (loss)	338614	-38943	-59919	398533
	Profitability of activity	5,75	-3,67	-5,68	-11,43
PJSC «Carlsberg Ukraine»	Net profit (loss)	1635402	1341539	1528878	-106524
	Profitability of activity	30,89	23,77	21,12	-9,77
JSC «Zhytomyrski Lasoshchi»	Net profit (loss)	12 340	682	-13814	-26154
	Profitability of activity	3,87	0,16	-2,38	-6,25
LLC «TERRA FOOD»	Net profit (loss)	-68083	-64175	246139	314222
	Profitability of activity	-39,74	-39,22	31,35	71,09

Source: calculated by the authors based on enterprise reporting



Fig. 9. Information content of non-financial reporting in Ukraine

Source: elaborated by the authors

As of2022, there is a sharp deterioration in the efficiency of operations, which is due to the inability to work at full capacity in the context of the military aggression of the Russian Federation against Ukraine.

Compared to 2020, only LLC „Kromberg & Schubert Ukraine LU” and LLC „TERRA FOOD” showed an increase in profitability, namely by 2.33% and 70.57%, respectively.

At the same time, a direct relationship between the efficiency of Ukranian enterprises and their formation of non- financial reporting has not been established. In 2020-2022, several external factors, such as the COVID-19 pandemic and the military aggression of the Russian Federation against Ukraine, had a significant impact on the companies' activities. Today it is almost impossible to exclude their influence on the performance of companies.

However, it is clear that as companies expand and engage with the capital markets, the amount of information a company discloses in its non- financial statements is likely to increase significantly.



Given the mandatory status of the Management Report of large and mediumsized enterprises of Ukraine, it is proposed to expand and specify its information content (Table 4).

In view of the above, the proposals are particularly aimed at meeting the information requests of impact investors.

Table 4

Guidelines on the information content of the Management Report to meet the requests of impact investors

No.	Section	Content
1	Organizational structure and description of company's activities	- description of company's business model; - management goals and strategies for achieving them; - organizational structure and changes therein; - characteristics of the internal audit system; - dividend policy; - basic principles and methods of corporate management; - permanent marketing communications; - anti-corruption activity
2	The results of the company's activities	- assessment of income, expenses and financial results; - analysis of the company's product strategy and its impact on profit; - analysis of profitability, liquidity, financial stability and business activity for the reporting and previous period; - economic contribution to society
3	Social responsibility	- personnel policy of the company; - educational projects to enhance personnel qualifications; - working conditions; - the components of the salary fund and their gender equality; - information on cases of industrial injuries; - social projects for vulnerable population groups; - employment of disabled people; - sports development; - corporate culture of the enterprise; - team building capacity
4	Environmental aspects of activity	- optimization of the use of resources (reduction to zero of unproductive consumption of raw materials and materials, minimization of consumption of water and energy carriers); - the impact of the enterprise on ecosystems (air, water, soil, flora, fauna); - waste minimization and handling (recycling, disposal, etc.); - environmental initiatives (recycling, accessible green spaces, cleaning territories, collecting used batteries, etc.); - a description of activities in the field of innovation implementation to reduce the resource intensity of production, implementation of zero-waste production
5	Activity risks	- description of activity risks and methods of their minimization
6	Perspectives for further development	- description of the development strategy in the long-term perspective

Source: elaborated by the authors

The proposed information content of the Management Report will contribute to increasing the transparency of reporting of domestic business entities, as it contains all aspects of the company's activities in accordance with the goals sustainable development goals.

Publication of information in accordance with certain major types of enterprise activities will reduce user costs for obtaining, processing and systematizing data, which will further contribute to increase the efficiency of use of resources in the preparation, justification, implementation and evaluation of economic decisions, as well as enhance analytical opportunities for its use in the interests of impact investors.



Conclusions and prospects for further research

To restore the economy of Ukraine in the post-war period, it is expedient to work out applicable communication tools with investors. Impact investing appears to be a groundbreaking tool of sustainable development aimed at ensuring the country's competitiveness, economic and environmental security. In order to attract this type of investment, it is necessary to provide transparent information about all aspects of the company's activities in compliance with sustainable development goals. Having conducted a study of published non-financial reporting of large and medium-sized industrial enterprises in Ukraine, it was found that only 22.7% of them annually prepare a Sustainable Development Report. However, a direct relationship between the efficiency of a company and its preparation of non- financial reporting has not been established. It has been established that with the growth of the size of the enterprise and its interest in cooperation with the capital market, the amount of information disclosed by the enterprise in non-financial reporting increases. In the selected group of enterprises, 91% prepare a management report in an arbitrary form and publish it on their official website. However, given the arbitrary form of information presentation, investors cannot fully obtain up-to-date information about the company's social policy and environmental activities. In addition, the formation of reporting on issues of sustainable development and social responsibility has not yet become widespread among Ukrainian enterprises, which hinders the development of impact investing in Ukraine. Especially with regard to increasing the investment attractiveness of Ukrainian enterprises, the structure has been clarified and meaningful recommendations have been developed regarding the information content of the Management Report, which will contribute to increasing the transparency of reporting and attract influential investors.



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