Key areas for modernizing the legal framework to support sustainable investment

The challenges related to legal support for the modernization of the investment system are analyzed, taking into consideration the impacts of conflict, the essential requirements for reconstruction, and the standards associated with European integration. The existing regulatory and legal framework governing investment activities presents several significant shortcomings and challenges. Notably, there is a lack of established criteria for assessing the social and environmental impacts of investments. Additionally, there is an absence of unified approaches for the prioritization, evaluation, and selection of investment projects. The monitoring system for tracking the implementation of these projects is ineffective, and there are insufficient criteria for applying incentives, which impedes investors from accurately evaluating the long-term risks and benefits associated with their projects. Furthermore, the current regulations do not adequately incorporate national security priorities into investment considerations. There is also a notable lag in adapting to contemporary practices for attracting investments, compounded by issues of unsystematic organization, instability, and inconsistencies with pertinent legislation across other sectors such as national security, defense, budgeting, and taxation. These deficiencies collectively contribute to the ineffective management of investment activities. The key objectives for modernizing Ukraine’s legal framework for sustainable investment, in alignment with European Union standards, are outlined as follows: (1) National Security Investment Protection System: Develop a system to identify and mitigate potentially risky investments, enhancing investor confidence through transparent fund allocation. This includes protocols for screening foreign direct investments and monitoring projects. (2) Investment Attraction and Selection Mechanism: Establish a mechanism that promotes sustainable and inclusive growth by defining regulatory priorities and criteria for selecting investment projects based on industry, geographic location, and post-war recovery stages, adhering to the «Build Back Better» principle. (3) Harmonization of Sustainability and Innovation Criteria: Align investment criteria with EU Regulation 2020/852, the EU Taxonomy, and related strategic documents for socially responsible business practices. (4) Modernization of Investment Activities: Refine economic and legal frameworks governing investment, improve incentives, and strengthen investor rights protections. These strategies aim to bolster the legal infrastructure for sustainable investment while protecting national security interests in Ukraine.