Azerbaijan sets priorities ahead of COP29
    "Green" financing, ESG implementation

    ANALYTICS  18 May 2024 - 12:13

    Khazar Akhundov

    In recent years, Azerbaijan has accelerated work to achieve the UN Sustainable Development Goals (SDGs) until 2030, including the international program on "green" transformation. In particular, projects in the field of alternative energy, decarbonization of industry are being implemented, as well as the first steps have been taken to comply with ESG criteria of "green" transformation of the financial sector. In the run-up to the 29th session of the Conference of the Parties (COP29) to the UN Framework Convention on Climate Change scheduled for November, the country is holding specialized events. Thus, the event “Enhancing Ambition, Enabling Action: COP29 Sustainable Business Forum” in Baku discussed the prospects for business and banks' participation in the "green" transformation.

    In order to overcome the consequences of global climate change and create new opportunities for "green" transformation of the economy, Azerbaijan is making maximum efforts to transition to renewable energy sources (RES), attracting international investors to these projects. With the support of the EBRD and other international donors, work is underway to introduce energy efficiency technologies in the municipal sector and decarbonize industry, and the number of jobs in the green and digital economy is gradually increasing. Nevertheless, all these large-scale endeavors require substantial amounts of funding, and relying only on budget funds is an impossible task for developing countries, including Azerbaijan.

    "It is necessary to involve the private sector in the transformation of the green economy as well as all other sectors: the transformation requires proper regulation, in particular it is necessary to identify potential risks and conflicts," Chairman of the Central Bank of Azerbaijan (CBA) Taleh Kazimov said during the forum. According to Kazimov, today both global and Azerbaijani economies are facing problems related to climate change, the consequences of which need to be eliminated. In particular, as  Kazimov noted, the CBA is taking measures to stimulate "green" financing and strengthen the Bank's participation in the regulation of energy efficiency initiatives.

    "The development of the financial sector will promote an ecosystem of sustainable financial flows: one of the tasks, according to the roadmap, is to introduce climate, environmental, social and governance factors into the financial system," the chairman said.

    He emphasized that the CBA amended the corporate governance standards of banks, insurance and investment companies, and under these standards, financial structures should take into account environmental, social and governance factors to ensure long-term sustainability.

    Today, this trend is recognized as the key direction of development of the global financial system: issues of corporate and social responsibility are brought to the forefront, when companies contribute to public welfare, address climate change and environmental issues. Such approaches, which originated about a decade ago mainly in the corporate sector of European countries, are widely spread in different regions of the world and are called ESG-criteria (environment, social, governance): responsibility in relation to the environment, society, and corporate governance. Accordingly, these approaches have formed a stable concept - responsible investment, which envisages the extraction of profits with unconditional compliance with ESG criteria.

    One of the key principles of responsible investment is that investors should include ESG criteria in their decision-making process. For example, when assessing environmental performance, attention is paid to whether the company is striving to reduce its negative impact on the environment. Such activities may include, for example, the company's efforts to reduce waste, promote biodiversity conservation, and combat the effects of climate change.

    Green obligations or green bonds are considered to be one of the effective tools for responsible investing. These are securities that companies issue to raise funds for the implementation of projects in the field of renewable energy, waste management, biodiversity conservation, green transportation, green construction, etc. By the way, Azerbaijan is also planning to issue "green" bonds; currently, specialists of the Asian Development Bank are negotiating with 3-4 private companies with Azerbaijani capital in this regard.

    In general, the roadmap for sustainable finance for 2023-2026 approved by the Central Bank last year was a significant step towards the implementation of ESG criteria in Azerbaijan. The document is designed to ensure the resilience of domestic financial institutions to the risks arising from climate change and their compliance with other ESG criteria - social and governance, as well as the realization of opportunities associated with the transition to a sustainable economy.

    It is noteworthy that the CBA's policy of introducing ESG criteria in the country's financial sector is fully supported by the World Bank (WB) and the International Finance Corporation (IFC), which are ready to participate in Azerbaijan's initiatives on the way to decarbonization and formation of a financial system resistant to climate, social and other risks.

    "The CBA is currently developing a taxonomy of sustainable financing of the country, the ministries of economy, environment and natural resources, energy are also involved in the preparation of this document, WB specialists also support the development of the taxonomy," CBA Chairman Taleh Kazimov said during the forum. He also emphasized that the transition to "green" growth and development of lending on ESG principles is one of the strategic goals of the Central Bank for the development of the financial sector.

    A similar collaboration is underway with IFC specialists supporting green transformations in energy, agriculture, transportation, industry and urban areas. "To ensure an integrated approach to sustainable development, IFC is also channeling funding to projects related to climate-smart financial systems. Investing in low-carbon technologies, developing innovative solutions and improving climate resilience opens up new opportunities for the private sector in Azerbaijan," another forum participant, IFC Country Representative Aliya Azimova said.

    The key emphasis in the green transformation of Azerbaijan's financial sector is aimed at the banking sector. "Azerbaijani banks should implement a well-considered climate policy, introduce climate component and responsibility measures in their portfolios for the long-term perspective," Minister of Ecology and Natural Resources Mukhtar Babayev said during the forum.

    Special mechanisms, new types of loans are needed to finance "green" projects, banks should offer preferential loans to those projects aimed at environmental protection. The regulator and the government are ready to facilitate this".

    The Ministry of Economy and its agencies are also working in a similar direction: for example, the Entrepreneurship Development Fund (EDF) has developed its own ESG model in accordance with international standards. Currently, the Fund has prioritized co-investment in "green" projects with a preferential 5 per cent annual interest rate on loans. In particular, with the support of EDF, endeavors in the field of solar panels at a poultry farm, the development of charging infrastructure stations, and an environmentally important project for the production of building materials using recycled materials are already underway.

    "The main theme of COP29 is climate finance, and we are working on how to support businesses: the necessary laws have been passed, and various tax and customs measures are in place. Facilitating the involvement of private investment in the process of implementing the climate agenda is one of our key priorities," Azerbaijan’s Deputy Minister of Economy Sahib Mammadov said in his remarks at the forum.


    Subscribe to our Telegram channel

Read also

Turkish naval mission to Japan: A historical & strategic outreach Marking century of diplomacy & Ertuğrul tragedy

14 June 2024 - 15:26

Is the Israel – Hezbollah war in Lebanon real? All out war

14 June 2024 - 12:48

Azerbaijan gears up for digital transformation on the horizon World Economic Forum appreciates Baku's efforts in IT sector

14 June 2024 - 16:26

Azerbaijan sets terms for USA, EU, & Armenia in South Caucasus geopolitics Baku opens the Zangazur Corridor

13 June 2024 - 18:00

From India to Europe via the Middle East Revolutionising trade?

13 June 2024 - 15:03

Macron's political gambit amidst shifting landscape Rise of European far-right

13 June 2024 - 14:10
Latest news

    Putin outlines conditions for peace with Ukraine

    14 June 2024 - 17:02

    Greek premier reshuffles Cabinet over party’s dismal EU polls performance

    14 June 2024 - 16:50

    Hamas admits they don’t know how many hostages are still alive

    14 June 2024 - 16:38

    Azerbaijan gears up for digital transformation on the horizon

    World Economic Forum appreciates Baku's efforts in IT sector

    14 June 2024 - 16:26

    Armenia issues protest note to Belarus amid diplomatic tensions

    14 June 2024 - 16:14

    Last bell rings after 32 years in schools of Azerbaijan’s Fuzuli


    14 June 2024 - 16:14

    Bruised Macron puts on brave face at G7

    14 June 2024 - 16:02

    Azerbaijan approves customs protocol with Kyrgyzstan

    14 June 2024 - 15:50

    Tajik MP suspected of plotting coup d'état

    14 June 2024 - 15:38

    Turkish naval mission to Japan: A historical & strategic outreach

    Marking century of diplomacy & Ertuğrul tragedy

    14 June 2024 - 15:26

    Finland suspects four Russian military planes violated its airspace

    14 June 2024 - 15:14

    Euro 2024 kickoff: Germany to face Scotland in opening match

    14 June 2024 - 15:02

    G-7 pledge to step up action on Russia oil fleet, energy, metals

    14 June 2024 - 14:48

    US Israel’s key intelligence partner in search for hostages

    14 June 2024 - 14:33

    President Aliyev delivers heartfelt Eid al-Adha message to Azerbaijanis worldwide

    14 June 2024 - 14:26

    COP29 Academy to empower young environmental leaders in Azerbaijan

    14 June 2024 - 14:18

    President Aliyev approves military cooperation agreement with Slovakia

    14 June 2024 - 14:13

    Ukraine national team to receive enhanced security measures at EURO 2024

    14 June 2024 - 14:06

    Armenian security chief to attend Ukraine Peace Summit in Switzerland

    14 June 2024 - 13:54

    Hungarian PM unveils NATO plans

    14 June 2024 - 13:42

    Bulgaria's GERB party wins most seats in parliament

    14 June 2024 - 13:30

    Scholz risks losing power if he calls early elections

    14 June 2024 - 13:18

    Oil, natural gas, renewables represent major segments of Azerbaijani energy policy

    Article by The Diplomatic Courier

    14 June 2024 - 13:06

    Armenian PM unveils government’s political will

    14 June 2024 - 12:54

    Is the Israel – Hezbollah war in Lebanon real?

    All out war

    14 June 2024 - 12:48

    Top 10 trading partners in Azerbaijan's foreign trade for early 2024

    Key indicators and trends

    14 June 2024 - 12:42

    Armenian officials barred from visiting Belarus

    14 June 2024 - 12:30

    Armenia exists thanks to Collective Security Treaty Organisation

    Russian experts’ opinions at Caliber.Az

    14 June 2024 - 12:20

    Azerbaijani MP emphasizes need for constitutional changes in Armenia

    14 June 2024 - 12:18

    Revanchist protesters relocate tent camp in Yerevan

    14 June 2024 - 12:06

    Government challenges acquittal of former Pakistan Premier Khan in state secret case

    14 June 2024 - 11:54

    Israel kills senior Hezbollah official following naval strike


    14 June 2024 - 11:42

    Is North Korea's missile program sparking East Asia crisis?

    Caliber.Az on YouTube

    14 June 2024 - 11:30

    US prohibiting Ukraine from striking Russia’s operational or deep rear in Russian territory

    Report by Institute for Study of War

    14 June 2024 - 11:18

    Türkiye deciding on contractor for Sinop Nuclear Power Plant

    14 June 2024 - 11:06

    Russian official: West lures Armenia with EU membership bait

    14 June 2024 - 10:42

    SOCAR, Baker Hughes sign cooperation agreement


    14 June 2024 - 10:30

    Erdogan hails Türkiye-Spain relations as model for NATO nations

    14 June 2024 - 10:18

    Macron's approval rating plummets to new low

    14 June 2024 - 10:06

    Ukrainian drones strike oil refinery in Russia’s Voronezh

    14 June 2024 - 09:54

All news