The Central Bank of Azerbaijan (CBA) is working on implementing ESG risk stress testing, which will become mandatory in the coming years, CBA Director General Shahin Mahmudzade said at the event "Measuring Climate Risks for Smarter Adaptation and Mitigation Solutions" within COP29, Report informs.
He noted that ESG risks will gradually be linked to green loans, green bonds and national taxonomy: "We are also trying to incorporate ESG risk management into our stress testing system. Additionally, we have a project with the International Monetary Fund on transition risks. Through this project, we want to determine the impact of the transition period."
"The development of ESG principles for the local financial system began this year. We have prepared several instructions for banks. The CBA has developed a roadmap to determine the impact of transition and ensure the security of the financial system in Azerbaijan. First, we started with a survey of the financial sector. Honestly, the results were not very good. Furthermore, we are trying to strengthen capacity not only in the financial sector but also in the central bank. And three days ago, we launched our local taxonomy, developed with technical support from the World Bank," Mahmudzade added.