CBA develops plan of supporting decarbonization through 'green' financing

The Central Bank of Azerbaijan (CBA) has developed an action plan for a sustainable finance roadmap, a key step in supporting the green growth agenda.

Report informs, citing the World Bank, that while a full analysis of green finance instruments for Azerbaijan is yet to be conducted, it is likely that asset diversification could also produce welfare gains.

"A comprehensive green growth and asset diversification strategy, followed by policy interventions, is key to fostering Azerbaijan’s sustainable future, cleaner environment, and green growth. Targeted public sector interventions may provide incentives and help create a reliable policy and regulatory environment for steering the economy towards a greener path. Investments in human capital development for the emerging green sectors would stimulate private investments in green and less polluting technologies," the bank's study says.

The plan of the Central Bank includes (i) skill and capacity development in sustainable finance within the CBA and other industry associations; (ii) climate and ESG risk assessments, disclosure, and reporting within economic and financial sectors; (iii) developing a sustainable finance taxonomy; (iv) creating climate and ESG risk management, and internal control systems; (v) devising incentive mechanisms to enhance public- private mechanisms and sustainable finance products, stimulate local investors, and mobilize donor financing.

According to the World Bank, all of these actions are steps in the right direction towards minimizing market uncertainties around greening the growth while also reducing transition costs.

"Public support for green investments could change the framework conditions and bring stability to the capital markets and financial institutions. In the short term, public finance will be critical when confronting key social and environmental challenges. It could also play a powerful market-shaping role as it does not face pressure to deliver short-term returns," the study says.