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Nazrin Abdul

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International financial institutions are stepping up their green investment efforts in Azerbaijan, aligning closely with the country’s strategic goal to diversify its economy and transition from traditional hydrocarbon dependence toward renewable and sustainable energy solutions. Both the Asian Development Bank (ADB) and the European Bank for Reconstruction and Development (EBRD) have recently unveiled projects that not only advance environmental sustainability but also strengthen infrastructure resilience and private sector development.

The ADB has approved a $700,000 technical assistance project to enhance energy efficiency and introduce clean technologies in the Baku Metro system. The initiative - titled “Decarbonizing Baku Metro for a Smart and Sustainable Urban Transit Future” - aims to reduce the capital’s carbon footprint, optimize energy use, and cut operational costs.

The project will assess opportunities for infrastructure modernization, including the integration of solar energy, battery storage systems (BESS), and intelligent energy management technologies. It will also incorporate predictive maintenance and big data-driven decision-making tools - a move that positions the Baku Metro as a model of sustainable public transport in the South Caucasus.

Serving nearly 630,000 passengers daily, the Baku Metro is at the heart of the capital’s transport system. With plans to expand the network to five lines covering 120 kilometers by 2035, the demand for energy-efficient and low-emission infrastructure has become increasingly urgent. Decarbonizing the metro will not only help Azerbaijan meet its national greenhouse gas reduction targets but also enhance operational efficiency and long-term financial sustainability.

This initiative forms part of the ADB’s broader engagement under its newly adopted Country Partnership Strategy (CPS) for 2025–2029, which prioritizes green and diversified economic development, low-carbon connectivity, and inclusive growth.

The strategy focuses on private sector-led expansion, financial sector resilience, and regional cooperation, all while addressing climate challenges and digital transformation. By promoting innovation and high-value services, the ADB aims to strengthen Azerbaijan’s human capital and competitiveness. Importantly, the CPS underscores that green transition efforts must go hand-in-hand with social inclusion, gender equality, and disaster risk reduction - ensuring that sustainability benefits both people and the environment.

Complementing ADB’s urban initiatives, the European Bank for Reconstruction and Development (EBRD) is preparing to provide a €89 million loan to the Azerbaijan State Water Resources Agency (ADSEA) for the development of modern water supply, sewage, and stormwater systems in Shaki and nearby villages — Oxud, Kish, and Qoxmuq,. The project also includes the construction of biological wastewater treatment facilities, marking a major step toward cleaner water management and flood prevention in regional communities.

The total project cost is estimated at €93 million, with up to €4 million expected as an investment grant. According to the EBRD, the initiative will have a significant environmental impact by cutting emissions from untreated wastewater, improving water quality, and boosting resilience against climate-related risks.

The project also includes an “inclusive transition” element - training and capacity-building programs for local water management specialists - reinforcing the EBRD’s emphasis on human capital and sustainable governance.

The EBRD Board of Directors is expected to review the project for approval in February 2026. As of September 2025, the bank’s active portfolio in Azerbaijan stands at €948 million, of which 89% supports sustainable infrastructure, 6% goes to financial institutions, and 5% to the corporate sector.

Under its 2025–2030 Country Strategy for Azerbaijan, the EBRD plans to accelerate the country’s green economic transition by encouraging non-oil private sector growth, renewable energy investments, and regional connectivity. The bank is also working closely with Azerbaijani financial institutions to improve lending capacity for SMEs, while supporting governance reforms and policy modernization to foster a more competitive business environment.

The simultaneous green initiatives by ADB and EBRD illustrate a growing international consensus on Azerbaijan’s potential as a regional hub for sustainable development. While the ADB is focusing on urban decarbonization and strategic planning, the EBRD is driving regional infrastructure modernization - together forming a complementary approach to advancing the country’s green transition agenda.

These efforts align with Azerbaijan’s long-term development vision, particularly as the nation prepares to host major international energy and climate dialogues in the coming years. By channeling investment into sustainable infrastructure and clean technologies, both banks are not only helping reduce environmental risks but also laying the groundwork for a resilient, innovation-driven economy.

If successfully implemented, these projects could serve as benchmark models for other developing economies seeking to balance industrial growth with climate responsibility. The strategic engagement of multilateral lenders such as ADB and EBRD thus signals confidence in Azerbaijan’s evolving green policy framework — and in its capacity to become a leader in sustainable transformation within the wider Caspian region.