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Akbar Novruz

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Sustainable finance has become one of the key pillars of the strategic framework of the Central Bank of Azerbaijan (CBA), reflecting the country's growing focus on climate resilience, green investments and long-term financial stability, AzerNEWS reports.

Speaking at the 14th Private Sector Forum of the Islamic Development Bank Group, Rustam Tahirov, Director of the CBA's Department for Sustainable Development of the Financial Sector, said Azerbaijan's exposure to climate and environmental risks makes sustainable finance a strategic priority for the regulator.

According to Tahirov, both physical and transition-related climate risks have direct implications for the Central Bank's mandate, particularly in maintaining financial stability and ensuring the resilience of financial institutions.

“As a result, sustainable finance has been incorporated into the strategic framework of the Central Bank,” he noted.

To support this agenda, the CBA has already approved a sustainable finance roadmap, introduced a national green taxonomy and established regulatory requirements for the management of climate and environmental risks within the banking sector. Requirements related to disclosure and accountability have also been introduced.

Tahirov described the green taxonomy as a strategic instrument for both public and private sector stakeholders. The framework is designed to direct financial resources toward priority sectors and support the decarbonization of the national economy.

He noted that, according to World Bank estimates, Azerbaijan will require annual investments equivalent to around 2.3% of GDP to achieve its long-term carbon neutrality objectives.

For businesses and financial institutions, the taxonomy is expected to create new opportunities to attract and diversify funding sources while facilitating the development of green financial instruments. It also enhances market transparency by establishing clear criteria for classifying projects as green, transitional or ineligible.

Under the framework, projects must meet environmental objectives, comply with technical standards, adhere to the principle of “do no significant harm” and satisfy minimum social requirements.

Tahirov added that the Central Bank is currently implementing regulations governing green and sustainable lending while also evaluating the expansion of sustainable financing instruments. These include green, social and sustainability bonds, as well as blue bonds, which finance projects related to water resources and the ocean economy.

He also highlighted the momentum generated following Azerbaijan's hosting of COP29, noting that the country's banking sector has committed to mobilizing 2 billion manats for sustainable finance initiatives.

According to Tahirov, banks have already begun financing projects in renewable energy, energy efficiency, sustainable agriculture and water resource management, supporting Azerbaijan's broader transition toward a greener and more diversified economy.