BAKU, Azerbaijan, October 5. Climate change is
an escalating global concern. Experts frequently cite increasingly
severe natural disasters—such as droughts, floods, hurricanes, and
wildfires—as direct consequences. These events inflict widespread
damage on ecosystems, agriculture, and national economies,
undermining food security and public health across the globe. In
addition, melting glaciers and rising sea levels pose severe
threats to coastal regions, potentially triggering mass migrations
and destroying critical infrastructure. Together, these factors
underscore the urgent need for coordinated, global efforts to
mitigate the impacts of climate change.
Addressing these challenges requires the rapid development and
implementation of effective solutions. One of the most powerful
tools for this is green financing, which supports projects aimed at
reducing carbon emissions, expanding renewable energy use, and
bolstering economic resilience against climate risks. Through green
financing, countries can attract international investment into
eco-friendly technologies, driving both environmental protection
and economic growth, while creating new jobs in the process.
Azerbaijan is committed to becoming a leader in this vital area.
Azerbaijan is leveraging legislative reforms and inclusive policies
to drive sustainable development. With the World Bank emphasizing
the need to scale up investments that provide environmental
benefits, or “green finance,” Azerbaijan is making bold strides to
align its financial systems with global sustainability goals,
particularly ahead of COP29.
Azerbaijan's hosting of this significant event, coupled with its
proactive efforts to build a robust green financing infrastructure,
positions the country to showcase its leadership in the global
fight against climate change.
On September 6, President of Azerbaijan Ilham Aliyev said during
the session titled “Azerbaijan's role in the new geopolitical
environment” at the International Cernobbio Forum themed
“Intelligence on the World, Europe, and Italy” that Azerbaijan is
actively working in order to build bridges between different actors
on the global arena.
“As we all know, the climatic topic is something, which divides
countries and peoples. There are mutual claims and accusations
about who is more responsible for damaging the planet and who has
to pay more and etc. While not being a major actor on international
arena, I think it is achievable for us to build bridges between the
Global South and the Global North,” said President Ilham
Aliyev.
The World Bank has highlighted that achieving a global
transition to a sustainable economy requires a significant boost in
green financing activities. However, it stresses that improvements
in tracking and measuring green finance flows are crucial.
Currently, the bond market leads the way, but other sectors, such
as banking and loans, need clearer decision-making criteria and
better project-level tracking.
Data from Spherical Insights reveals the Global Green Finance
Market was valued at USD 4.18 trillion in 2023, with projections
suggesting it will grow to USD 28.71 trillion by 2033.
Azerbaijan's government is keen to capitalize on this growing
sector, with significant investments needed to meet the country's
carbon reduction goals. According to the World Bank, Azerbaijan
will require $40 billion by 2060 to make a notable reduction in
emissions, with 40% of the funding expected from private financing,
particularly from the banking sector. The country is not only
focused on acquiring international green finance but is also
working to create a domestic framework to stimulate green
investments.
The Central Bank of Azerbaijan has played a pivotal role by
introducing a green financial taxonomy, aimed at aligning the
country’s financial institutions with international standards. The
taxonomy, expected to be presented before COP29, will serve as a
foundation for new guidelines that banks and financial institutions
must follow, ensuring that they integrate climate risks and
sustainable development principles into their corporate governance
and strategies. With banks making up the bulk of Azerbaijan’s
financial sector, the new criteria will ensure they play a critical
role in the nation’s green transition.
As part of its broader green finance efforts, Azerbaijan’s
banking sector has already shown strong support for eco-friendly
initiatives. This is evident in sectors such as transportation,
where new electric buses have been deployed in Baku, and
agriculture, where innovations like drip irrigation systems,
supported by bank financing, are helping to address water scarcity.
The Central Bank has also approved a system for regulating the
financial sector that emphasizes green financing, marking a
significant step in advancing the country’s green agenda.
In addition to developing its green finance framework,
Azerbaijan recognizes that climate action requires the active
participation of all sectors of society. Empowering women to take
leadership roles in climate-related initiatives has emerged as a
key priority. Research has consistently shown that women are also
highly effective leaders in times of crisis, and their involvement
in community planning, disaster response, and climate mitigation
efforts can also result in stronger, more resilient outcomes.
As climate change impacts men, women, and youth differently,
it’s crucial to incorporate their diverse voices and perspectives
into policy and action. By promoting gender equality in the climate
arena, Azerbaijan is not only advancing women’s rights but also
ensuring more comprehensive, inclusive climate solutions.
Participation of both men and women in climate action is essential
to building stronger communities capable of adapting to the
realities of climate change.
By prioritizing green finance legislation and highlighting the
vital role of women in addressing climate change, our country is
taking a holistic approach toward securing a sustainable
future.
On top of that Azerbaijan has been proactive in
integrating the Sustainable Development Goals (SDGs) into its
national development strategies, with a specific focus on clean
environment and green development as one of the five priority areas
of its socio-economic development plan until 2030. As part of this
commitment, Azerbaijan is advancing several renewable energy
projects, aiming to increase the share of renewables in its energy
mix to 37% by 2030.
Furthermore, the country is playing a key role in the
Azerbaijan-EU Green Corridor project, which will supply green
electricity produced in Azerbaijan through Georgia and the Black
Sea to Romania, and eventually to Hungary and other European
countries.
One of Azerbaijan's most ambitious green initiatives is the
declaration of the Karabakh and Eastern Zangazur regions as "green
zones." These regions are being rebuilt with sustainability at
their core, adopting green economy principles, with plans to
establish a carbon-neutral zone in the liberated territories by
2050. The establishment of Nakhchivan as a green energy zone
further underscores Azerbaijan’s commitment to sustainability,
which is expected to bolster partnerships with major international
players such as bp, Masdar, ACWA Power, and Fortescue Future
Industries.
At the international level, organizations like UN Environment
are working closely with financial regulators and the private
sector to align global financial flows with the 2030 sustainable
development agenda. They promote public-private partnerships and
support the creation of green finance frameworks, such as green
bonds, which have become an essential tool for funding sustainable
development projects.
Looking ahead, COP29 is expected to generate critical momentum
for green financing in Azerbaijan. The event will focus on
enhancing accessibility to green finance for not only large
corporations and state-owned enterprises but also for small and
medium-sized enterprises (SMEs). This is crucial, as SMEs often
face barriers in accessing sustainable finance, yet their role in
the green transition is indispensable.
Azerbaijan’s hosting of this important event, along with the
country’s proactive steps in developing a green finance
infrastructure, will allow it to showcase its leadership in
tackling climate change.
By emphasizing green finance legislation and the role of women
in climate action, Azerbaijan is taking comprehensive steps to
ensure a sustainable future.
As 2024 has been declared the "Green World Solidarity Year" in
Azerbaijan, the country remains firmly committed to the global
fight against climate change, leading by example with its
legislative reforms, financial initiatives, and inclusive policies
aimed at empowering all members of society to contribute to their
solution.
In conclusion, the global movement toward sustainable
development and green finance underscores the critical need for
legislative change. Without a robust regulatory framework, the full
potential of green financing to combat climate change and achieve
environmental goals will remain underutilized. Governments,
financial institutions, and international organizations must
collaborate to create and implement laws that encourage green
investments, provide clarity on sustainable finance practices, and
integrate environmental, social, and corporate governance (ESG)
criteria into decision-making processes.
For green finance to truly thrive, a well-defined legal
framework is necessary to ensure that all financial actors—banks,
corporations, institutional investors, and SMEs—are aligned with
international standards and sustainability targets. By making green
finance not only accessible but also advantageous through tax
incentives, subsidies, and transparent tracking mechanisms,
policymakers can drive a significant shift in global finance
towards sustainability. This is particularly important in sectors
like banking, where improved loan tracking processes and clear
decision-making criteria can stimulate long-term investments in
renewable energy, eco-friendly infrastructure, and climate
resilience projects.
Azerbaijan’s efforts to introduce a green financing taxonomy
ahead of COP29 are a timely example of how legislative initiatives
can catalyze sustainable development. These new regulations will
encourage banks to incorporate climate risks into their corporate
strategies and incentivize private investment in green projects. As
Azerbaijan continues to refine its green finance policies, the
country demonstrates how regulatory frameworks can foster financial
innovation while driving the global energy transition.
Moreover, inclusive green finance policies that involve women in
decision-making processes have the potential to produce more
effective and sustainable solutions. By promoting gender equality
in green financing legislation, countries can ensure that
women—proven to be highly effective leaders in times of crisis—play
a central role in climate action. Empowering women within green
finance frameworks not only enhances climate resilience but also
strengthens community-based solutions, contributing to more
comprehensive, equitable climate responses.
Incorporating comprehensive regulations into national and
international financial systems is essential to scale up green
finance and mobilize the trillions of dollars needed to meet global
climate goals. As countries like Azerbaijan lead the way, the
global community will succeed pushing for legal reforms that embed
sustainability into the core of financial decision-making, ensuring
a greener, more resilient future for generations to come.
Sevil Mikayilova, Member of Parliament of
Azerbaijan
