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COP for Hope: BSTDB to explore ways to coordinate financing for climate initiatives in Baku - President Serhat Köksal (Exclusive interview)

Green Economy Materials 12 November 2024 10:09 (UTC +04:00)
COP for Hope: BSTDB to explore ways to coordinate financing for climate initiatives in Baku - President Serhat Köksal (Exclusive interview)
Laman Zeynalova
Laman Zeynalova
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BAKU, Azerbaijan, November 12. As part of COP29 in Baku, Trend News Agency proudly presents COP for Hope, a special project offering an unparalleled platform to hear from world leaders and trailblazers in politics, economics, science, and ecology, all united by a shared commitment to addressing today’s pressing climate challenges.

Today, we are honored to speak with the President of the Black Sea Trade and Development Bank (BSTDB) Serhat Köksal.

In an exclusive interview with Trend, he said that the BSTDB will explore ways to coordinate financing for climate initiatives at COP29 in Baku.

“I am honoured to join global leaders and heads of international financial institutions at a panel organized by the Central Bank of Azerbaijan, where we’ll explore ways to coordinate financing for climate initiatives and mobilize the substantial funds needed to drive a green transition in line with Paris Agreement. Leading a delegation by BSTDB, I look forward to fruitful multilateral and bilateral meetings, with government officials and private sector representatives,” he said.

Regarding the Bank’s stance on climate finance, Köksal said it is compatible with the Bank’s core dual mandate, which is to promote regional cooperation among, and economic development in, member countries.

“Climate finance has obvious developmental benefits, and in many cases, it helps promote cooperation since climate related issues go across borders and many times require intergovernmental cooperation, or for expertise from one country to be provided to another. Moreover, BSTDB has adopted a Climate Change Strategy that aims at reducing emissions in its portfolio and raising the share of climate financing to at least 30% by supporting more climate positive operations and by incorporating mitigation and/ or adaptation elements into as many projects as possible,” the BSTDB president added.

New Country Strategy for Azerbaijan

“Amid the on-going war in Ukraine and its impact on the Bank, we have prioritized consolidating our portfolio to protect the interest of our shareholders- a goal we have successfully achieved. However, the focus on consolidation led to a slowdown in new project development throughout 2022, 2023, and the first half of 2024. Only in the second half of 2024 have we picked up our activity again, with a view to increasing the momentum in 2025-26. This temporary decline in new project activity has rendered the preparation of individual country strategies less important and therefore the Bank has adopted a more synoptic view as it re-expands project activities. We do expect that as we return to normal, in the next strategy period from 2026-2030 we will prepare country strategies for all our member countries where it is possible to conduct business, including of course Azerbaijan,” said Köksal.

He went on to add that the new country strategy for Azerbaijan will take into account by all means its climate priorities.

“Azerbaijan has signed and duly ratified the Paris Agreement by committing through its Nationally Determined Contributions (NDCs) to reduce emissions and limit global temperature rise. Its NDC outlines the country’s emission reduction target, the national socio-economic climate priorities, the most vulnerable sectors, what mitigation and adaptation actions are necessary to meet said target, and what financing is required in this respect. Therefore, by including the climate commitments into the country strategy BSTDB will align its financing priorities with the NDC of Azerbaijan which, we believe will play an important role in supporting the country in meeting its climate mitigation and adaptation targets and will add more relevance to our mandate fulfilment,” said the BSTDB president.

Pipeline of new projects for Azerbaijan

Köksal said that the Bank is building up a pipeline in Azerbaijan in line with its appetite to do more and strengthen its presence in the country.

“Given the need to promote diversification of the economy and to strengthen the non-oil/ non-energy portion of the economy, the Bank will pay particular attention to operations which facilitate diversification, including the promotion of small and medium scale projects in the non-oil sector which generate new employment creation and development impact. In line with the increased strategic emphasis of the Bank to help countries to boost investment and to invest in infrastructure, BSTDB will prioritize such infrastructure investment activities where possible,” said the Bank’s president.

He pointed out that given the great need, however, for development of the non-energy related portion of the economy, BSTDB will be open to undertake bankable operations that support private sector development, with emphasis on high potential sectors like: (i) trade finance and financial sector, (ii) energy and infrastructure, (iii) manufacturing, (iv) agriculture and agribusiness, (v) petro-chemical industry, (vi) transport, and (vii) real estate an tourism.

“This means that we continue focusing on medium scale projects in the non-oil sector with development and regional cooperation impact. In particular, we have projects in agribusiness, in manufacturing of some industrial goods & household items, in logistics and retail sectors. These are mostly the projects of large local companies that plan to expand their business through their subsidiaries in different sectors. It is important to note that we also have some projects in our pipeline of some Azerbaijanian companies planning to expand regionally in the Caucasus and in Turkiye. We give priority to such projects since they fit perfectly to our mandate of regional cooperation,” Köksal said.

He noted that the Bank also continues to strengthen and expand cooperation with Azerbaijani banks, including through rolling over of existing trade finance lines and working on the new medium-term financing to support access to finance for SMEs, including through provision of funding in local currency.

New spheres of cooperation

Köksal said that BSTDB plans to expand activities in the non-oil sector and is keen to develop a portfolio in the so-called real sectors of the economy.

“While it has had success financing banks, including being the first multilateral development bank to issue a local currency bond in manat in order to catalyze development of the financial sector, it has proven more difficult to find projects in areas such as manufacturing, transportation, infrastructure development, and municipal development.

Our priority will continue to be on the projects that:

  • Increase the share of non-oil sector in the economy,
  • Substitute imports through local production,
  • Help technological know-how transfer to Azerbaijan,
  • Support MSMEs and green investments by offering dedicated wholesale funding through financial intermediaries,
  • Support our potential partners in Azerbaijan to mitigate their climate impacts, by reducing their emissions through investing in renewables such as hydro-power, wind and solar as well as energy efficiency in the building sector, transport and industries. Equally important will be supporting our potential partners better adapt to the impacts of the changing climate, and BSTDB will specifically target the vulnerable sectors, such as construction and real estate, coastal infrastructure, agribusiness, mining, water-intensive sectors and utilities,” the BSTDB president explained.

Expanding the network of partner banks in Azerbaijan

Köksal noted that the Bank is working on adding new partner banks to its network.

“In addition to Turanbank and Rabita bank, with whom there are active lending operations, there are discussions with two other financial intermediaries about starting cooperation where the Bank can offer trade finance and/or SME facilities. In addition, we are interested in deepening our relationships with some large banks on funding side to be able to source local currency for on-lending to both FI and corporate clients,” he concluded.

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