Azerbaijan Central Bank approves green taxonomy to boost sustainable finance

By Akbar Novruz

The Central Bank of the Republic of Azerbaijan (CBA) has officially approved the green taxonomy through a decision dated November 7. This new classification system is designed to identify and categorize green activities across various economic sectors, establishing technical criteria and subtypes to ensure clarity and consistency, Azernews reports.

According to the CBA, the green taxonomy primarily serves financial institutions by providing a standardized framework to evaluate and support environmentally sustainable projects. However, it is also available for use by the private sector to ensure that business activities align with the taxonomy’s defined criteria and principles. This alignment enables companies to develop green and sustainable transition strategies, disclose relevant information to the public, attract green investments, and pursue similar initiatives.

The implementation of the green taxonomy is expected to play a crucial role in forming a sustainable financial ecosystem within Azerbaijan. By directing both internal and external resources towards green and sustainable projects, the taxonomy aims to regulate risks associated with climate change and leverage opportunities presented by the transition to a low-carbon economy. Additionally, it supports enterprises engaged in the export of goods and services, thereby contributing significantly to the country’s adaptation to sustainable development imperatives.

Developed by the "Expert Group on Sustainable Finance," the green taxonomy was created under the initiative of the Central Bank with participation from relevant state institutions and support from World Bank experts. During its development, the group incorporated advanced international practices while also considering the unique characteristics of Azerbaijan’s economy.

The CBA emphasized that the green taxonomy will not only facilitate the sustainable growth of the financial sector but also enhance the overall resilience of the Azerbaijani economy. By fostering a sustainable financial environment, the taxonomy is poised to attract substantial green investments and promote long-term economic stability.