Central Asia is undergoing a transformation to address the urgent challenges of climate change. Governments are adopting sustainable practices to improve environmental quality, ensure energy security, and transition to affordable, renewable energy sources. Multilateral development banks (MDBs) play a pivotal role in this shift by providing the financing needed for local actors to achieve these objectives efficiently. These investments are directed towards projects that promote long-term environmental and social benefits, contributing not only to the region’s economic growth but also laying the foundation for sustained social and economic well-being.
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Sustainable finance employs investment strategies that generate financial returns while benefiting both the environment and society. Green bonds, for example, fund renewable energy, water management, waste systems, and social infrastructure like hospitals and schools, among other things. These bonds are regulated more strictly than traditional bonds to ensure that they serve long-term community development goals. MDBs have been instrumental in advancing green finance in Central Asia, particularly in Kazakhstan and Uzbekistan.
Kazakhstan, the first country in the region to adopt green finance standards, has seen over twenty issues in sustainable finance to date. By 2024, the country’s sustainable finance segment has exceeded $1 billion, supported by MDBs and local entities, among others. The government introduced measures such as loan subsidies and bond issuance guarantees for SMEs to encourage further sustainable investments. The Asian Infrastructure Investment Bank’s (AIIB) wind power pipeline in Kazakhstan complements the government’s efforts to accelerate green transition and achieve carbon neutrality by 2060.
Uzbekistan followed suit in 2023, issuing its first sovereign green Eurobonds on the London Stock Exchange – the first such issuance in the CIS. AIIB played a key role in supporting the growth of Uzbekistan’s green bond market. It invested $25 million in a $100 million sustainable Eurobonds issuance by JSCB Uzpromstroybank (SQB). This underscored the bank’s commitment to expanding sustainable finance across the region. Proceeds from the issuance have been directed toward, among other things, sub-projects focused on energy efficiency, water efficiency and renewable energy, aligning with Uzbekistan’s green economy goals under the Uzbekistan 2030 strategy.
The green bond market in Central Asia still faces challenges. Higher issuance costs, and complex certification and reporting requirements can deter potential issuers, particularly those that are less sophisticated or financially constrained. There is also a lack of standardized metrics and transparency in the use of green bond proceeds, leading to concerns over ‘greenwashing’ – a practice where the environmental benefits of projects are misrepresented, undermining the credibility of the issuer and, potentially, of the larger market.
Efforts are underway to address these issues. Kazakhstan’s introduction of national taxonomies for green projects helps define what qualifies for green financing, and the Central Asia Green Bond Accelerator aims to promote transparency and standardization. Governments across the region are enacting supportive regulations to encourage green bond issuances and to bring them in line with international standards.
Building a more resilient global economy requires aligning economic activities with sustainability goals, and Central Asia’s growing green finance market signals the region’s commitment to this path. AIIB, in collaboration with the private sector and local banks, is playing a pivotal role in accelerating Central Asia’s shift toward sustainable development. As MDBs like AIIB continue to provide crucial funding for environmentally responsible initiatives, Central Asia is becoming better-equipped to tackle the challenges of climate change and secure a sustainable future.
The author is Yulia Rusanova, Investment Officer, Financial Institutions and Funds, the Asian Infrastructure Investment Bank (AIIB). The bank is a multilateral development bank that began operations in Beijing in 2016 and now has 110 approved members worldwide.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of The Astana Times.
