Central Bank of Azerbaijan working on 'greening' monetary policy operations

The Central Bank of Azerbaijan is working on the "greening" of its monetary policy operations, Director General of the Central Bank, Shahin Mahmudzada, said at an event held within the framework of the annual meeting of the Islamic Development Bank (IsDB) Group in Baku.

Report quotes him as saying the institution he represents is closely cooperating with the government on several directions, including the integration of ESG components.

He noted that, unlike traditional financial risks, ESG risks are transnational and systemic in nature, making them significantly more difficult to contain within national borders. ESG risks also create externalities - costs or consequences borne by third parties. For example, a company in Europe may depend on raw materials from Africa or a production chain in Asia, and disruptions at any stage can affect the entire system. Therefore, broader and more coordinated international efforts are needed to build a sustainable future.

The Central Bank representative also announced the launch of an international initiative aimed at improving the comparability and interconnectedness of sustainable finance taxonomies.

Within this framework, together with partners such as the International Finance Corporation (IFC), Sustainable Banking and Finance Network (SBFN), United Nations Development Programme (UNDP), UNEP Finance Initiative, Climate Bonds Initiative, and others, a project titled "Roadmap for Enhancing Interoperability and Comparability of Sustainable Finance Taxonomies" has been launched. The initiative is a voluntary multilateral platform aimed at addressing one of the key challenges in green finance - fragmentation.

According to Mahmudzada, the lack of unified approaches to taxonomy development leads to uncertainty and additional barriers to capital flows.