Green finance in Azerbaijan faces hurdles despite taxonomy approval

Despite the Central Bank of Azerbaijan's approval of the national Green Taxonomy, financing for green projects remains problematic, according to Bahruz Naghiyev, Deputy Chairman of the Management Board at PASHA Bank, Report informs.

Speaking on the second day of the Baku Climate Action Week (BCAW2025), Naghiyev said that clients frequently apply for green loans, but banks face difficulty determining whether a project qualifies as green.

"The problem is that we can't verify whether a project is green or not, because the definition is still unclear. The taxonomy provides a framework, but there"s no standardized system or verification process in place. We need an independent body that can assess and provide ESG evaluations integrated into our decision-making. That does not currently exist," he explained.

Naghiyev also pointed out a lack of diversity in green financial products:

"There are no transition bonds, no sustainability-linked bonds, or other forms of financing. This is partly due to short deposit terms, and as a corporate bank, we can't ensure long-term financing on our own. What we need is a permanent mechanism to access funding or create a sustainable green bond market."

He further emphasized that Azerbaijan's credit risk differs significantly from that in Europe or the US, which makes financing less appealing for corporations:

"They complain when they hear about double-digit interest rates - they find it unacceptable. But we are working on it. The good news is, we are optimistic. If there is a problem, there is a solution - it's just a matter of time," he said.

Naghiyev concluded by noting that other countries didn't solve these issues overnight and expressed confidence that Azerbaijan could even reach its goals faster by learning from others' mistakes.