Climate change is an escalating global concern. Experts frequently cite increasingly severe natural disasters—such as droughts, floods, hurricanes, and wildfires—as direct consequences. These events inflict widespread damage on ecosystems, agriculture, and national economies, undermining food security and public health across the globe. In addition, melting glaciers and rising sea levels pose severe threats to coastal regions, potentially triggering mass migrations and destroying critical infrastructure. Together, these factors underscore the urgent need for coordinated, global efforts to mitigate the impacts of climate change.
Addressing these challenges requires the rapid development and implementation of effective solutions. One of the most powerful tools for this is green financing, which supports projects aimed at reducing carbon emissions, expanding renewable energy use, and bolstering economic resilience against climate risks. Through green financing, countries can attract international investment into eco-friendly technologies, driving both environmental protection and economic growth, while creating new jobs in the process.
Azerbaijan is committed to becoming a leader in this vital area. Azerbaijan is leveraging legislative reforms and inclusive policies to drive sustainable development. With the World Bank emphasizing the need to scale up investments that provide environmental benefits, or “green finance,” Azerbaijan is making bold strides to align its financial systems with global sustainability goals, particularly ahead of COP29.
Azerbaijan's hosting of this significant event, coupled with its proactive efforts to build a robust green financing infrastructure, positions the country to showcase its leadership in the global fight against climate change.
On September 6, President of Azerbaijan Ilham Aliyev said during the session titled “Azerbaijan's role in the new geopolitical environment” at the International Cernobbio Forum themed “Intelligence on the World, Europe, and Italy” that Azerbaijan is actively working in order to build bridges between different actors on the global arena.
“As we all know, the climatic topic is something, which divides countries and peoples. There are mutual claims and accusations about who is more responsible for damaging the planet and who has to pay more and etc. While not being a major actor on international arena, I think it is achievable for us to build bridges between the Global South and the Global North,” said President Ilham Aliyev.
The World Bank has highlighted that achieving a global transition to a sustainable economy requires a significant boost in green financing activities. However, it stresses that improvements in tracking and measuring green finance flows are crucial. Currently, the bond market leads the way, but other sectors, such as banking and loans, need clearer decision-making criteria and better project-level tracking.
Data from Spherical Insights reveals the Global Green Finance Market was valued at USD 4.18 trillion in 2023, with projections suggesting it will grow to USD 28.71 trillion by 2033.
Azerbaijan's government is keen to capitalize on this growing sector, with significant investments needed to meet the country's carbon reduction goals. According to the World Bank, Azerbaijan will require $40 billion by 2060 to make a notable reduction in emissions, with 40% of the funding expected from private financing, particularly from the banking sector. The country is not only focused on acquiring international green finance but is also working to create a domestic framework to stimulate green investments.
The Central Bank of Azerbaijan has played a pivotal role by introducing a green financial taxonomy, aimed at aligning the country’s financial institutions with international standards. The taxonomy, expected to be presented before COP29, will serve as a foundation for new guidelines that banks and financial institutions must follow, ensuring that they integrate climate risks and sustainable development principles into their corporate governance and strategies. With banks making up the bulk of Azerbaijan’s financial sector, the new criteria will ensure they play a critical role in the nation’s green transition.
As part of its broader green finance efforts, Azerbaijan’s banking sector has already shown strong support for eco-friendly initiatives. This is evident in sectors such as transportation, where new electric buses have been deployed in Baku, and agriculture, where innovations like drip irrigation systems, supported by bank financing, are helping to address water scarcity. The Central Bank has also approved a system for regulating the financial sector that emphasizes green financing, marking a significant step in advancing the country’s green agenda.
In addition to developing its green finance framework, Azerbaijan recognizes that climate action requires the active participation of all sectors of society. Empowering women to take leadership roles in climate-related initiatives has emerged as a key priority. Research has consistently shown that women are also highly effective leaders in times of crisis, and their involvement in community planning, disaster response, and climate mitigation efforts can also result in stronger, more resilient outcomes.
As climate change impacts men, women, and youth differently, it’s crucial to incorporate their diverse voices and perspectives into policy and action. By promoting gender equality in the climate arena, Azerbaijan is not only advancing women’s rights but also ensuring more comprehensive, inclusive climate solutions. Participation of both men and women in climate action is essential to building stronger communities capable of adapting to the realities of climate change.
By prioritizing green finance legislation and highlighting the vital role of women in addressing climate change, our country is taking a holistic approach toward securing a sustainable future.
On top of that Azerbaijan has been proactive in integrating the Sustainable Development Goals (SDGs) into its national development strategies, with a specific focus on clean environment and green development as one of the five priority areas of its socio-economic development plan until 2030. As part of this commitment, Azerbaijan is advancing several renewable energy projects, aiming to increase the share of renewables in its energy mix to 37% by 2030.
Furthermore, the country is playing a key role in the Azerbaijan-EU Green Corridor project, which will supply green electricity produced in Azerbaijan through Georgia and the Black Sea to Romania, and eventually to Hungary and other European countries.
One of Azerbaijan's most ambitious green initiatives is the declaration of the Karabakh and Eastern Zangazur regions as "green zones." These regions are being rebuilt with sustainability at their core, adopting green economy principles, with plans to establish a carbon-neutral zone in the liberated territories by 2050. The establishment of Nakhchivan as a green energy zone further underscores Azerbaijan’s commitment to sustainability, which is expected to bolster partnerships with major international players such as bp, Masdar, ACWA Power, and Fortescue Future Industries.
At the international level, organizations like UN Environment are working closely with financial regulators and the private sector to align global financial flows with the 2030 sustainable development agenda. They promote public-private partnerships and support the creation of green finance frameworks, such as green bonds, which have become an essential tool for funding sustainable development projects.
Looking ahead, COP29 is expected to generate critical momentum for green financing in Azerbaijan. The event will focus on enhancing accessibility to green finance for not only large corporations and state-owned enterprises but also for small and medium-sized enterprises (SMEs). This is crucial, as SMEs often face barriers in accessing sustainable finance, yet their role in the green transition is indispensable.
Azerbaijan’s hosting of this important event, along with the country’s proactive steps in developing a green finance infrastructure, will allow it to showcase its leadership in tackling climate change.
By emphasizing green finance legislation and the role of women in climate action, Azerbaijan is taking comprehensive steps to ensure a sustainable future.
As 2024 has been declared the "Green World Solidarity Year" in Azerbaijan, the country remains firmly committed to the global fight against climate change, leading by example with its legislative reforms, financial initiatives, and inclusive policies aimed at empowering all members of society to contribute to their solution.
In conclusion, the global movement toward sustainable development and green finance underscores the critical need for legislative change. Without a robust regulatory framework, the full potential of green financing to combat climate change and achieve environmental goals will remain underutilized. Governments, financial institutions, and international organizations must collaborate to create and implement laws that encourage green investments, provide clarity on sustainable finance practices, and integrate environmental, social, and corporate governance (ESG) criteria into decision-making processes.
For green finance to truly thrive, a well-defined legal framework is necessary to ensure that all financial actors—banks, corporations, institutional investors, and SMEs—are aligned with international standards and sustainability targets. By making green finance not only accessible but also advantageous through tax incentives, subsidies, and transparent tracking mechanisms, policymakers can drive a significant shift in global finance towards sustainability. This is particularly important in sectors like banking, where improved loan tracking processes and clear decision-making criteria can stimulate long-term investments in renewable energy, eco-friendly infrastructure, and climate resilience projects.
Azerbaijan’s efforts to introduce a green financing taxonomy ahead of COP29 are a timely example of how legislative initiatives can catalyze sustainable development. These new regulations will encourage banks to incorporate climate risks into their corporate strategies and incentivize private investment in green projects. As Azerbaijan continues to refine its green finance policies, the country demonstrates how regulatory frameworks can foster financial innovation while driving the global energy transition.
Moreover, inclusive green finance policies that involve women in decision-making processes have the potential to produce more effective and sustainable solutions. By promoting gender equality in green financing legislation, countries can ensure that women—proven to be highly effective leaders in times of crisis—play a central role in climate action. Empowering women within green finance frameworks not only enhances climate resilience but also strengthens community-based solutions, contributing to more comprehensive, equitable climate responses.
Incorporating comprehensive regulations into national and international financial systems is essential to scale up green finance and mobilize the trillions of dollars needed to meet global climate goals. As countries like Azerbaijan lead the way, the global community will succeed pushing for legal reforms that embed sustainability into the core of financial decision-making, ensuring a greener, more resilient future for generations to come.
Sevil Mikayilova, Member of Parliament of Azerbaijan
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