In recent times, Uzbekistan has undergone a noteworthy shift, evolving into a significant participant in the global financial landscape with a strong emphasis on green finance. The nation's debut in international markets began with its inaugural bond issuance in 2019, followed by the swift release of three thematic bonds, including a sovereign sustainability bond in 2021 and two green bonds in 2023. These achievements have positioned Uzbekistan as a trailblazer in Central Asia, introducing thematic bonds as a relatively new financial instrument, The Organization for Economic Cooperation and Development (OECD) reported.
Motivation for Green Bonds
Uzbekistan's drive towards green bonds is rooted in the substantial gap between investment needs, especially in sustainable infrastructure, and the current expenditure predominantly funded by the state budget. With an estimated annual shortfall of $6bn, the Uzbek government acknowledges the necessity to attract private capital for projects aligned with environmental and developmental goals. A significant challenge lies in transforming Uzbekistan's energy system, heavily reliant on natural gas and a substantial contributor to greenhouse gas emissions.
Environmental Challenges and Ambitious Targets
Despite a commendable 14% reduction in greenhouse gas emissions per unit of output, Uzbekistan recognizes that it remains off track to meet its 2030 goal. The country's ambitious targets include a 35% reduction in the GHG intensity of the economy and the integration of renewable energy sources, constituting 25% of Total Primary Energy Supply (TPES).
Financial Market Landscape
Uzbekistan faces challenges in its financial markets, characterized by the dominance of state-owned enterprises and banks dependent on government subsidies. The absence of active institutional investors in debt markets and low trading volumes further complicates the financial landscape. Ongoing efforts aim to harmonize the fragmented financial market infrastructure, reflecting the country's commitment to fostering a conducive environment for financial growth.
Key Findings and Recommendations
The report underscores the substantial potential for Uzbekistan to reduce greenhouse gas emissions by rapidly increasing the share of renewable energy sources, particularly solar. However, it emphasizes the need for credible costing information and financing strategies, given the significant investments required.
The call for a comprehensive net-zero target aligns with the imperative of integrating sustainable practices across sectors, marking a crucial step towards achieving Uzbekistan's environmental and developmental goals.
Simplifying regulatory frameworks is identified as a pivotal recommendation, aiming to enhance market facilitation and promote a more streamlined approach to capital market operations.
Industry Perspectives
Bekhruzbek Ochilov, Investment Banking Director of Alkes Research, accentuates the importance of green financing in achieving Uzbekistan's objectives. He emphasizes the role of thematic bonds in financing impactful projects and welcomes private institutions in facilitating green financing initiatives. Greenbonds offer Uzbekistan a pathway to sustainable development, attracting global investor interest. Drawing inspiration from successful solar and wind projects, transitioning to green bonds for refinancing and future initiatives holds the key to a more eco-friendly and economically sound future for the nation.
OECD' reports that Uzbekistan's journey towards a sustainable and green future is marked by commendable milestones, yet challenges persist. With continued international collaboration, regulatory reforms, and the integration of green finance instruments, Uzbekistan can position itself as a leader in the region, attracting investments for a more sustainable and economically viable future.
The Organization for Economic Co-operation and Development (OECD) serves as a distinctive platform where 37 democratic nations with market-oriented economies collaborate to establish policy norms aimed at fostering sustainable economic development. Acting as a forum for governments, the OECD facilitates the exchange of experiences, the exploration of solutions to common challenges, the identification of best practices, and the formulation of rigorous standards for economic policies. With a history spanning over 50 years, the OECD has been a trusted provider of policy analysis grounded in evidence and economic data. The United States, in conjunction with other member nations, is actively engaged in reinforcing transparency, accountability, budgetary discipline, and responsiveness to the priorities of OECD members.
Alkes Research, a newly established investment and consulting firm in Uzbekistan, offers diverse services including brokerage and investment banking. They hold the copyright for the EQRE Blue index, which monitors the country's prime securities. Recognized by various entities, including Uzbekistan's Ministry of Finance, Alkes emphasizes commitment to the United Nations Sustainable Development Goals (UN SDGs) and plays an active role in advancing the nation's capital market.
Earlier Daryo reported that in an exclusive statement to Daryo, Odil Musaev, Managing Director of Investment Banking & Advisory Boutique Alkes Research, provides insights into the remarkable issuance of two sets of Green Sovereign bonds and Eurobonds on the London Stock Exchange. This noteworthy development highlights the favorable reception of Uzbekistan's swiftly progressing economy by the international investment community.
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