Greening the Economy: How Uzbekistan is Aligning Policy, Finance, and Innovation

The World Bank and Uzbekistan's Ministry of Economy and Finance highlight the country's green transition efforts, leveraging state-owned entities and financial institutions to drive sustainable investments. Key reforms include adopting green taxonomies, scaling renewable projects, and fostering private sector collaboration for climate resilience.

The World Bank, in collaboration with the Ministry of Economy and Finance of Uzbekistan, has presented a comprehensive report on the country’s commitment to a green economic transition, detailing its efforts to modernize while addressing the escalating challenges of climate change. Since 2022, Uzbekistan has implemented wide-ranging reforms, including recalibrating investment policies, introducing green standards, and realigning subsidies to encourage sustainable practices. These initiatives have been underpinned by significant policy shifts aimed at incentivizing green investments and ensuring a regulatory framework conducive to environmental sustainability. Despite these efforts, the report underscores that much more remains to be done to accelerate the country’s progress. Central to Uzbekistan’s green transformation is the untapped potential of its state-owned financial institutions (SOFIs) and state-owned enterprises (SOEs), which collectively wield substantial economic influence. Nine SOFIs dominate the national banking sector, providing 70% of all loans, while state investment funds and enterprises control key sectors like energy, industry, and agriculture. These entities are pivotal in mitigating market risks for green technologies and fostering public-private partnerships to mobilize additional private capital for environmentally sustainable projects. By embracing bold financial reforms and leveraging these state assets strategically, Uzbekistan can create a ripple effect that drives the broader adoption of green initiatives.

Key State Entities as Champions of Sustainability

The report identifies several key state entities as prime candidates for leading Uzbekistan’s green agenda. Among them are the Entrepreneurship Development Company (EDC), the Uzbekistan Mortgage Refinancing Company (UzMRC), and the Business Development Bank (BDB). These institutions have already demonstrated potential through various initiatives. EDC has adopted a forward-looking strategy to prioritize green investments, setting a target to allocate 35% of its financing to green projects by 2026. UzMRC, with its focus on housing finance, has partnered with international financial institutions like the Asian Development Bank to develop green mortgages and introduce sustainability criteria in the housing sector. Meanwhile, BDB has incorporated environmental, social, and governance (ESG) principles into its operational guidelines and is actively developing a Sustainable Finance Framework to support green projects. Each of these entities represents a cornerstone of Uzbekistan’s strategy to operationalize green finance and set benchmarks for other organizations to follow.

The Role of Governance and Green Standards

The Ministry of Economy and Finance is positioned as a critical driver of these initiatives, with its shareholder control over many SOEs and SOFIs allowing it to mandate green investment targets and operational changes. Through shareholder resolutions, the ministry can direct these entities to adopt the National Green Economy Taxonomy (NGET), which provides standardized criteria for green investments. The NGET plays a vital role in reducing ambiguity around what qualifies as green, thereby enhancing the credibility of Uzbekistan’s green finance initiatives. By aligning state assets and policies with the NGET, Uzbekistan can foster transparency, improve investment decisions, and attract more private sector participation. The report emphasizes the need for robust monitoring and reporting mechanisms to ensure accountability and prevent greenwashing, a risk that could undermine the credibility of these efforts.

A Coordinated Effort to Scale Green Investments

In addition to institutional reforms, the report calls for the establishment of a central coordination body to oversee climate and green finance across the public and private sectors. This body, potentially housed within the Ministry of Economy and Finance, would streamline resources, optimize synergies between public and private investments, and capitalize on international climate funds and carbon markets. The coordination platform could also guide the design of a national climate fund to centralize green financing efforts and maximize their impact. The examples of Brazil’s National Development Bank and Abu Dhabi’s Masdar provide valuable lessons on how state-backed entities can become catalysts for large-scale green investments. The report also highlights the importance of introducing climate risk guidelines in the banking sector, which would encourage financial institutions to incorporate sustainability considerations into their credit risk assessments and portfolios.

A Blueprint for Leadership and Private Sector Mobilization

Despite significant progress, challenges remain in scaling up green investments and ensuring effective implementation. The report outlines actionable recommendations, including updating investment criteria, training staff on green finance, and establishing clear metrics to measure progress. EDC, for instance, has been encouraged to develop specialized mechanisms to support small and medium-sized enterprises in adopting energy-efficient technologies. UzMRC is advised to advocate for industry-wide green standards in housing construction to facilitate the scaling up of green mortgages. Meanwhile, BDB’s plans to launch concessional financing and join international green finance platforms underscore its potential as a leader in sustainable banking. The report concludes that Uzbekistan’s green transition depends on the strategic mobilization of state resources and the creation of enabling conditions for private sector participation. By demonstrating leadership through its SOEs and SOFIs, Uzbekistan can inspire confidence among private investors and international partners. The coordinated efforts of the Ministry of Economy and Finance, coupled with robust governance frameworks and innovative financing mechanisms, are essential to achieving the country’s climate goals. This comprehensive approach positions Uzbekistan as a model for other emerging economies seeking to balance development with environmental sustainability. Through bold action and strategic alignment, the country can accelerate its green transition and contribute meaningfully to global climate resilience.