Despite the persisting uncertainty in global markets and rising economic challenges, ESG aspects remain among the priorities for Central Asia. In the region’s states, the ESG agenda is promoted by local legislation, regulatory framework, and requirements of international investors, banks, and other stakeholders.

Since 2012, Central Asian nations have been adopting long-term development strategies and setting forth national goals that among other things prioritise social, economic, and environmental aspects, which are also embedded in the New Uzbekistan Development Strategy for 2022–2026.

In the 2018–2021 period alone, Uzbekistan saw the adoption of over ten resolutions and decrees of the President and the Cabinet of Ministers to facilitate transition to green economy, ensure energy efficiency, engage in environmental protection, secure human rights, and fight corruption.

Another major driver is the criteria that investors and lenders use to assess potential target companies and projects. This is especially relevant in Uzbekistan, given its privatisation prospects, plans to attract international investments, buoyant stock performance and market cap, as evidenced by trading data from the Toshkent Republican Stock Exchange.

For instance, in 2021, a considerable share of investors in the secondary market of Kazakhstan was represented by institutional investors making up 25% and 6% in bond and equity transactions, respectively, according to statistics by the Kazakhstan Stock Exchange (KASE).

International banks and financial institutions, such as J.P. Morgan, Citi, Societe Generale, Credit Suisse, ICBC Standard Bank, Deutsche Bank, China Development Bank, BlueOrchard, and Incofin, which all have noticeable exposure to debt issued by Uzbek, Kazakh, and Tadjik companies, place a special emphasis on ESG risk management (table 1). This is evidence of the stringent criteria that companies must meet to be eligible for any financing. Development banks that invest heavily in the region, including the European Bank for Reconstruction and Development, European Investment Bank, Eurasian Development Bank, and the Asian Development Bank, have their own social and environmental policies, along with standards and requirements that potential projects must satisfy.

Central Asian businesses are also expected to meet criteria of international counterparties as part of supply chains. In various industries, many major Asian and European companies have policies and processes in place to manage supply chains and related ESG risks, which are taken into account as early as the supplier selection stage and are usually stipulated in supply contracts.

Overall, the Central Asian market is increasingly interested in implementing the ESG agenda. Uzbekistan’s largest companies strive to align their corporate governance, strategies, and non-financial disclosures with best practices and stakeholder expectations. There is also a trend for corporate and sovereign issuers to increase their reliance on sustainable finance instruments. As an example, in July 2021, Uzbekistan became one of the first nations in the region to issue a Sovereign Sustainable Development Goals (SDGs) Eurobond, with two tranches of UZS 2.5 trillion and USD 635 million, respectively.

In the corporate sector, sustainable finance tools have gained the strongest foothold in Kazakhstan, which has a green taxonomy in place. Between 2020 and 2022, Kazakh companies offered seven green bond issues and four social bond issues for a total of approximately KZT 220 billion (USD 460 million) on Kazakhstan’s KASE and AIX stock exchanges. On top of that, in 2021, Kazakhstan saw the issuance of three green loans worth a total of USD 60 million. That said, Uzbekistan is also firmly on its way to securing an ESG leadership standing in the region, driven by a variety of external factors and rapid rise in demand from international investors.

Finvizier Consultancies provides ratings advisory, financial modelling, and ESG advisory services, including climate consulting.