The 4th edition of the Sustainable Finance Forum took place at the beginning of April and concentrated on the markets in Eastern Europe, Caucasus, and Central Asia (EECCA). The virtual two-day forum, held on 7 and 8 April, explored a multitude of topics ranging from ESG to renewable energy, agriculture, and climate risks. Along with seasoned professionals from various institutions, such as the EBRD, IFC, investment funds and governmental organisations, regional GEFF experts had the opportunity to join the discussion on ways to advance in the development of sustainable financing in the region.
The Forum kicked off with a discussion on how recent regional and geopolitical developments have impacted operations and the financial sector in the region. “Build greener” was the message delivered by Sergiy Maslichenko, founding partner of the Green Trio Fund, signifying that there are opportunities to embrace technologies and strategic approaches that underpin sustainable finance.
Of course, there has to be close cooperation between governments, central banks and financial institutions in order to realise the wider goal of transitioning to a greener financing system. As Louise Gardiner, coordinator at the Sustainable Banking and Finance Network (SBFN) at IFC emphasised, central banks should be working towards creating an enabling environment and guiding the market. The National Bank of Georgia was one of the first to join the SBFN network and it is well on its way to realising its Sustainable Finance Roadmap. Kyrgyzstan has also made commendable strides in developing its framework, which stands on the four pillars of policymaking and regulations, building institutional capacity, ensuring environmental safety, and creating knowledge-sharing platforms.
Accelerating sustainable finance in the regions is a priority for many international institutions and investors. However, along with providing capital, it is also necessary to support regional partners in their day-to-day operations with technical assistance and advisory services. Sharing knowledge is also useful in developing other financial instruments in the market, such as green or sustainability bonds. Despite their popularity in Europe, these have yet to become a standard tool in non-EU markets. In time, with taxonomy alignment and rigorous verification standards, the EECCA region might become an interesting market for them.
As for renewable energy, EECCA offers the most exciting opportunities. Both the private and the public sectors are keen on developing wind and solar projects. As can be observed from the GEFF operations in the region as well, more and more businesses from a wide range of sectors are taking an interest in exploiting renewable energy. This is largely due to the rising electricity prices. The benefits of utilising the potential of renewable energies are clear: they provide gains for the government, are a very competitive resource, increase the security of supply and contribute to energy independence. Most technologies in the renewable energy space are equally bankable since technology risks are not particularly prevalent; however, the financial market needs to develop substantially in order to ensure it can support renewable energy development.
Climate risk was also discussed at length at the Forum, primarily in the context of agriculture. As Leah Soroka, Programme Manager for Europe Climate and Agri-Financial Services at the IFC outlined, agriculture remains one of the sectors most vulnerable to climate change. However, a number of regional conflicts, the pandemic, and the rise in commodity prices have all caused disruptions in the agricultural value chain. Ms Soroka stressed the importance of adopting technologies and sustainable practices in order to ensure that hunger and poor nutrition are prevented. Financial institutions need to understand the specificities of the agricultural business in order to devise instruments that support and empower local farmers. This is especially true for small-scale farmers: sharing knowledge, devising pricing policies, and making investments in infrastructure are all crucial when it comes to including smallholders in the agricultural value chain.
The Forum ended with an extensive masterclass on ESG Management and Climate Risk. Climate Risk Services CEO Gerhard Mulder and Project Manager Nathalie Lockton defined climate risk and its effects on the environment and institutions. The masterclass looked in depth at the types of risks associated with changes in climate and outlined priorities for institutions that want to mitigate, adapt or prevent the crisis. First and foremost, institutions have to have a clear definition of what climate change is and how it affects their organisation. They should then consider how climate-related risks and opportunities may evolve and they need to understand how the potential implications may play out under different circumstances (scenario analysis). All participants had a chance to see the benefits of scenario analyses and accurate climate-risk assessments with the help of the many case studies presented by the Climate Risk Services trainers.
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