Urgent policy reforms are needed to address the growing challenges of sustainable development, requiring a crucial shift in the financial system to mobilise green and inclusive economic growth. The reorientation of private capital towards sustainable investments is essential for achieving long-term stability, transparency, and economic resilience.
To ensure financial stability and support sustainable development, the National Bank of Georgia (NBG) is actively integrating environmental, social, and sustainability considerations into its policies. The bank has launched a Sustainable Finance Roadmap, outlining actions to be implemented with specific timeframes, aiming to establish a reliable regulatory framework and prepare the market for a transition to sustainable finance, ultimately contributing to long-term economic sustainability and financial stability.
The NBG has made significant progress in implementing actions outlined in its Sustainable Finance Roadmap, with many already completed or in the development phase. Looking ahead, the bank plans to enhance its Sustainable Finance framework and aims to publish a new roadmap in 2024, detailing the action plan for the years to come.
The financial sector in Georgia is predominantly composed of commercial banks, with the two largest banks holding a significant majority of total assets. While pension funds are increasing, microfinance institutions (MFIs) play a crucial role, particularly in funding SMEs and facilitating financial access in rural areas. Although the insurance market is growing, its share in the overall financial sector remains relatively small. The NBG’s sustainable finance policies primarily target commercial banks, as well as MFIs, but the bank recognises the capital market’s significance and includes actions for capital market participants in its Sustainable Finance action plan.
The NBG collaborated with local and international experts to develop the Sustainable Finance (SF) Taxonomy, published in August 2022. This taxonomy classifies activities promoting climate, green, social, or sustainability objectives into green and social categories. The NBG also enacted the Taxonomy Regulation in January 2023, defining green, social, and sustainable loans and imposing reporting obligations on commercial banks. Banks can label loans as such only if they meet SF Taxonomy criteria, and monthly reports on green loans are required. As of September 2023, the SF Taxonomy-aligned green loan portfolio in Georgia amounted to about GEL 412 million, representing less than 1% of the total lending portfolio. The majority of these loans (63%) are directed to the renewable energy sector, with 57% allocated to hydropower projects, and 17% going to the green transport sector. The relatively low share is attributed to ongoing implementation by banks and not all banks adopting the Taxonomy as of yet.
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