We spoke with the President of the Union of Banks of the Kyrgyz Republic, Mr. Anvar Abdraev, who recently returned from a study tour to Mongolia, to learn more about sustainable and green finance and its prospects in the context of Kyrgyzstan.

The dramatic effects of climate change and environmental degradation showed the need for a more sustainable economy on the agenda. Transforming the economies of many developing countries, including Kyrgyzstan, to become more sustainable requires large investments, especially to ensure the transition to a green and low-carbon economy. Given that the public sector alone is often unable to meet this financial need, solutions have been found in many countries to involve the private sector.

What is Green Finance?

Green finance involves raising funds to address climate and environmental issues on the one hand and improving climate and environmental financial risk management on the other. In turn, "sustainable finance" considers environmental, social and governance issues and risks to increase long-term investment in sustainable economic activities and projects.

Examples of green finance range from green mutual funds, where you invest in companies that provide environmentally friendly products and services. It also includes "green credit cards" that give users extra rewards for every dollar they spend on sustainable activities. “Green finance is very broad. This may include, but is not limited to, climate finance,” Mr. Abdraev says. “It can also refer to a wide range of other environmental goals, such as industry pollution control, water sanitation, or biodiversity protection.”

Green finance plays an important role in achieving carbon reductions and can be the driving force behind the transition to a carbon neutral economy. As part of the implementation of Nationally Determined Contributions (NDCs), by 2030, Kyrgyzstan has committed to reducing emissions by 15.97% through domestic resources and by 43.62% with international support. According to the statement of the President of the Kyrgyz Republic at the Conference of Parties (COP) in Glasgow, with international support, Kyrgyzstan will strive to reach the platform of carbon-free green development by 2050.

Why was the experience of Mongolia chosen for the purpose of the educational tour?

Mongolia is one of the main leaders in the region in integrating sustainable green finance. The first results were the creation of the green corporation and guidelines aimed at establishing a classification system for determining whether an economic activity is environmentally sustainable (a "taxonomy"); and setting low-carbon targets. That is why, at the initiative of the leadership of the Ministry of Economy and Commerce of the Kyrgyz Republic and the Union of Banks of Kyrgyzstan and the active participation of the Ministry of Finance of the Kyrgyz Republic, Mongolia was chosen as a site for a study tour aimed to develop partnerships in sustainable green finance between the stakeholders of the two countries.

“Learning Mongolian experience allowed the participants to better understand the topic, see the results firsthand, get to know people who are directly working on the development and implementation of sustainable financing models through the improvement of legal acts,” shares Anvar Abdyldaev.

According to him, the trip made a huge impression on everyone as the participants did not expect such a breakthrough from Mongolia: “The country itself, the scale of development of the city of Ulaanbatoor, the scale of constructions, human potential, mass knowledge of a foreign language, openness in communication, freedom of thoughts and views was impressing as well as general goodwill of the people there. The level of development of the banking sector is worth mentioning, the results and figures indicate the rapid development of the economy. The assets of one bank alone exceed the figures of the entire banking system of Kyrgyzstan.”

The program of the study tour included various meetings with key employees of the Mongolian financial sector, including representatives of the State Mortgage Company. “The State Mortgage Company of Mongolia has existed for about as long as the State Mortgage Company in Kyrgyzstan, however, during this period they have issued 10 times more loans. Noting that the population of Mongolia is 2 times less than in the Kyrgyz Republic, this is a very serious result! It is also impressive that in a very short period, in just 1.5 years, they were able to create a green corporation and achieve good results. Their experience undoubtedly needs to be adopted, and we must do our best to achieve and possibly surpass this result, because we have already begun to study the mistakes and achievements of Mongolia and other countries. We must not repeat their mistakes." – Mr Abdraev shares.

Thus, participation in the study tour on sustainable green finance was a necessary and useful initiative for representatives of Kyrgyzstan, where each member of the delegation received the necessary information that will be useful in further work. Now on it is planned to actively promote projects on the principles of sustainable financing and the green taxonomy project.

The Decree on taxonomy is especially important for the consistent development of future legislation, which is advocated, in particular, by the Union of Banks of Kyrgyzstan. Investor interest around the world in green and sustainable finance is growing very fast. Given that climate change and environmental degradation are global issues, international cooperation is in the common interest; UNDP is actively promoting this through the international platform of the Partnership Actions on Green Economy (PAGE).

What are the plans to replicate the best practices of Mongolia in the Kyrgyz Republic?

“It is definitely necessary to replicate the experience of Mongolia. Specifically, I would highlight the following points for replication:

- First, an example of accreditation from the green fund of one of the financial institutions as "KhasBank", which currently receives funds from the Green Climate Fund (GCF) in the amount of $25 million.

- Creation of a green corporation. In fact, we announced plans for its creation before Mongolia, but they outrun us in its creation. The green corporation will be responsible for borrowing funds for green projects throughout the system. In Mongolia, the green corporation was originally created by the Mongolian Bank Association, as we plan to do it here. Its founders are the Government of Mongolia together with all members of the Mongolian Bank Association.

- And the most important is the replication of the related policies and regulations. Taxonomy issues, where we are just starting the work - Mongolia has already completed and it is in the public domain. We witnessed that it works there well. This means that it is also possible for us. They shared their experience with us so that we didn’t step on the same rakes but offered us a ready-made foundation.” – Mr Abdraev says.

How did the study tour participants improve their understanding of green finance?

“Now we are digesting the amount of information received. Of course, in Kyrgyzstan there is also a base of the green sector since Soviet times, it cannot be said that everything is new for us. For example, our agro system, the use of various types of heating such as gas heating systems, small hydroelectric power plants, drip irrigation, which, by the way, was the idea of our academician Dr Sharshenaliyev, who did not receive proper development in his time. In addition, examples of financing alternative energy sources, all these experiences will be used when working on the implementation of green taxonomy.”

How can the government advance the green finance agenda in the Kyrgyz Republic?

“In order to advance the green finance agenda in the Kyrgyz Republic, it is necessary to streamline it and determine its consistency, as well as develop a memorandum describing the main requirements. It is vital to clearly define priorities, indicate the norms and rules of behavior of the financial sector in relation to green projects and their stimulation. Today this is a priority at the heart of the National Bank of the Kyrgyz Republic. We also have strong experts involved in this area, and I have high expectations from our team.”

Mr Abdraev says that the trip to Mongolia gave a new breath to all participants and stakeholders of the financial sector. The participants were able to expand their networks of cooperation and establish the necessary contacts. He is sure that studying the experience of other countries and their trajectories is very important for Kyrgyzstan, as this will help to avoid mistakes others came across with.

“We have also started contacting with Georgia, which also has great success in this sector. If Mongolia's vision is more southeast, then Georgia's vision is more western. Georgia already has a very good developed taxonomy and they are also ready to cooperate with us. We have a lot in common with Mongolia and Georgia. The exchange of experience always brings positive results even the experience of those countries that are fundamentally different from our country

What are the next steps?

According to Mr Abdraev, now the participants of the study tour have learned what resources and where to get them, and how to use them. The next step will be the adaptation of new knowledge to the context of Kyrgyzstan. During the year it is planned to complete the work on the roadmap, promote the taxonomy, create a green corporation, and in parallel, search funds that can finance all this work.

“Already during the visit, the delegates, in particular the members of the Union of Banks, held a number of bilateral meetings, where the first cooperation agreements have already been signed. Several of our banks have already planned a follow-up trip for more specific purposes. The program of the trip was very intense and included parallel sessions. Our delegation was divided into interest groups, even I was not able to take part in all sessions, but my colleagues who participated said that they were very informative and useful. There are many related topics around sustainable green finance that require more in-depth study. Therefore, we plan not to limit ourselves to this one trip only, many meetings with colleagues in Mongolia are ahead of us and we are also planning to invite them to Kyrgyzstan as well. Everything can be seen in comparison, and unfortunately, this comparison is not yet in favor of our country, but there is space to move, and we have still got a lot to learn.”

The educational event in Mongolia became possible with the financial support of UNDP in Kyrgyzstan within the framework of the PAGE project, which brings together the specialized experience of 5 UN partner agencies (UNEP, ILO, UNDP, UNIDO, UNITAR), 20 partner countries (including Kyrgyzstan), 8 partners finance and cooperating partners to drive environmental and economic cyclical transformations to achieve the SDGs, creating an enabling environment for sustainable finance, including through green recovery.