Uzbekistan’s green leap

Uzbekistan is a nation with high stakes when it comes to being affected by extreme weather – from threats of water scarcity and droughts to heat waves, flooding and landslides. Recognizing that these issues threaten the core of the country's agriculture, economy, and people, Uzbekistan has decided on a strategy of integrating green goals into financial sector reforms, creating a strong alignment between domestic finance and action to build resilient infrastructure and systems.

Uzbekistan Moves to a Greener Future

In the past few years, Uzbekistan has set ambitious goals to reshape its economy. Presidential Resolution No. 436, passed in 2022, lays out the government’s strategy to cut greenhouse gas (GHG) emissions by 35% per unit of GDP by 2030, improving resource efficiency, as well as reforestation and urban greening. The strategy has become a blueprint for the country's double transition to market principles and to a more resilient growth model. Another pivotal step is the creation of a National Green Economy Taxonomy, which sets a standard for environmentally sustainable activities and is instrumental for targeting policy support and influencing investment decisions

Uzbekistan’s ambitious strides toward a sustainable future have been supported by financial assistance and policy guidance from the World Bank. Aligned with the Country Partnership Framework, recent Development Policy Operations (DPOs) focused on improving fiscal management, promoting social inclusion, and advancing climate action.

Greening Public Institutions: The Next Frontier

Building on this collaboration, the World Bank's new report, Prime Picks for a Green Pivot: Uzbekistan State Funds for Climate Action (full report in English and Uzbek), provides a roadmap for financing the next green wave. The idea is straightforward yet powerful: by focusing state-owned financial institutions on green projects, the government leads by example and stewards the broader shift of other actors toward sustainable growth.

The World Bank's new report,  Prime Picks for a Green Pivot: Uzbekistan State Funds for Climate Action provides a roadmap for financing the next green wave.

The report's recommendations include identifying 'green investment champions' among state finance institutions. By setting ambitious green targets and publicly reporting on progress, these green champions can create a ripple effect across both the public and private sectors.

The potential for impact is massive. State-owned institutions hold substantial sway in Uzbekistan’s economy. State-owned financial institutions provide 70 percent of all loans across the economy, while state investment funds like the Uzbekistan Fund for Reconstruction and Development (UFRD) collectively invest the equivalent of 10 percent of projected GDP in 2024. They can lead the country’s green transformation by driving investments into clean energy, sustainable agriculture, and climate-resilient infrastructure and housing.

Ultimately, it's not about spending more, but about ensuring that state money is driving resilient and environmentally positive development. Uzbekistan’s public funds have the capacity to crowd in even bigger private investments, whether through renewable energy projects, sustainable farming, or urban greening initiatives. Aligning the country's financial flows with national climate goals also unlocks innovation, attracts new investors and create growth opportunities.

Aligning the country's financial flows with national climate goals also unlocks innovation, attracts new investors and create growth opportunities.

The government of Uzbekistan is committed to ensuring that public institutions lead the charge in adopting green practices. The state-owned Entrepreneurship Development Company is already gearing up for this shift, incorporating green principles into its operations. The company’s business strategy commits to increasing its share of green projects to 35 percent, using the National Green Economy Taxonomy as an investment screening tool. By doing so, it hopes to attract private and international capital, creating a powerful synergy between public leadership and private sector innovation. In the domestic debt market, the Uzbekistan Mortgage Refinancing Company issued the first commercial green bond using newly legislated green bond standards.

Carbon Markets and Green Technology Incentives

Uzbekistan’s broader policy reforms were crucial ingredients for mobilizing finance. Businesses can now access tax breaks and subsidies for investing in technologies like solar panels, wind turbines, and energy-saving systems. Uzbekistan had undergone a round of energy tariff adjustments which became the foundation for access to the carbon markets. Because of the climate change mitigation value of the tariff reform, this policy has given businesses the opportunity to earn and sell carbon credits, incentivizing them to cut GHG emissions and adopting sustainable practices.

The Road Ahead

Uzbekistan’s green transition is gaining serious momentum, but continued progress will require more financing. The key to unlocking more funds is to harness synergies among the government, state institutions, and the private sector. The report, Prime Picks for a Green Pivot: Uzbekistan State Funds for Climate Action  outlines how public funds can be used to unlock a first layer of such synergies.