| Project Detail |
Project Name Advancing Green Finance for Sustainable Development
Project Number 57314-001
Country / Economy Regional
Armenia
Georgia
Project Status Active
Project Type / Modality of Assistance Technical Assistance
The technical assistance (TA) aims to foster green banking practices in Armenia and Georgia, facilitating economic development and environmental sustainability in the region. The TA projects major activities are centered around conducting comprehensive gap assessments for selected financial institutions in both countries, by strategically identifying areas for improvement in green finance practices. The project will also prioritize enhancing internal capabilities within these financial institutions through focused capacity development and knowledge-sharing initiatives. The TA is strategically designed to align with overarching goals, placing specific emphasis on fostering green finance practices and amplifying green lending initiatives. This approach positions financial institutions to assume a proactive role in driving economic growth, promoting environmental sustainability, and achieving the Sustainable Development Goals (SDGs) within the region. The TA will actively explore potential market needs for further lending to banks, aiming to enhance their green portfolios. By identifying specific gaps and opportunities in green financing, the TA will pave the way for targeted interventions that address the unique needs of financial institutions in both countries. This strategic exploration is designed to inform future endeavors, potentially leading to additional project opportunities that actively promote green finance practices and foster the expansion of green lending initiatives.
Project Rationale and Linkage to Country/Regional Strategy
The finance sectors of Armenia and Georgia play pivotal roles in their economic development, with Armenias sector accounting for 6.5% of its GDP and Georgias for 4.9%. However, recognition is growing in both countries about the potential benefits derived from integrating environmental and sustainability considerations into green finance practices. As of 2022, about 29% of the Armenian banking sectors loan portfolio is dedicated to sectors deemed vulnerable to climate-related risks. These sectors include a range of industries and activities that may be significantly affected by climate change impacts, such as agriculture, tourism, and infrastructure development. Additionally, an estimated 19% of banking sector loans are tied to mortgages linked to real estate properties, including buildings and housing. These figures underscore the importance of integrating green finance practices within the Armenian banking sector to mitigate climate-related risks and capitalize on opportunities for green and resilient investments. In 2022, Georgia reported a notable volume of green loans, totaling about $180 million, within its finance sector. These green loans constituted 1.2% of the total loans issued during 2022. These data indicate a positive trajectory, reflecting a 0.2 percentage point increase compared with the previous year. This underscores the growth potential toward green financing within Georgias banking sector, signifying an increasing commitment to green finance practices and environmentally responsible investments.
Despite efforts to promote sustainability, both Armenia and Georgia face challenges in fully integrating green finance into their operations, highlighting the need for further investment and collaboration to advance the agenda of environmental responsibility in the finance sector. Effectively addressing environmental risks and climate challenges requires diversifying funding sources to include private capital for sustainable projects, alongside government support. Given their significant presence and importance in both countries economies, small and medium-sized enterprises (SMEs) have the potential to catalyze widespread adoption of sustainable and green practices and technologies. Therefore, empowering SMEs with access to green finance resources and support is essential for accelerating the transition to a more sustainable and resilient economy. Solutions could also facilitate unlocking the potential of women to participate more in the countries economies by enabling access to green finance for SMEs led by women and mitigating some gender-specific risks of climate change. Green finance has yet to provide opportunities for businesses initiated by women in sustainable sectors. Therefore, it is important to integrate gender considerations into the design and operationalization of dedicated green finance mechanisms and the development of green credit products targeted at women. Further efforts are required to enable applying a gender lens to green finance through building tools, resources, and expertise that can influence the financial systems in Armenia and Georgia and achieve green and socially inclusive economies.
Impact
Finance sector resilience and green finance practices enhanced |
