In recent years, Uzbekistan has committed to transit to a green economy, including through cutting greenhouse gas emissions, expanding renewable energy, improving energy and water efficiency, and enhancing urban green spaces. These initiatives are more than environmental and climate adaptation efforts—they are strategic steps toward accelerating the country’s shift to market principles and building a resilient model for future growth.
Engaging SOFIs and SOEs is pivotal for this economic transformation. SOFIs currently provide around 70% of loans across the economy. Meanwhile, state investment funds, such as the Uzbekistan Fund for Reconstruction and Development (UFRD), will invest in projects in relevant sectors amounting to about 10% of GDP in 2024. Moreover, SOEs dominate sectors like energy, industry, agriculture, and transportation. Jointly, these institutions represent a largely untapped source of green investment.
The Ministry of Economy and Finance (MEF) is instrumental in untapping this green potential from state-owned entities. As a key shareholder in many SOFIs and SOEs, MEF can mandate that these organizations set green investment targets and ensure transparency in outcomes, driving a shift toward sustainable projects.
Green Investment Champions
The World Bank’s report recommends establishing “green investment champions” among SOFIs and SOEs that would prioritize green technologies and sustainable business models—setting an example for the private sector.
Through investments in clean energy, sustainable agriculture, climate-resilient infrastructure, and green housing, these entities could lead Uzbekistan’s green transformation.
Three institutions stand out as potential leaders in green finance: the Entrepreneurship Development Company (EDC), Business Development Bank (BDB), and Uzbekistan Mortgage Refinancing Company (UzMRC). EDC is already financing solar energy and other green projects, aiming for 35% of its funding to support green initiatives by 2026. BDB is integrating sustainability into its operations, setting climate finance targets, while UzMRC is preparing to issue green bonds and can play a vital role in green housing finance.
Other SOEs, like Uzkimyosanoat in chemicals and Issiqlik Elektr Stansiyalari in power generation, are exploring ways to reduce emissions and adopt cleaner technologies. Their leadership could inspire private companies to follow, creating a positive ripple effect.
The Uzbekistan Direct Investment Fund (UzDIF) and the Fund for State Support for Agriculture (FSSA) are also critical to this shift. UzDIF can attract foreign investors interested in environmental and climate-resilient projects across various sectors, while the FSSA can promote climate resilience in agriculture by incorporating green criteria into its financing.
With clear leadership, strategies, and targeted policies, state funds can effectively drive forward the green economy, paving the way for sustainable development and attracting private capital.
This report was produced with financial support from the Whole of Economy Program of the Climate Support Facility administered by the World Bank.
