Green Bonds Market Framework in Tajikistan and What’s On Offer

Tajikistan has established internationally aligned legal framework for the issuance of sovereign green bonds. This blueprint adheres to the four core components of the International Capital Market Association (ICMA) Green Bond Principles, encompassing clear governance, project selection criteria, and robust reporting requirements.

Policy vs Facts

While commitment to policy is present, no sovereign green bond has been issued to date. And the primary challenge seems to be not a lack of regulation, but lies in operational and institutional capacity. As far as major climate-liked projects are concerned, two transactions dominate Tajikistan’s experience so far:

The country's first and only green bond issuance was a private-sector transaction led by Eskhata Bank in February 2024, supported by the International Finance Corporation (IFC). This initiative may be seen as a successful proof-of-concept for the green bonds market.
A major climate-related project, the Rogun hydropower plant, was financed in 2017 through a conventional Eurobond and that was prior to the formal green framework being established. Retroactively, the latter may seem like and opportunity that could have materialized into something more significate and potentially attract wider pool of capital. The reason being that the institutional capacity, framework, and market readiness for a sovereign green issuance were not in place at the time. At present it should probably serves as a pointer to still existing disconnect between what is a policy and what should be financing practices in reality.

The Context and the Imperative

To start with, Tajikistan is faced with climate-related vulnerabilities. According to World Bank Climate and Development Report for Tajikistan (November 20204), climate-related damages to infrastructure, agriculture, and livestock productivity may reduce the nation's real GDP by 5–6% by 2050. Land degradation costs are projected to double by that time from the current annual average of nearly $325 million. While the Government adopted Green Economy Development Strategy for 2023–2037 and has thus voiced its commitment to the challenges, implementing the such climate agenda is said to require some $17 billion in investment by 2050. And green bonds are viewed as a crucial tool to mobilize the private and external capital necessary to address this ambitious funding requirement.

Sovereign Green Bond Framework Blueprint

A "government green bond" is defined as a sovereign debt obligation aligned with the ICMA Green Bond Principles. The framework explicitly references lists published by ICMA and the Climate Bonds Initiative for defining "External Verification Service Provider" and "Review".

The proceeds from these bonds must be used exclusively for financing or refinancing projects in five core categories that mirror the ICMA principles:

Climate change mitigation.
Adaptation to climate change.
Conservation of natural resources.
Biodiversity conservation.
Pollution prevention and control.

Governance and Project Evaluation

The framework is governed by a dedicated Inter-ministerial Committee for State Green Bonds (Committee), chaired by the Ministry of Finance. The Committee is responsible for project selection, review, and final approval.

Projects are supposed to be evaluated based on key factors, including:

The environmental sustainability objectives.
Alignment with the government's green policy.
Management of social and environmental risks.
Compatibility with official or market-based taxonomies.

The Committee is also responsible for approving an external verification service provider to conduct both pre-issuance assessment and post-issuance verification.

Post-Issuance Reporting

The Ministry of Finance is obligated to publish a comprehensive annual report between 12 and 18 months after the initial issuance, and annually thereafter. This report must include a list and description of the funded projects, the specific amount of proceeds directed to each project, and an assessment of the expected and actual environmental and social impact.

IFI-Led Pipeline

A pipeline of viable, green-aligned projects is being implemented through traditional IFI financing, confirming the existence of investable opportunities. They include EBRD loans for sustainable transport infrastructure in Dushanbe (€28.45 million), EBRD financial facilities for upgrading the national power grid (€31 million) and ADB grants for households and micro-enterprises to access finance for energy-efficient home solutions ($10 million).

These projects, while not financed by bonds, are building the groundwork and institutional capacity that will be necessary to support future green bond issuances. They also show that multilateral partners are ready and already engaged in supporting the Tajikistan's green transition through a variety of financial instruments.

Institutional and operational challenges

Operationalize the Inter-ministerial Committee. The Inter-ministerial Committee for State Green Bonds would need become now an active project pipeline developer. Its mandate would now need to expand form pure policy setting point to a proactive actor geared towards identification, appraisal, and strategic packaging of a portfolio of eligible green projects that meet the framework's criteria. This will create a ready, investable pipeline for a future sovereign issuance, addressing the lack of a comprehensive project framework which now does not exist.

Develop a National Green Taxonomy. While the current framework replicates the ICMA principles, the development of a more detailed and nationally specific green taxonomy is a necessary next step. A national taxonomy would provide a more precise and locally relevant definition of what constitutes a "green" project in Tajikistan, thereby enhancing investor clarity and providing a more robust foundation for reporting and impact measurement.

Pilot a Small-Scale Sovereign Issuance. To build internal capacity and test the framework, the Ministry of Finance would need considering a small-scale, domestic-market issuance. This would allow the government to navigate the full lifecycle of a green bond—from project selection and external verification to proceeds management and impact reporting. A successful domestic pilot would build confidence and institutional experience before targeting a larger, more demanding international market.

Incentivize Private Issuances: The government would need to consider implement policies, such as tax incentives or technical assistance programs, to encourage other financial institutions and corporations to follow Eskhata Bank’s lead, deepening the domestic green finance market.

Enhancing Regulatory Capacity: The National Bank of Tajikistan would need to strengthen its regulatory capacity by developing clear standards for private green bonds and ensuring consistent and credible post-issuance reporting to prevent "greenwashing" and maintain investor confidence.