1. GREENING DEBT CAPITAL MARKETS IN EU EASTERN
PARTNERSHIP COUNTRIES AND KAZAKHSTAN
For Agenda Item 4. Mobilising and catalysing private-sector investment in
green economy transition in EECCA
GREEN ACTION TASK FORCE ANNUAL MEETING
12 MAY 2023, ISTANBUL
NELLY PETKOVA, OECD

2. Scope and objectives of the analysis
• Scope of the analysis - covers the Eastern Partnership (EaP) countries
(Armenia, Azerbaijan, Georgia, Moldova and Ukraine) plus Kazakhstan, most
recently Uzbekistan
• Objectives of the analysis:
 To assess the potential role of green bond markets in financing green investments
 To identify barriers to scaling up green bonds
 To identify the role of governments and regulators in mobilising domestic capital
markets
• In-country meetings with private, public sector actors and IFIs
• Analysis financed by the EU through the “EU4Environment” Project and by
the Federal Ministry for the Environment, Nature Conservation and Nuclear
Safety of Germany (International Climate Initiative)

3. Financial
market
Capital
market
Stock
market
Bonds
market
Primary
market
Secondary
market
Money
market
Bonds are a fixed-income debt
instrument which allows the bond
issuer to raise money (debt) from bond
holders (investors) against the
obligation to repay the debt over a
certain period of time and at a certain
interest rate.
Bonds can be issued by:
• public authorities (governments,
municipalities)
• credit institutions
• companies
• supranational institutions in the
primary markets

4. • Green bonds are similar to traditional bonds but
– The proceeds from the bonds have to be spent exclusively on
green investments – need for a green bond framework
– Issuers have to track, measure and report on the impact of the
bond – need for external reviews
– Additional costs related to green bond issuance
Innovations related to green bonds

5. 38 47
90
164
153 236 246
545
20
83 136
288
14
19 155
207
0
200
400
600
800
1000
1200
2014 2015 2016 2017 2018 2019 2020 2021
Green Sustain&SLB Social
• The sustainable debt market
(GSSS: Green, Social,
Sustainability and
Sustainability-linked bonds)
reached a cumulative USD
2.4 tn between 2014-2021
• While green bonds have
dominated the market and
more than doubled between
2020 and 2021, social and
sustainability bonds grew
dramatically and achieved
higher volumes than in all
previous years combined
• The dramatic growth of
social bonds in particular
can be largely attributed to
the effects of the COVID-19
pandemic
Global sustainable bond markets primary
issuance, all currencies (USD bn, equivalent)
Source: Climate Bonds Initiative.

6. – Armenia
(financial
corporate
bonds) -2
– Georgia
(corporate
bonds, SOEs)
- 2
– Kazakhstan
(corporate and
supranational
bonds) - 5
– Ukraine
(corporate
bonds) - 2
Green bond market in EaP countries and Kazakhstan
0 0.2 0.4 0.6 0.8 1 1.2 1.4
Armenia
Georgia
Kazakhstan
Ukraine
Global green bond markets primary issuance,
2020-23, USD bn, equivalent

7. Country Residential
buildings
Public
buildings
Electricity &
Heat
Industry Transport Total Annual
percentage
of 2019
GDP
Armenia 0.3 - 0.6 0.1 - 0.2 0.7 0.4 - 0.8 0.2 - 0.5 1.7 - 2.8 1.5% - 2.5%
Azerbaijan 0.4 - 0.8 0.3 - 0.5 1.6 1.7 - 3.6 0.5 - 1.2 4.5 – 7.7 1.1% - 1.9%
Georgia 0.4 - 0.6 0.1 - 0.1 9.1 0.7 - 1.5 0.2 - 0.7 10.5 - 12.0 7.1% - 8.1%
Moldova 0.3 - 0.6 0.04 - 0.1 1.0 0.5 - 1.1 0.2 - 0.5 2.0 - 3.3 2.0% - 3.3%
Ukraine1 3.6 - 6.4 2.0 - 3.7 16.5 3.2 - 6.9 2.1 - 6.1 27.4 - 39.6 2.1% - 3.1%
Kazakhstan 1.2 - 2.2 0.9 - 1.5 4.0 10.4 - 22.2 1.7 – 4.0 18.2 - 33.9 1.2% - 2.2%
Total 6.2 - 11.2 3.4 - 6.1 32.9 16.9 – 36.1 4.9 - 13.0 64.3 – 99.3
Source: Authors’ calculations.
Note: * The calculations do not consider the substantial war-related investment needs in Ukraine.
Mitigation related investments 2022-2030 (bn EUR)

8. 8
Green bond
issues on
international
exchanges
 Substantial green
bond fund mobilised
by two entities in
Ukraine and two in
Georgia
 Oversubscription
underlined
international investor
appetite
 EBRD/ADB support
in 3 issues (SOEs)
Amount Matu-
rity
Coupon Public/private
placement
Use of
proceeds
IFI initial
purchase
Georgia
Georgian
Railways JSC,
2021
USD 500
m.
7 yrs. 4% London Refinance
existing debt
and fund rail
infrastructure
EBRD and
ADB
Georgia Global
Utilities, 2020
USD 250
m
2 yrs. 7.75% Ireland Refinancing of
a number of
assets
ADB
Ukraine
DTEK
Renewables,
2019
EUR 325
m.
5 yrs. 8.5% Ireland RE projects
Ukrenergo, 2021 USD 825
m.
5 yrs. 6.875%
Variable for a
sustainability
-linked
portion
Several
European
exchanges
EBRD:
USD 75 m.

9. 9
Green bond issues
on local exchanges
 Issues on local
markets much more
limited
 Ameriabank: a solid
green bond
framework, despite
the absence of local
green finance
legislation
 Kazakhstan: first
small issue on Astana
Int’l Exchange, one
transaction of 2 bonds
by ADB on KASE (Kaz
Stock Exchange)
Armenia
Ameriabank I,
2020
EUR 42
m.
5 yrs 3.05% Private RE and various
other activities
FMO
Ameriabank II,
2022
USD 8m
AMD 3
bn.
27
months
USD 3.5%
AMD 9.5%
Yerevan
Exchange
As before
Kazakhstan
DAMU
Entrepreneurshi
p Fund, 2020
USD 0.5
million
3 yrs Listed on
Astana
exchange,
though only
one investor
Solar power
Asian
Development
Bank, 2020
USD 32
m.
2 yrs 10.1% KASE ADB climate-
related
projects

10. Several countries have also defined elements of a green finance
regulatory framework often with support by int’l community
Georgia:
• 2019 roadmap for
sustainable finance
• ESG disclosure and
reporting principles for
the banking sector. First
stock take published in
2021
• Sustainable Finance
taxonomy being
completed
Kazakhstan/AIX
• Full set of green bond
rules and core taxonomy
• Technical support and
some incentives for
potential issuers
Kazakhstan/KASE
• Taxonomy under
preparation
• Limited ESG disclosure
Ukraine
• National Bank of Ukraine
roadmap contains plans for
disclosure rules and
sustainable financing
• Green bonds recognised in
capital market law as an asset
in its own right
• Detailed rules on use of
proceeds under preparation
• Taxonomy and rules for green
finance projects of state
entities under preparation

11. Obstacles to green bond market development
• Lack of sufficiently sizable potential issuers whose corporate
governance is adequate for a bond market presence and a local rating –
a key problem for green bond investors looking for greater
transparency of use of proceeds and impact
• Lack of institutional capital, e.g. pension funds or insurance agencies
• Lack of a sufficient pipeline of projects that are sufficiently
transparent, of high quality and sizable
• Erratic investment environment for renewables, specifically, unclear or
unreliable feed-in-tariff regimes, persistent use of incentives/subsidies
for fossil-fuel consumption, lack of carbon pricing
• Green finance regulation is still in its infancy, or completely lacking in
some of the countries

12. What can governments do?
 Sovereign issuers, agencies and state enterprises could be early green bond issuers, within
existing debt management guidelines
 Bank supervision and ESG principles could encourage emergence of green loan portfolios
– ultimately for the refinancing through green bonds on local markets
 Green bonds on international exchanges the main option for larger and highly rated
corporates or banks with an established bond market presence and credit history
 Providing public support can help launch an effective green bond market:
- governments can set targets for green bond issuance by public funds, state-owned
enterprises and local governments to support the initial development of the market
- governments can adjust fiscal policies and putting in place fiscal incentives (tax credit to
investors,, subsidies for interest payments to green bond issuers)
 Preparing robust and credible project pipelines can be used as underlying assets for the
green bond issuance by public entities
 Develop or upgrade local green finance frameworks: clear and locally specific taxonomies
but should be compatible with EU and other internationally recognised standards