The Agency's management has participated in the Astana Finance Days sessions
ESG (Environmental, Social, and Corporate Governance) practices in the banking sector, regulatory plans, new reporting standards, and climate risks were discussed during Green Growth Forum which was held during Astana Finance Days.
During the session on “The transformative potential of ESG in banking and climate risks" Madina Abylkassymova, Chairperson of the Agency of Republic Kazakhstan for Regulation and Development of the Financial Market, noted that the transition to the principles of sustainable development and increasing the share of "green" financing is a main global trend. Transformation of the economy in accordance with international principles and ESG standards is becoming a prerequisite for attracting external financing.
The Chairperson of the Agency shared the plans for the implementation of environmental and social risk management guidelines for second-tier banks. The Agency has already developed a roadmap for implementation of ESG standards in the financial sector, which at the first stage includes recommendations for voluntary disclosure by financial institutions on ESG risks and their impact. Starting from 2024 it is planned to include ESG risks in the annual stress testing process of the banking sector. "Five banks in Kazakhstan are already implementing high-level disclosure of ESG information in their annual sustainability reports" noted Madina Abylkassymova.
As a result, ESG risks will be integrated into the supervisory system of financial institutions and will be monitored as part of banks’ annual supervisory review SREP (Supervisory Review and Evaluation Process).
As a part of supervisory stress testing, the Agency plans to perform stress testing of ESG risks for financial organizations in 2024. The methodology and scenarios of stress tests will be developed in 2023.
To implement these stages, the Agency actively cooperates with international financial organizations to create a legal system for the implementation of sustainable development principles.
In particular, in April 2022, the Agency signed a Cooperation Agreement on ESG with IFC (The International Finance Corporation). It is planned to develop a roadmap for the implementation of sustainable and "green" financing in Kazakhstan, as well as to bring the green taxonomy in line with international standards. In cooperation with IFC, the ESG Risk Management Guidelines and ESG Risk Disclosure Guidelines will be developed for financial institutions.
"In Kazakhstan, the necessary legal environment for the issuance of such sustainable financing instruments as green bonds, social bonds, sustainable development bonds has been formed in 2021" said Mariya Khajiyeva, Deputy Chairperson of the Agency, during the session on “Regional cooperation on the development of green capital markets”.
Mariya Khajiyeva delivered that today the size of the market for bonds related to the sustainable development already exceeds $200 million (95.8 billion tenge). The volume of such bonds is $125 million on KASE. Issuers were Asian Development Bank ($79 million), Eurasian Development Bank ($43 million), and DAMU Fund ($2.2 million).
In general, the implementation of the gradual integration of ESG principles into the regulation will ensure the creation of a socially and environmentally responsible financial system, as well as increase access to the international capital market for financial institutions by attracting investors focused on ESG-principles.
External Communications Division of the Agency
+7 (727) 237 1089, press@finreg.kz