BEYOND GREENWASHING: STRENGTHENING CENTRAL BANK POLICIES FOR ECOLOGY IN UZBEKISTAN

INTERNATIONAL SYMPOSIUM “ADVANCED RESEARCH IN ECONOMICS AND BUSINESS MANAGEMENT”, SEPTEMBER 19, 2025 455 BEYOND GREENWASHING: STRENGTHENING CENTRAL BANK POLICIES FOR ECOLOGY IN UZBEKISTAN Zulfiya Nosirova Tashkent State University of Economics. https://doi.org/10.5281/zenodo.17266925 Abstract: Climate change more and more threatens financial and economic stability, and thus the operation of central banks comes into action. The thesis explores the role of climate shocks in monetary policy, price stability, and financial oversight, with special reference to Uzbekistan. It analyzes international policies—like the European Central Bank stress tests, China's green credit policy guidelines, and World Bank taxonomy frameworks—and compares them with Uzbekistan's current policy measures, such as green refinancing, NGFS membership, and pilot green bonds. Uzbekistan does not yet have a clear green taxonomy, disclosure requirements, and robust monitoring mechanisms despite the advancements. The study argues that international best practices can help Uzbekistan curb greenwashing, activate sustainable finance, and realign its central banking system towards long-term environmental and economic resilience. Keywords: Climate change, Climate shock, heatwaves, greenwashing, monetary policy, sustainability, default, inflation, economic growth, loans, green bonds, credit guidelines, green project catalogues, fund. The devastating effects of climate change are becoming increasingly evident. Temperature records are being shattered again this year in Central Asia, Canada, the United States, Arctic Russia, and elsewhere. In Fact, the past six years have been the hottest six on record, and temperatures in 2020 exceeded the 1850–1900 average by 1.25°C globally[2]. Climate shocks are significant obstacles to the growth of the economy, which directly raises problems in the operation of Central Banks. Central banks, unlike commercial banks, ensure price stability, promote economic growth, define monetary policy, and oversee the financial market. In the case of Uzbekistan, water security is heavily dependent on the mountain ranges of the Pamir and Tyan Shan, which serve as the source of the Amu Darya and Syr Darya rivers. However, climate change intensified heatwaves and accelerated glacial melt, increasing the possibility of unexpected floods and long-term water scarcity. Such events pose a serious threat to Uzbekistan's economy, as agriculture remains a cornerstone of its economy. Another climaterelated risk concerns energy. The world is shifting to more sustainable power resources, such as solar and hydro power, from fossil fuels. If droughts occur, energy sources will fall sharply, making consumers return to more expensive gas and coal. This illustrates why central banks should increase their attention to climate change, as the likelihood is that it will affect their ability to achieve their mandates. Additionally, when banks concentrate their lending in a few volatile sectors (food, construction, energy), a downturn in these sectors leads to a wave of loan defaults. Banks suffer heavy losses, reduce capital to lend, and starve the entire economy of the country. If left unaddressed, these disruptions could be amplified, as weak mitigation policies increase the risk of even larger climate shocks. Therefore, climate shocks and climate policies INTERNATIONAL SYMPOSIUM “ADVANCED RESEARCH IN ECONOMICS AND BUSINESS MANAGEMENT”, SEPTEMBER 19, 2025 456 interact to shape inflation dynamics—while climate change raises the uncertainty of inflation, policies such as carbon pricing raise prices in the short term but level them once the transition is reached [2]. In Contrast, there are also other views. “We should not be activists,”. “Our role should remain about understanding how climate impacts the economy, without trying to drive the policy agenda.” Central banks’ independence is an “exorbitant privilege,” and monetary policymakers should avoid straying from their core remit of price stability and supervision, European Central Bank governing council member Pierre Wunsch told The Wall Street Journal. [3] In a nutshell: There is no universal agreement. The Fed believes its job is to keep the car's engine running (the economy), not to tell the driver (the government) where to go. The ECB and its allies believe that if a massive storm is ahead (climate change), the mechanic must warn the driver and help prepare the car for it, because otherwise the engine will be destroyed anyway. [3] In 2018, Uzbekistan ratified the Paris Agreement and adopted a national commitment to reduce GHG emissions per unit of GDP by 10% of the 2010 level by 2030. According to the Strategy on the Transition of the Republic of Uzbekistan to the “Green” Economy for the Period 2019-2030, Uzbekistan aims to increase the share of RESs in total electricity generation to more than 25% by 2030 [7]. It also plans to double its energy efficiency indicator, reduce the carbon intensity of GDP, and provide the entire population and all economic sectors with access to modern, inexpensive, and reliable energy. The transition may be costly in the short run, but upfront investment will likely be more than offset over the long run as the country avoids the aggravation of physical risk and reaps the economic rewards of mitigation[2]. Whereas Uzbekistan progresses on its domestic transition, other big economies and international institutions are also enhancing their climate policies. The European Central Bank (ECB) has begun taking climate risks into its monetary policy operations, conducts stress tests, and develops supervisory expectations, recognizing that physical and transition risks can potentially disrupt both price stability and financial stability. "We already said that if banks don't comply, we won't shy away from enforcement measures," Heemskerk told a Reuters Newsmaker event. "Some banks did not meet this interim deadline on materiality assessment or other matters, and we already issued periodic penalty payments." Similarly, the People's Bank of China (PBoC) led the way for green finance by introducing green credit guidelines, green bond issuance facilitation, and creating national green project catalogues, persuading banks to tie lending practice with environmental objectives. For instance, A city government in China issues a green bond worth $200 million to build a subway line. Investors buy it because they know it’s labeled and certified as green under the PBoC’s framework. Globally, the Network for Greening the Financial System (NGFS) consists of more than 100 central banks and financial supervisors and works together to develop similar techniques of climate stress tests, disclosure obligations, and mainstreaming sustainability in financial supervision. In addition, the World Bank plays a large role by investing in green infrastructure, technical support for renewable energy project finance, and low-carbon growth in developing countries. The publication Developing a National Green Taxonomy: A World Bank Guide will help regulators in emerging economies who seek to “green” their countries’ financial systems [6]. “As a pioneering issuer of green bonds, the World Bank has played a key role in developing sustainable capital markets and facilitating innovative transactions,” said INTERNATIONAL SYMPOSIUM “ADVANCED RESEARCH IN ECONOMICS AND BUSINESS MANAGEMENT”, SEPTEMBER 19, 2025 457 Anshula Kant, Managing Director and World Bank Group Chief Financial Officer [5]. Uzbekistan has already begun using several tools from the ECB, PBoC, and World Bank playbook. The Central Bank of Uzbekistan (CBU) has set up a green refinancing window for financing renewable energy projects, including solar panels, and has joined the Network for Greening the Financial System (NGFS) to comply with best global practices. In its domestic capital market, SQB (Sanoat Qurilish Bank) and Agrobank issued the country's first green bonds with technical assistance from the Global Green Growth Institute (GGGI), a landmark step for sustainable finance. In addition, multilateral and bilateral development partners like the European Bank for Reconstruction and Development (EBRD), the Asian Development Bank (ADB), and the Asian Infrastructure Investment Bank (AIIB) have provided blended finance lines to build up local banks' green lending capacity. Furthermore, the Central Bank of Uzbekistan became a member of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS) on 13 October 2022. According to the announcement, joining gives it the opportunity to improve capacity in managing ecological and climate risks in the financial sector by exchanging experience and learning best practices[1]. What’s still developing is a clear national green taxonomy, supervisory expectations for climate risk disclosure, and a regular evaluation framework for these policies—tools emphasized by OECD and the World Bank in their broader guidance. Despite recent progress, Uzbekistan’s green finance framework still has important gaps compared to international best practices. There is no clear green taxonomy, meaning that banks and companies can label projects as “green” without consistent standards, creating a high risk of “greenwashing” [5]. Additionally, there are no climate stress tests or disclosure requirements, unlike jurisdictions such as the European Central Bank (ECB), where banks already have to analyze their exposure to climate risks. The Central Bank's green refinancing facility has no proper monitoring and verification, which may lead to misutilization of funds. Furthermore, Uzbekistan also relies on foreign donors when it comes to blended finance because its domestic derisking frameworks are still nascent. To bridge these challenges, Uzbekistan is required to move toward a national green taxonomy similar to the EU Green Taxonomy that clearly shows what economic activities qualify as environmentally sustainable. Such a taxonomy reduces the risk of “greenwashing” as well as guides banks and investors. It should also require climaterelated disclosures and stress tests, ensuring that financial institutions report how climate-shock resilient they are. On its part, the CBU should further improve the design of its green refinancing window by requiring independent verification of the qualifying projects. Budget-wise, the establishment of a stateguaranteed green guarantee fund would de-risk private funding and leverage domestic capital for green projects. Finally, entities that benefit from green bonds or concessional funding should be required to publish detailed reports on project implementation, ensuring transparency and building investor confidence for future support. Functional green finance system. Climate change involves grave risks to economic and financial stability, which makes central bank involvement unavoidable. Uzbekistan has taken first steps—green refinancing, joining NGFS, and pilot green bonds—but must be equipped with a clear taxonomy, disclosure requirements, and strong monitoring. Using international best practices, such as the World Bank's green project lists, the EU's taxonomy regulations, and China's green finance guidelines, Uzbekistan can create its own framework to prevent greenwashing and establish trust. By INTERNATIONAL SYMPOSIUM “ADVANCED RESEARCH IN ECONOMICS AND BUSINESS MANAGEMENT”, SEPTEMBER 19, 2025 458 benchmarking such models and improving domestic reporting and transparency, the country can mobilize sustainable finance, ensure price stability, and sustain long-term growth. REFERENCES 1. Central Bank of Uzbekistan, 2025. The Central Bank takes part in the IMF and World Bank Annual Meetings. Central Bank of Uzbekistan, 17 April. Available at: https://cbu.uz/en/press_center/news/701782/?utm [Accessed 17 September 2025]. 2. Schnabel, I., 2021. Climate Change and Monetary Policy. Finance & Development, International Monetary Fund, September. Available at: https://www.imf.org/en/Publications/fandd/issues/2021/09/isabel-schnabel-ECBclimatechange [Accessed 17 September 2025]. 3. Wunsch, R., 2025. ECB’s Wunsch: central banks should avoid climate politics. The Wall Street Journal, February. Available at: 4. https://www.wsj.com/articles/ecbs-wunsch-central-banks-should-avoid-climatepolitics [Accessed 17 September 2025]. 5. World Bank, 2025. Uzbekistan’s Green Leap. World Bank Blogs, 26 February. Available at: https://blogs.worldbank.org/en/climatechange/uzbekistan-s-green-leap [Accessed 17 September 2025]. 6. World Bank, 2020. How to Develop a National Green Taxonomy for Emerging Markets – A New World Bank Guide. Press release, 12 July. Available at: https://www.worldbank.org/en/news/press-release/2020/07/12/how-to-develop-anationalgreen-taxonomy-for-emerging-markets-a-new-world-bank-guide [Accessed 17 September 2025]. 7. International Energy Agency (IEA), 2020. Uzbekistan Energy Profile: Sustainable Development. Paris: IEA. Available at: https://www.iea.org/reports/uzbekistanenergy-profile/sustainable-development [Accessed 17 September 2025].