Central Bank of the Republic of Azerbaijan amends bank governance and credit risk rules to embed ESG and require 2026 sustainability disclosures in Q1 2027

The Central Bank of the Republic of Azerbaijan has amended several banking regulatory acts to strengthen the sustainability and green finance framework, with the changes effective from 9 February 2026. The package is designed to expand the application of environmental, social and governance (ESG) approaches in banks, integrate climate and other ESG factors into governance and risk management systems, and reinforce transparency and market discipline. Updates to the Corporate Governance Standards for Banks require clearer allocation of powers and responsibilities, creation of functional responsibilities for managing climate and other ESG risks and opportunities, and incorporation of ESG criteria into internal governance mechanisms and policy documents. New requirements also integrate ESG factors into internal audit and remuneration policies and introduce disclosure obligations for qualitative and quantitative sustainability indicators. Amendments to the Regulation on the Management of Credit Risks in Banks extend the credit risk framework by requiring internal policies and procedures for managing a sustainable loan portfolio, including evaluation and monitoring of sustainable loans, use of supporting verification and assessment documentation, processes to set key performance indicators and sustainability targets for sustainability-linked loans, and criteria for green activities. The first sustainability reporting is to be undertaken for the 2026 reporting year, with the relevant information required to be disclosed in the first quarter of 2027.