The role of regulations in promoting Sustainable Finance in emerging markets

Abstract

Emerging market financial systems are undergoing profound transformation as sustainability issues, along with digitalization and the integration of artificial intelligence, become integral parts of high-level investment decisions, long-term strategies and regulatory frameworks.

The paper analyzes how the existing regulatory framework contributes to the promotion of sustainable finance in Georgia, with a particular focus on sustainable finance taxonomy. It examines the conceptual foundations of the national taxonomy, its scope of application and the specifics of its implementation. The study used a quantitative methodology, including taxonomy regulations and collection of data from secondary sources such as official statistics, reports, conference proceedings and scientific journals.

Taxonomies are at the core of sustainable finance. They provide a unified classification system for identifying sustainable economic activities, thereby guiding responsible investment flows, reducing information asymmetry and mitigating greenwashing. The paper examines how Georgian commercial banks apply taxonomy in practice to minimize climate risks, and highlights the challenges of aligning national regulations with best international standards.

The analysis of Georgian banking sector illustrates how the national taxonomy in emerging country is being operationalized and implemented under the leadership of central bank. However, there is also a need for further institutionalization and enforcement, ensure consistent implementation, and closer alignment with international standards.