




































AGORA International Journal of Economical Sciences, http://univagora.ro/jour/index.php/aijes 

ISSN 2067-3310, E-ISSN 2067-7669 

Vol. 19, No. 1 (2025), pp. 15-36 

 

15 

 

GREEN BANKING INITIATIVES IN AZERBAIJAN: CONTRIBUTION 

OF FINANCIAL SYSTEM 

 

N. AKHUNDZADA, I. RZAYEVA 

  

Nazrin Akhundzada¹, Inara Rzayeva² 

¹ ²Azerbaijan State University of Economics, Azerbaijan  

¹ https://orcid.org/0000-0001-8049-0318, E-mail: axundzada.nazrin@unec.edu.az  

²https://orcid.org/0000-0003-2122-0603, E-mail: inara_rzayeva@unec.edu.az  

 

Abstract: Based on existing academic literature, green banking can primarily evolve 

along three directions: green product development, green corporate social responsibility, and 

green internal processes This study qualitatively evaluates the commitment of seven top-

performing banks in Azerbaijan to green banking initiatives and categorizes their activities 

across these dimensions. The results of the content analysis illustrate that the banks under 

study demonstrated the strongest commitment in the areas of green products and corporate 

social responsibility. The adoption of green banking practices is anticipated to expand within 

the banking sector of Azerbaijan in the foreseeable future. Moreover, this article empirically 

examines the impact of environmental performance, primarily related to the internal 

processing category of business operations and assessed by resource consumption, on the 

profitability of the top two banks in Azerbaijan. The results reveal that, after controlling for 

bank size, environmental indicators do not exert a statistically significant impact, either 

positive or negative, on the profitability of these banks. Notably, energy consumption and GHG 

emissions exhibited the most considerable negative association, while only water consumption 

demonstrated a positive relationship with profitability. These findings support the tenets of 

Legitimacy theory and align with the findings of previous studies. 

Keywords: green banking, green finance, sustainable development, commercial banks, 

profitability. 

 

1. INTRODUCTION  

Society is coping with the complex problems of climate change. Nowadays, people are 

analysing global warming and its effects on humanity. Reducing carbon emissions and 

dependence on hydrocarbon fuels, and ensuring an appropriate transition to renewable energy 

sources, are the main requirements. With this goal in mind, many countries and companies 

have declared their commitments to achieve zero carbon levels by 2050. However, given that 

the transition is not limited to the energy sector alone, but also covers agriculture, industry, 

tourism, and many other sectors, this approach emphasizes the need for systematic 

environmental management for sustainable and inclusive development. 

This goal serves the interests not only of society but also of many stakeholders, such as 

private companies responsible for pollution, financial institutions like banks, and 

policymakers. All parties play an important role in the development of society. Although 

banking activities do not have a direct physical impact on the environment, the external impact 

of bank customers’ activities should be taken into account. Therefore, there is a need for banks 

https://orcid.org/0000-0001-8049-0318
mailto:axundzada.nazrin@unec.edu.az
https://orcid.org/0000-0003-2122-0603
mailto:inara_rzayeva@unec.edu.az


GREEN BANKING INITIATIVES IN AZERBAIJAN: CONTRIBUTION OF FINANCIAL 

SYSTEM 

16 

 

to follow the “green” trend in their development strategies. This strategy should be reflected in 

various banking operations, including investment and financing decisions. 

Going green brings plenty of benefits to the community and nature. For example, the 

decline in paper waste due to switching many transactions to online channels helps reduce 

deforestation. Digitalization, on the other hand, reduces the risk of errors (Kesavan, 2018). 

Environmental management in the banking sector is similar to risk management. 

Environmental risk management can be organized according to relevant guidelines (Hoque et 

al., 2019). With this method, banks take into account both investment and environmental risks 

in their decision-making processes. Banks also intensively adopt in-house environmental 

management. The key aspects of these activities include: 

 Reduction in utility, paper, and stationery consumption.   

 Use of renewable energy.   

 Waste management.   

 Green travel for employees.   

 Reference to ethical banking. 

The main objective of this study is to review the green banking practices implemented 

in commercial banks in Azerbaijan, as well as green banking policies and practices observed 

across the globe, for comparative analysis. Meanwhile, the research emphasizes the role of the 

financial system in the green transformation of banks. Additionally, the article evaluates the 

environmental performance of banks. This study aims to contribute to academic literature by 

investigating how the environmental costs borne by banks affect their profitability in 

Azerbaijan. 

 

1.1 Green banking: Literature review  

The banking sector can enhance environmentally sustainable and socially responsible 

investment by performing an intermediary function between economic development and 

environmental protection (Lalon, 2015). The key features of green banking include the 

implementation of online banking, reduction of costs and energy usage, and a subsequent 

increase in GDP. Banks should adopt significant green banking policies to demonstrate their 

commitment. Among various policies, one worth mentioning is the support of eco-friendly 

projects via green finance. The effectiveness of green finance initiatives across different 

regions—including Europe, Asia, and the Americas—was discussed by Sule et al. (2024). In 

the authors’ opinion, a combination of regulatory clarity, cross-sector collaboration, and 

technological advancements turns green finance into a powerful tool to address climate change 

and support sustainability. Case studies included practical applications of green finance 

products, such as green bonds and sustainability-linked loans. For example, there was 

successful financing of clean energy projects, such as wind farms, through green bonds in 

Mexico. 

Nawaz, Sirajudeen, and Khan (2020) claim that providing loans to firms that care about 

the environment would ensure more appropriate use of natural resources. As a result, we could 

expect the emergence of a more socially responsible corporate world. By implementing this 

policy, banks can reject loan applications from businesses that seek high profits without 



Nazrin AKHUNDZADA, Inara RZAYEVA 

17 

 

considering environmental damage. On the contrary, banks can promote low-interest loans to 

environmentally friendly businesses. 

Another external aspect of green banking is the issuance of eco-oriented banking 

products. For instance, implementing green card products driven by technological innovation 

can improve customer awareness of their ecological footprint. Kondyukova, Shershneva, and 

Savchenko (2018) mentioned the case of Russia's Tinkoff Bank, where a bank card helped 

collect over 500,000 rubles for environmental programs in 2017. Using the card for daily 

purchases contributed to nature protection by transferring 0.75% of each purchase to the World 

Wildlife Fund. 

When it comes to internal processes, greening banks becomes possible through the 

establishment of “electronic branches” and “E-drive” technology. For example, the electronic 

document management system applied at Sberbank resulted in annual savings of 40 tons of 

office paper. There are also many other green financial services emerging in the financial 

sector. Joshi and Jain (2024) discussed several offered in India, such as green bonds, green 

mortgages, and green car loans. These products can influence customer behavior by 

encouraging the purchase of energy-efficient homes and fuel-efficient vehicles. Baicu (2021) 

noted that customers benefit from buying energy-efficient homes through lower interest rates, 

reduced heating/cooling costs, and higher market value. Green banking practices also 

positively influence bank profitability (Putri et al., 2022). By supporting green banking, banks 

demonstrate environmental commitment and enhance their public image. It is possible to 

reduce credit risk, improve asset quality, and increase enterprise value through environmental 

management. 

Successful green banking implementation involves technological progress, operational 

improvements, and customer behaviour changes (Nath et al., 2014). Ozili (2023) tested the 

hypothesis that fulfilling Sustainable Development Goals (SDGs) can improve bank 

profitability by enabling access to low-cost clean energy, healthy and well-educated 

employees, decent workplaces, good infrastructure, better equality, and a climate conducive to 

sustainable banking operations. The study found a statistically significant negative relationship 

between SDG 13 (Climate Action) and bank profitability, as measured by return on assets 

(ROA). Other studies also note a negative correlation between environmental impact and 

financial performance in banks (Bressan, 2024). Bătae et al. (2021) found a positive 

relationship between emission/waste reductions and the financial performance of 39 European 

banks from 2010 to 2019. These results support the basic principles of Stakeholder Theory and 

the Resource-Based View. 

Environmental performance can be measured by both monetary and non-monetary 

indicators. Dragomir et al. (2022) examined the impact of ESG performance on the financial 

performance of 333 banks across different regions. The authors used ROA and return on equity 

(ROE) as financial indicators and the natural logarithm of total assets as a control variable for 

bank size. Key environmental factors included resource usage, waste reduction, and emissions. 

The study found that environmental performance had a negative impact on ROE, and the 

impact on ROA was also negative, though statistically insignificant. 

 

1.2. Theoretical Framework: Financial System and Green Banking 

 



GREEN BANKING INITIATIVES IN AZERBAIJAN: CONTRIBUTION OF FINANCIAL 

SYSTEM 

18 

 

Organizations that embrace green banking often recognize their dependence on the 

social environment. This means their choices are not always driven by pure economic self-

interest but also by social norms and what is deemed acceptable within their context. From a 

theoretical perspective, scholars apply the ideas of institutional theory to the study of 

multinational corporations (MNCs) (Kostova, 2013). The implementation of green banking 

practices does not just represent a change in banking operations; it also involves a cultural shift 

within the bank. Green banking necessitates the development of a distinct business ideology 

that emphasizes environmental issues and potential benefits. 

The study by Bukhari, Hashim, and Amran (2019) contributes to the green banking 

literature by developing an institutional theory-based framework to evaluate how green 

banking is adopted. The framework proposes four determinants that impact the adoption of 

green banking: 

 Top management pressure   

 Customer pressure   

 Competitor pressure   

 Community pressure   

Top management pressure and customer pressure are recognized as compulsory factors 

exhibited by banks in the adoption of green banking practices. The study by Mishra (2023) 

highlights that stakeholder demand, environmental interest, and brand image are the major 

drivers for the adoption of green banking in Nepal. Legitimacy theory supports this argument 

by stating that organizations aim to operate within societal norms and expectations. 

Particularly, as proposed by Dowling and Pfeffer (1975), it has a significant relationship with 

environmental performance. It implies that society  expects organizations to operate in an 

environmentally responsible manner. This behaviour includes minimizing pollution, 

conserving resources, and engaging in sustainable practices. According to Legitimacy theory, 

companies will pay attention to these evolving environmental norms to be accepted as 

legitimate. Otherwise, refusal or avoidance of this strategy may lead to loss of the company's 

reputation, stakeholder relationships, and even cancellation of its license to operate. It implies 

that strong environmental performance can stand as a significant source of legitimacy. 

The Sustainable Banking Network (SBN) represents a group of banking regulators and 

associations from 24 emerging markets and focuses on establishing frameworks for 

environmentally and socially sustainable lending (IFC, 2015). Based on general experience, 

common barriers preventing sustainable banking have been identified in a survey by the IFC 

across 25 countries. These challenges include issues of definition and measurement for 

sustainable banking, implementation of sustainable banking practices in core business, creation 

of business drivers for sustainable banking, promotion of information flow, and building 

capacity among regulators and banks. A survey conducted by the IFC across 25 emerging 

markets indicates that the commitment of senior management is essential to provide company-

wide support and build robust frameworks for environmental and social risk management, as 

well as sustainable banking. 

The relevance of private investments in financing the transition to a green economy has 

also been emphasized after the Paris Agreement. The role of climate policy and regulations in 

enhancing green investments has become a subject of analysis. Adequate assessment of climate 



Nazrin AKHUNDZADA, Inara RZAYEVA 

19 

 

risk is a major factor contributing to the attraction of private capital flows. More than a hundred 

financial supervisors, encompassing central banks and financial regulators, have recognized 

the importance of climate risk. Consequently, after their involvement, investors are encouraged 

to disclose and evaluate climate-related risks. 

Since the Paris Agreement (PA), there has been an expectation for the financial sector 

to play a significant role in the decarbonization of the economy. The green investment gap 

remains a decisive factor preventing the achievement of climate mitigation ambitions 

(Monasterolo et al., 2024). This gap can be reduced by enacting green regulatory policies that 

include the macroprudential regulation of financial institutions. 

Firstly, we distinguish between the Green Supporting Factor (GSF) mechanism and the 

Dirty Penalizing Factor (DPF) mechanism. According to the GSF, banks are allowed to lower 

risk weights assigned to assets under green projects. Therefore, this mechanism fosters the 

transition to a sustainable economy as it requires banks to hold less capital for green loans. 

However, the absence of a standardized taxonomy for green activities represents a potential 

drawback to this mechanism, as it could lead to inaccurate assessments and the underestimation 

of the financial risks tied to green investments. As an example, the National Bank of Hungary 

set preferential green capital requirements in 2019 and 2020, offering the option to reduce 

capital requirements for certain categories of green assets, such as energy-efficient housing 

loans, loans to corporates or municipalities for renewable energy projects, electromobility, 

sustainable agriculture, or investments in green bonds. The second mechanism, called the Dirty 

Penalizing Factor (DPF), is another policy tool used to increase green investments. Compared 

to the GSF, the DPF requires financial institutions to hold more prudential capital for high-

carbon assets exposed to climate transition risk. 

The next set of policies related to green financial systems are the Green Portfolio 

Rewards (GPR) and Green Monetary Policies (GMP). Specifically, GMP can take two forms: 

 Green Collateral Frameworks: Through green collateral frameworks, the central bank 

establishes acceptable upper and lower bounds for the proportions of high-carbon and 

low-carbon assets in a portfolio. 

 Green Asset Purchase Program, also known as Green Quantitative Easing (GQE), 

targets low-carbon assets. GQE can be classified as a tool that shifts the central bank’s 

balance sheet toward green bonds. 

Vulnerability and sensitivity to climate change can also impact countries’ preferences 

for imposing green financial policies. This hypothesis was tested by Gupta, Cheng, and Rajan 

(2022). The authors examined the determinants of green financial policy and found a positive 

and significant coefficient for climate vulnerability. Furthermore, the research confirms the 

hypothesis that the financial independence of central banks matters for the intensity of green 

financial policy. According to statistical results, larger central banks are less likely to 

implement green financial policies, ceteris paribus. In contrast, smaller central banks, 

particularly in developing countries, devote more attention to green financial policies. 

The Central Bank of Azerbaijan (CBA) plays a key role in promoting sustainable 

finance in the economy. The CBA developed the Roadmap for Sustainable Finance for 2023-

2026 to strengthen the contribution of the financial sector to the country’s sustainable 

development. This Roadmap aims to encourage the provision of sustainable financial flows by 

considering climate-related and environmental risks alongside social and governance (ESG) 



GREEN BANKING INITIATIVES IN AZERBAIJAN: CONTRIBUTION OF FINANCIAL 

SYSTEM 

20 

 

factors. It supports the integration of climate-related and ESG factors into the risk management 

and decision-making processes of financial institutions concerning finance and investments. 

The CBA distinguishes four pillars for Sustainable Finance Roadmap (SFR) and proposes 

relevant actions for each pillar. Pillar 1 addresses the need to raise awareness about climate-

related and ESG risks. Pillar 2 involves relevant government agencies and stakeholders under 

the CBA's leadership developing a taxonomy for sustainable finance. One benefit of 

establishing a taxonomy is the introduction of a standardized framework for organizations to 

develop sustainable finance policies. 

Given the profound role of the financial sector in the transition to a sustainable 

economy, the CBA recognizes the transformation of the financial sector toward sustainable 

finance as a strategic priority. In March 2025, the CBA, in cooperation with the British 

Embassy in Azerbaijan, the British Standards Institution (BSI), and the Azerbaijan Banks 

Association (ABA), organized a training session on carbon accounting for the banking sector 

within the framework of the “Carbon Accounting and Accountability in Financial Institutions” 

project. The primary goal of the event, held on March 3-6, was to facilitate the ability of banks 

to develop carbon accounting strategies for their financed emissions in accordance with 

international standards. 

The key challenges preventing long-term green financing include limited awareness, a 

shortage of policies and instruments, and insufficient capacity within financial institutions to 

manage climate-related risks (World Bank, 2023). 

Azerbaijan’s financial system is characterized as bank-based, with a small role for non-

bank financial intermediation. According to the CBA, the banking sector has demonstrated 

positive dynamics in profitability indicators (CBA, 2024). In the first half of 2024, the banking 

industry generated a net profit of AZN 614M. Return on Equity (ROE) stood at 21.86% and 

Return on Assets (ROA) reached 2.54% for the first quarter of 2024 (Figure 1). The ROA 

remained stable due to rising interest income. Net interest income followed an upward trend, 

increasing by AZN 145M from the first half of 2023 to AZN 1,379M in the first half of 2024 

(Figure 2).  

Despite the positive profitability across all banks in the sector, profitability was 

concentrated. Three banks, which account for 63% of total assets, generated 68% of the sector’s 

net profit in the first half of 2024. A similar pattern was observed in 2023 when 71% of the 

sector’s net profit was concentrated in three banks, which together hold 63% of the sector’s 

assets. 

A detailed review of the loan portfolio of banks reveals that business loans were the 

prevailing type of loans issued, showing an increasing rate between March 2023 and March 

2024 (Figure 3). Digitalization in the banking sector is another trend. Currently, most banks 

have successfully transitioned to providing services through internet and mobile banking 

applications. The volume of transactions conducted via internet and mobile banking is growing 

rapidly (Figure 4). 

 

 

 

 

 



Nazrin AKHUNDZADA, Inara RZAYEVA 

21 

 

Figure 1. Profitability Indicators in the Banking Sector  

Source: CBA  

 

Figure 2. Net Interest Profit in the Banking Sector in 2024. 

 

 
Source: CBA 

 

 

 

 

 

2.3% 2.5%

020%

2.4% 2.5% 2.5%

20.30%
21.30%

1.50%

20.30%

21.86% 21.37%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2023 Q1 2023 Q2 2023 Q3 2023 Q4 2024 Q1 2024 Q2

Profitability Ratios 

ROA ROE

227.2 

456.5 

685.0 

920.7 

1,150.1 

1,379.4 

1/31/24 2/29/24 3/31/24 4/30/24 5/31/24 6/30/24

Net Interest Profit in the Banking Sector 



GREEN BANKING INITIATIVES IN AZERBAIJAN: CONTRIBUTION OF FINANCIAL 

SYSTEM 

22 

 

Figure 3. The Structure of Loan Portfolio of Banks   

 
Source: CBA  

 

Figure 4. Electronic Banking in 2023  

 
Source : CBA  

 

10,971.4 11,108.0 11,170.8 
11,650.5 11,622.7 11,821.8 12,078.7 12,246.4 12,421.2 12,616.8 

12,912.9 13,063.7 13,201.5 

5,942.4 6,072.3 6,224.5 6,324.7 6,376.0 6,532.5 6,680.1 6,751.3 6,869.7 6,937.0 7,008.0 7,077.3 7,141.9 

3,124.8 3,199.3 3,264.0 3,321.0 3,373.3 3,459.9 3,523.1 3,462.0 3,590.3 3,629.2 3,645.5 3,692.0 3,759.2 

Business Loans Consumer Loans Mortgages

0

5000

10000

15000

20000

25000

30000

16749 16392 17252 16923
18036

16440

20023 19891
18778

21431

18785

26979

1997 24…
2956 2840 3110 3986 4154 4569 4211

5675 4694 5587

Electronic Banking in 2023: Volume of transactions in million 
AZN

Internet banking Mobile Banking



Nazrin AKHUNDZADA, Inara RZAYEVA 

23 

 

2. Methodology 

The banking sector of Azerbaijan includes both public and private banks. As of 

December 31, 2024, there are a total of 22 banks, of which two are state-owned and the 

remaining twenty are private. A wide range of green initiatives can be observed among both 

state and private banks in Azerbaijan. This study explores the green banking practices of seven 

banks, selected based on their net profits  (Table1). The initiatives undertaken are classified 

into three categories:  

- green product development,  

- corporate social responsibility  

- internal processes. 

The research method employed for analysing green banking initiatives is content 

analysis. The primary purpose of this research is to review the adoption of green banking 

initiatives by commercial banks in Azerbaijan. To assess the commitment of the banking sector 

to sustainable banking practices, we use various reports from the Central Bank of Azerbaijan 

and other major commercial banks. The article uses secondary data from annual reports and 

sustainability reports published between 2021-2023, in addition to news and press releases 

uploaded from official websites within the date range of 2021 to 2025. 

 

Table 1. Net Profit of Banks ( in thousand AZN) for 2023   

 

Name of Bank   Net Profit  

Kapital Bank  242 209  

ABB  358 399 

PASHA Bank   225 712  

Xalq Bank  64 641 464 (in AZN) 

Bank Respublika  38 815  

Access Bank  39 838 

Unibank  31 071  

Source: Financial Statements of Banks  

Note: For Xalq Bank it is shown in AZN 

 

Our research question focuses on the relationship between environmental performance 

and the profitability of banks, which will be investigated through multiple regression analysis. 

To address this, we utilized annual data from the financial statements of the two banks for the 

years 2021–2023, as well as the sustainability reports of these banks to collect data on their 

environmental indicators. The financial ratios used to measure profitability in the study were 

calculated based on data from the financial statements of relevant banks. The time span was 

selected based on the availability of data for environmental indicators. 

Table 2 illustrates the variables with their symbols and descriptions applied in the study. 

 

 

 



GREEN BANKING INITIATIVES IN AZERBAIJAN: CONTRIBUTION OF FINANCIAL 

SYSTEM 

24 

 

Table 2  

Name of Variable  Symbol  Description  

Dependent Variable  ROA  Net Profit / Total Assets  

Return on Assets  

Independent Variables   

Watercons  

Waste 

Energycons 

Carbon  

 

Logarithm of water consumption 

Logarithm of generated waste  

Logarithm of energy consumption 

Logarithm of GHG emissions 

Water Consumption   

Waste generated   

Energy Consumption   

Total GHG emissions  

Control Variable  Size Logarithm of Total Assets  

Bank Size  

Source: Design of authors  

 

Despite being strongly balanced, panel data analysis does not provide reliable estimates 

due to scarcity of data. Single-equation model was estimated using ordinary least squares 

(OLS) method. To reduce omitted variable bias, we also incorporated additional control 

variable “Bank Size” that also affects financial performance. Bank size is measured by the 

natural logarithm of the book value of total assets.  

The sample captured two best-performing banks, ABB and Kapital Bank, based on their 

net profit for 2023. The regression model can be represented as follows in equation (1):  

𝑅𝑂𝐴𝑖𝑡= 𝛽1𝑆𝑖𝑧𝑒 +  𝛽2𝑊𝑎𝑡𝑒𝑟𝑐𝑜𝑛𝑠 +  𝛽3𝑊𝑎𝑠𝑡𝑒 +  𝛽4𝐸𝑛𝑒𝑟𝑔𝑦𝑐𝑜𝑛𝑠 +  𝛽5𝐶𝑎𝑟𝑏𝑜𝑛 + 𝜀𝑖𝑡  (1),  

 where i- represents the group ( i=1,2) and  t- represent time (t = 1,2,3) , 𝜀𝑖𝑡- idiosyncratic error 

term.   

 

3. Results  

First of all, we represent and summarize the results of content analysis for green banking 

initiatives held in Azerbaijan. The list of conducted activities grouped for each bank separately 

in bullet points.  

 

I. Kapital Bank  

Kapital Bank represents one of the largest financial institutions in the country. The bank 

proactively demonstrates its environmental commitment through participation in various 

sustainability projects and promotes green banking initiatives in its business model. The 

statements below summarize these activities: 

1. Green corporate social responsibility  

 Establishment of Red Hearts Foundation: Kapital Bank targets to increase community 

and environmental wellbeing in the society by integrating corporate social 

responsibility (CSR) principles into daily business operations. The Red Hearts 

Foundation intends to focus on community engagement, animal welfare, and 

environmental protection. The bank arranges educational workshops, training sessions, 

and awareness campaigns for community engagement. Investments in the community 

have grown steadily during recent years (Figure 5).  



Nazrin AKHUNDZADA, Inara RZAYEVA 

25 

 

 The next initiative of Kapital Bank in the field of environmental protection and 

environmental improvement was related to tree planting campaigns. Birbank 

introduced the “Green Deposit” campaign in the Year of Solidarity for a Greener World 

in October 2024. According to this campaign,  anyone who places a deposit via the 

Birbank app will have a chance not only to earn interest but also to contribute to 

environmental sustainability. For every customer aged 18 and above who applies for a 

digital deposit, a tree will be planted in their name, alongside that electronic certificate 

as a token of appreciation will be provided.  

 Digital Banking: Kapital Bank presented Birbank digital centres that offer various 

advantages to customers such as elimination of paperwork and self-service mode.  

 

Figure 5. Community Investments in Kapital  Bank   

 
Source : Kapital Bank Annual Sustainability Report (2023)  

 

Figure 6  

 
Source: ABA (2023)  

 

0

5,000

10,000

15,000

20,000

25,000

2021
2022

2023

15,077

23,571

20,081

Community Investments ( in thousand AZN)

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NUMBER OF ACTIVE PLASTIC CARDS IN 2023, THOUSAND UNITS 

 - Debit cards, thousand units (including salary cards)  - Credit cards, thousand units (including installment cards)



GREEN BANKING INITIATIVES IN AZERBAIJAN: CONTRIBUTION OF FINANCIAL 

SYSTEM 

26 

 

2. Green product development  

 On June 8, 2023 Kapital Bank participated in syndicated loan project of Türkiye İş 

Bankası with sustainability-linked objectives with total amount of $224 million to be 

used according to ESG criteria.  

 In general, among the main strategic directions Kapital Bank recognizes financing of 

green projects, significant discounts on eco-friendly car loans, efficient use of eco-

resources, and implementation of projects aimed at reducing waste.   

 The bank developed the “Digital Deposit” product, allowing customers to open and 

manage deposit accounts entirely online through the Birbank mobile application. The 

Bank also is a leader in the number of actively used plastic cards (Figure 6). 

 

3. Green internal processing  

 The bank is successful in organizing internal process automation. There is a significant 

decline in the amount of paper waste and energy consumption generated from 

automating administrative processes. Tough waste management practices help to 

reduce the environmental footprint linked to business operations. For instance, The 

Archive department applies paper recycling while Marketing and HR departments work 

closely with external stakeholders to ensure corporate social responsibility initiatives 

to give prompt waste management practices. 

 Kapital Bank reached the implementation of ESG initiatives that represent part of green 

internal processing, such as applying 3R principles in waste management, 

implementing a discrimination-free workplace, and initiating inclusive education.  

 

II. ABB 

Bank ABB  is one of the leading banks in the country. The Bank puts effort to improve 

ESG performance within the organization. The list of main achievements presented below 

according to classifications: 

1. Green corporate social responsibility  

 ABB achieves enhancement of operational efficiency via technological advances. The 

bank pursues digitized accounting documents and paperless branch initiative which 

suggests digitized loan processing. Moreover, the practice of digital ID cards is also 

implemented.  

 To support environmental sustainability goal, the Bank introduced Tam DigiCard 

which is issued digitally. This card offers a wide range of transactions without 

commission.  

 The Bank took part in several tree-planting campaigns. One of them was organized by 

IDEA Public Union and the Ministry of Ecology and Natural Resources. The trees were 

planted on a 51-hectare area allocated in Mushfigabad settlement. 

 The bank while establishing the Khankendi branch took into account the declaration of 

Karabakh and East Zangezur as a zone of green growth. The building of the Khankendi 

branch was built according to green banking concept. Solar panels were placed on the 

roof of the building and the facade and advertising boards of the Khankendi branch are 

illuminated with renewable energy. 



Nazrin AKHUNDZADA, Inara RZAYEVA 

27 

 

2. Green product development  

 The bank supports provision of financing for the sustainable projects. Sustainable loan 

can be  with 2 types of labels: green label and social label. Green label projects should 

aim to support direct or indirect reduction in GHG emission, efficiency of energy/ 

resource consumption, transition to a circular economy and protection, restoration and 

promotion of natural resources and healthy ecosystems.   

 ABB launched a new green product called the TamEco card that was made from 

recycled plastic collected from the oceans in 2023. As a part of project, the Bank 

committed to planting one tree for each order of TamEco card.   

 

3. Green internal processing  

 The Bank was successful in the reduction of total GHG emissions and electricity usage 

per employee approximately 5% and 10,6% respectively from 2022 to 2023 (Figure 7). 

 

Figure 7  

 
Source: ABB Sustainability Report (2023)  

 

III. PASHA Bank 

PASHA Bank is a leading corporate bank in Azerbaijan with its strong capital base. 

The Bank achieved total regulatory capital adequacy ratio of 20.41% in 2024 IV quarter. One 

of its strategic goals is to finance projects that promote environmental protection and energy 

efficiency. PASHA Bank implements an integrative sustainability strategy that consists of its 

economic, social and environmental activities. 

 

1. Green corporate responsibility  

 The Bank joined the tree planting campaign organized by IDEA Public Union in 

collaboration with the Ministry of Ecology and Natural Resources. 

Total emissions (tCO2 eq)

Electricity usage per employee, kWh

0.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

7,000.00

8,000.00

2022 2023

7211,7
6833,5

3,291
2,941

ABB 

Total emissions (tCO2 eq) Electricity usage per employee, kWh



GREEN BANKING INITIATIVES IN AZERBAIJAN: CONTRIBUTION OF FINANCIAL 

SYSTEM 

28 

 

 The Bank offers digital loan products and SME customers can apply completely online, 

without submission of physical documents or visiting branches. This is a convenient 

and fast way for doing business that enhances flexibility and effectiveness. 

 

2. Green product development 

 The State Oil Company of the Republic of Azerbaijan (SOCAR) successfully placed 

$200 million in “green” bonds with the support of PASHA Capital Investment 

Company. These bonds targeted developing renewable energy sources and supporting 

new "green" energy projects. 

 PASHA Bank also made investments in environmentally friendly modes of transport. 

Within a joint project with “Xaliq Faiqoğlu” Company, the Bank financed the import 

of 50 compressed natural gas (CNG) buses and 5 electric buses. Moreover, the Bank 

supported financing of many other green projects.  

3. Green internal processing  

 PASHA Bank effectively manages total electricity and water consumption by using an 

advanced technology infrastructure throughout its branch network and at headquarters.  

 The Bank formed its own recycling infrastructure. Initiatives include recycling vehicle 

batteries, in addition to collecting waste papers and disposing of electronic equipment. 

 The Bank organizes special training for its staff members to increase environmental 

awareness among the workforce and other stakeholders.  

 PASHA Bank has joined the Mastercard Sustainable Cards Program to reduce plastic 

waste and restore environmental protection. The aim of program is to eliminate 

gradually the usage of polyvinyl chloride (PVC) in the production of payment cards 

and replace with recycled and bio-based materials for all newly issued cards for by 

2028.   

 

 

IV. Xalq Bank  

Xalq Bank, founded in 2004, is one of the largest private banks in Azerbaijan in terms 

of total assets (ABA, 2023).   

 

1. Green corporate social responsibility  

  A tree planting campaign was held in the Mushfigabad settlement of Baku organized 

by Xalq Bank and supported by the Ministry of Ecology and Natural Resources. 

 Support of online  banking services via XalqOnline app, implementation of Digital Card 

for free that allows the management and tracking of banking operations. The customers 

can also use Cash In ATMs to top up the card.  

2. . Green product development  

 On April 06, 2023 Xalq Bank took part in sustainability-linked syndicated loan project 

with total amount $1.3 billion to be used according to ESG criteria originated for Ziraat 

Bank. Loans extended within the Earthquake Support Packages to mitigate the effects 

of the earthquake in February.  



Nazrin AKHUNDZADA, Inara RZAYEVA 

29 

 

 On May 13, 2024, Xalq Bank participated in the syndicated loan facility for Türk 

Eximbank (Türkiye Ihracat Kredi Bankası A.Ş.) with total amount $728m equiv. This 

loan also will be used in accordance with ESG standards, which refer to the principles 

of environmental, corporate governance and social responsibility. The bank highlights 

the significant role of participation in this syndicated loan project for enhancement of 

interbank relations with the banks of the Republic of Türkiye. 

 

V. Bank Respublika  

Bank Respublika, being one of the largest commercial banks in the country, attempted 

to promote sustainability through various initiatives.  

 

1. Green corporate social responsibility 

 Bank Respublika proactively supports provision of basic financial operations with help 

of mobile banking. It makes possible to activate virtual Digital Card via application.  

 The bank's employees planted about 100 trees around Bank Respublika Arena with the 

players of "Sabah" FK, one of the leading clubs in the national football championship. 

 

2. Green product development 

 The bank introduced "Green Loan" as new financial instrument for entrepreneurs, 

offered under the EU4Business-EBRD Credit Line, which represents a combined effort 

of the EU and the European Bank for Reconstruction and Development and aims to 

support environmentally sustainable projects and improve the energy efficiency of 

micro, small and medium-sized enterprises (MSMEs). This product proposes numerous 

benefits to entrepreneurs such as  up to 15% cashback to reduce the financial burden on 

entrepreneurs, a decline in operational costs, quick processing and the usage of cleaner 

technologies for environmental protection. 

 

3.  Green internal processing 

 The bank conducted several events for the "Year of Solidarity for a Green World". 

There was held two-day seminar on green financing for employees with the Dutch 

Entrepreneurial Development Bank (FMO). Specialists from FMO shared their 

experience in field of green financial projects and discussed possibility for development 

of such initiatives in the banking sector.  

 

 

VI. AccessBank  

AccessBank established since 2002 and serves Azerbaijan MSME and retail market 

with total assets of 1.5 bn AZN. 66 % of loan portfolio is devoted to micro loans (AccessBank, 

2023). One of the strategic goals of AccessBank is to ensure sustainable development and 

financial profitability for investors.  

 

1. Green corporate social responsibility  



GREEN BANKING INITIATIVES IN AZERBAIJAN: CONTRIBUTION OF FINANCIAL 

SYSTEM 

30 

 

 The bank participates in tree plantation campaigns. In 2024, for the sake of “Year of 

Solidarity for a Green World”, a tree planting campaign was held with the support of 

AccessBank with the participation of members of the Baku Port and the Institute of 

Internal Auditors (IIA Azerbaijan Chapter). During the campaign, 170 olive and pine 

trees were planted in the territory of the Baku Port.  

 The Bank puts to use its digital platform myAccess for all customer segments. In 2023, 

AccessBank successfully  moved to the Azericard processing center. This migration 

helps to expand payment tools by integrating its digital services with Google Pay and 

Apple Pay. 

 Since 2022 after joining “Collect Batteries, Protect Nature” project, AccessBank  has 

collected used batteries at its headquarters and branches in other regions, then  handled 

them over to a specialized waste management company for safe disposal.    

 

2. Green product development  

 In 2023, AccessBank signed a senior unsecured loan agreement with the Global Climate 

Partnership Fund S.A. (GCPF) with first committed tranche of  AZN 8.5 million. The 

proceeds from loan will  support  initiatives for energy efficiency and renewable energy 

projects undertaken by MSMEs in Azerbaijan.  

 

3. Green internal processing  

 AccessBank carries out activities directed to minimize its carbon footprint. This target 

implies optimizing operations and investing in energy-efficient technologies. In 

2023,the bank started tracking emissions with the goal to continuously reduce them. 

According to statistics, total emissions (tCO2e) based on Scope 1 reduced significantly 

from 2022 to first half of 2024 (Figure 8).  

Figure 8  

AccessBank- Total Emissions based on Scope 1  

 
Source: AccessBank Sustainability Report  

 

0

200

400

600

800

1000

1200

2022 2023 2024 1H

1029 989

501

Total Emissions (tCO2e)- Scope 1 



Nazrin AKHUNDZADA, Inara RZAYEVA 

31 

 

VII. Unibank  

Unibank represents one of the largest private banks founded in Azerbaijan in July 1992 

under the name of MBank.  

 

1.  Green corporate social responsibility  

 The bank planted 500 trees in the Mushfigabad area. Bank employees planted Eldar 

pine and olive seedlings on an area of about 1 hectare. The tree planting campaign was 

supported by the Eco Hub Public Union for Support of Ecological Initiatives. 

 

2. Green product development  

 Unibank issued securities that can be classified as green bonds in compliance with 

international green finance standards in October 2024. The nominal value of the bonds 

is set at 100 AZN, with an annual interest rate of 11.5%.  

 Unibank entered into a strategic partnership with one of the leading taxi companies 

Yango Azerbaijan. The aim of partnership is to provide financial support for increasing 

the number of eco-friendly hybrid cars in Baku. As part of this partnership, the delivery 

of 500 new hybrid cars to four partner taxi fleets of Yango Azerbaijan was expected. 

The cars were offered under very favorable, preferential conditions.  

3. Green internal processing  

  The bank has launched its first digital branch, which offers access to  services and 

products in a completely digital format. Noticeably, Unibank was ahead in the volume 

of cashless payments made with active plastic cards in 2023 (Figure 9).  

 

Figure 9 

 
Source: ABA (2023)  

 

 

 

 

 -
 1,000,000,000
 2,000,000,000
 3,000,000,000
 4,000,000,000
 5,000,000,000
 6,000,000,000
 7,000,000,000
 8,000,000,000
 9,000,000,000

 10,000,000,000

Volume of all cashless payments with plastic cards, Manats in 2023



GREEN BANKING INITIATIVES IN AZERBAIJAN: CONTRIBUTION OF FINANCIAL 

SYSTEM 

32 

 

Results of Regression Analysis 

Table 3: Descriptive statistics  

Variable Obs        Mean    Std. Dev. Min      Max 

 

ROA              6          2.12       1.29        .03          3.94 

Watercons   6         10.86        .31        10.53     11.28 

 Size               6         16.11        .30       15.71     16.45 

Energycons  6         16.06        .06       15.97     16.14 

Waste              6          7.56           .92        6.56        8.51 

Carbon 6          8.87           .05        8.79        8.92 

Source: Authors’ calculations 

 

Table 3 above demonstrates the descriptive statistics of the data generated using 

STATA software. The table summarizes the mean, maximum and minimum values, and 

standard deviation for the variables. In the following analysis, we examined the role of 

environmental impact on bank characteristics by using a set of resource-based environmental 

factors. The profitability of the banks was measured by Return on Assets (ROA), which is 

derived as the total net income divided by the book value of assets. Consequently, higher levels 

of ROA indicate better performance for the bank. 

According to the obtained results, both banks in the sample showed positive 

performance in terms of profitability, with a positive mean of 2.12% for ROA. Typically, a 

desirable level of ROA is above 1%.  

The low standard deviation observed for all independent variables and the control 

variable suggests small variability and homogeneity in the data. When it comes to 

environmental indicators, it is evident that the banks in the sample are primarily exposed to 

water and energy consumption. 

 

Table 4 : Regression Output       

Variable Coefficient Std.Error P-value 

Waste  -.31 - 0.06  0.96 

Energycons  -10.12  27.73  0.77 

 Size  6.76  10.66  0.64 

Watercons  6.40  10.06  0.63  

Carbon  -1.31 39.28  0.97 

Source: Authors’ calculations  



Nazrin AKHUNDZADA, Inara RZAYEVA 

33 

 

Table 4 illustrates regression output generated from regression analysis of equation (1). 

The results show that the coefficient of the waste, energy consumption and GHG emissions on 

ROA is negative. However, we find a positive coefficient for water consumption among the 

environmental variables. Notably, profitability is more severely affected by energy 

consumption and greenhouse gas emissions. Conversely, the higher of water consumption is 

associated with increased profitability. As regards the control variable, we notice that 

profitability positively influenced with an increase of bank size as it was expected. These 

findings align with previous studies, including Emmanuel et al. (2024). To sum up, all 

regressors are statistically insignificant as p-values are higher than 0.05.  

 

4. CONCLUSIONS  

This research discusses how the financial system contributes to the development of 

green banking. A large body of academic literature acknowledges that the enforcement of green 

regulatory policies is a key factor in promoting green investments in financial institutions. 

Roadmap for Sustainable Finance for 2023-2026, introduced by the Central Bank of 

Azerbaijan, supports the incorporation of ESG factors into risk management policies. 

The present study analysed green banking initiatives implemented in Azerbaijan, 

categorizing them according to the three categories used in the study by Sharma and Choubey 

(2022) for Indian banks. The results indicate that the top-performing seven banks in Azerbaijan 

have been quite successful in recent years in establishing and implementing green banking 

practices. Notably, all the banks under review demonstrated a strong commitment to 

participating in activities linked to green corporate social responsibility. These banks have 

consistently engaged in important campaigns organized for environmental protection purposes. 

Furthermore, all of them have adopted internet and mobile banking for a wide range of banking 

operations. The banks in the country also showed positive trends in the green product 

development dimension presented in the classification. Despite being relatively new, several 

green financing products, such as green loans, green deposits, and green bonds, have been 

successfully introduced to the market.  

In terms of internal process improvements, it is clear that all the banks under 

consideration have made considerable efforts to ensure effective waste management and reduce 

their carbon footprint. Trainings for employees, as well as initiatives aimed at saving water, 

paper, and electricity, are being intensively implemented. The introduction of fully digital 

branches is another initiative that has been successfully executed.  

However, there is still room for improvement. It is expected that the scope of these 

initiatives will continue to expand across various dimensions. In general, it is likely that large-

scale implementation of certified green buildings, the use of renewable energy through solar-

powered ATMs, or the generation of wind power for branches will be pursued in the future.  

As a growing body of academic literature recognizes, we can infer that environmental 

management which became an important part of business regulation, facilitates efficiency and 

profitability of banks in Azerbaijan. Particularly, two major banks of the country showed 

consistency in terms of environmental performance. Both banks proactively target to reduce 

their carbon footprint by implementing effective environmental management strategies. We 

observe a negative but not significant relationship between disclosures of environmental 

performance regarding energy consumption, carbon emissions, and waste, and financial 



GREEN BANKING INITIATIVES IN AZERBAIJAN: CONTRIBUTION OF FINANCIAL 

SYSTEM 

34 

 

performance, even in the short term. Our findings coincide with the study by Dragomir et al. 

(2022). However, it is crucial to consider that other unobserved factors or additional variables 

that are not reflected in our model can also influence ROA. In this case, further investigation 

might be necessary to attain a more complete model for the determinants of ROA.  

 

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bank-turk-eximbankin-sindikat-kreditlesmesinde-istirak-edib-en 

 

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https://unibank.az/az/news/retail/1831/unibank_etraf_muhite_destek_meqsedi_ile_500_agac_ekib
https://unibank.az/az/news/corporate/1673/unibank_novbeti_yashil_maliyyeleshmeni_heyata_kechirir
https://unibank.az/az/news/corporate/1673/unibank_novbeti_yashil_maliyyeleshmeni_heyata_kechirir
https://unibank.az/az/news/retail/1629/unibank_azerbaycan_maliyye_bazari_uchun_bir_ilke_imza_atib
https://unibank.az/az/news/retail/1629/unibank_azerbaycan_maliyye_bazari_uchun_bir_ilke_imza_atib
https://unibank.az/az/news/retail/786/unibankin_ilk_reqemsal_filiali_fealiyyete_bashlayib
https://unibank.az/az/news/retail/786/unibankin_ilk_reqemsal_filiali_fealiyyete_bashlayib
https://www.xalqbank.az/az/ferdi/bank/xeberler/xalq-bank-agacekme-aksiyasi-teskil-etdi-az
https://www.xalqbank.az/az/ferdi/bank/xeberler/xalq-bank-agacekme-aksiyasi-teskil-etdi-az
https://www.xalqbank.az/en/personal/bank-en/news/asc-xalq-banki-novbeti-defe-irihecmli-beynelxalq-sindikat-kreditlesmesi-sovdelesmesinde-istirak-edib-en
https://www.xalqbank.az/en/personal/bank-en/news/asc-xalq-banki-novbeti-defe-irihecmli-beynelxalq-sindikat-kreditlesmesi-sovdelesmesinde-istirak-edib-en
https://www.xalqbank.az/en/personal/bank-en/news/asc-xalq-banki-novbeti-defe-irihecmli-beynelxalq-sindikat-kreditlesmesi-sovdelesmesinde-istirak-edib-en
https://www.xalqbank.az/en/personal/bank-en/news/xalq-bank-introduced-a-digital-card-product?include=menu
https://www.xalqbank.az/en/personal/bank-en/news/xalq-bank-introduced-a-digital-card-product?include=menu
https://www.xalqbank.az/en/personal/bank-en/news/xalq-bank-turk-eximbankin-sindikat-kreditlesmesinde-istirak-edib-en
https://www.xalqbank.az/en/personal/bank-en/news/xalq-bank-turk-eximbankin-sindikat-kreditlesmesinde-istirak-edib-en

