Today, environmental assessments in bank lending are becoming a standard daily practice. The French Development Agency (AFD) project, “Financing Sustainable Livestock Development,” has served as a key catalyst for this process. By collaborating with local partner banks, AFD contributes to the establishment of new project assessment standards within the sector. We spoke with two participating banks about how exactly they evaluate the environmental sustainability of borrowers and what changes are taking place in their operations.
Xalq Banki
Xalq Banki takes a systematic approach to environmental assessment. Loan applications from SMEs financed through funds provided by international financial institutions undergo a mandatory basic environmental screening. Regional branch employees, together with the applicants, fill out an ESG risk checklist. Standard underwriting begins only after this step is completed, during which the bank verifies state environmental appraisal and Environmental Impact Statement documentation (EIS).
Previously, ESMS screening was applied only to large infrastructure projects. Today, it has been extended to include SMEs financed through funds provided by international financial institutions.
For agricultural and livestock projects – the key focus area of the AFD project – the bank requires applicants to submit contracts for municipal solid waste management and water usage. Furthermore, the sustainability of production must be detailed in the business plan for each year of the project.
Xalq Banki views its partnership with AFD as the cornerstone of its sustainable development strategy–a tool that enables the integration of international environmental standards directly into local lending practices. As of the first quarter of 2026, the share of ESG projects in the bank’s loan portfolio stands at 23.6%, consistently remaining within the 22–25% range over the past few years.
The primary challenge facing the bank is not procedural, but information-related: clients often simply do not collect environmental data, which significantly complicates project assessment and reporting. Furthermore, businesses currently have no formal environmental reporting obligations–a factor the bank considers one of the key systemic gaps.
Nonetheless, Xalq Banki no longer regards environmental risk assessment as an optional practice, but as an integral component of compliance–on par with credit history checks or AML (Anti-Money Laundering) procedures.
The Bank expects that over the next three to five years, environmental screening will become increasingly digitalized through government platforms and APIs. The period is also expected to see the introduction of financial instruments such as green bonds and ESG-linked loans, along with enhanced regulatory oversight by the Central Bank, including mandatory climate stress testing of financial portfolios.
Microcreditbank JSCB
At Microcreditbank, the environmental assessment of projects is structured around a clear principle: before a financing decision is made, the bank analyzes the borrower’s environmental and social risks and verifies that their business activities do not fall under the list of prohibited activities in accordance with the bank’s internal policy.
To achieve this, the bank has a dedicated environmental and social risk management policy, which serves as the basis for evaluation during the review of each application. The authenticity of the environmental data provided by borrowers is verified through the state registry: clients can independently verify their environmental appraisal conclusions on the eco-service.uz portal, or, if necessary, consult the bank’s environmental protection specialist.
For agricultural and livestock projects, the evaluation of environmental aspects is conducted based on the requirements of the state environmental appraisal. This covers water usage, waste management, and the sustainability of production processes.
Today, the share of sustainable and “green” projects in Microcreditbank’s portfolio is approximately 30%. The largest contribution comes from projects in solar energy and agriculture, including horticulture.
The bank views AFD’s involvement in this process positively, noting that international partnership helps integrate ESG approaches systematically rather than on a case-by-case basis. According to the bank’s assessment, businesses are generally ready to provide environmental reporting. The primary challenge facing the bank is not a lack of tools, but managing the risks that may arise in the client’s future operations after the loan is disbursed: compliance with environmental appraisal requirements must be maintained throughout the entire project lifecycle, not just at the approval stage.
Overall, Microcreditbank views environmental assessment not as an additional burden, but as part of its systematic operations–embedded in its internal policy and gradually becoming the industry standard. The bank has a positive outlook on the development of ESG banking in Uzbekistan over a three-to-five-year horizon.
The experience of both banks demonstrates that environmental assessment is no longer a rarity in Uzbek banking. In this context, the AFD “Financing Sustainable Livestock Development” project acts as a true partner: it does not merely fund specific farms, but also helps banks build the capacity to evaluate projects not only through the prism of financial performance, but also through their impact on nature, people, and the long-term sustainability of production.
Source: JSCB “Xalq Bank”, JSCB “Microcreditbank”
