POSSIBILITIES OF AZERBAIJAN'S INTEGRATION INTO THE INTERNATIONAL GREEN FINANCING SYSTEM IN THE CONTEXT OF CLIMATE CHANGE

Abstract

In the context of escalating global climate challenges, environmental degradation, and the urgent need to transition to sustainable development models, the importance of green finance systems has increased significantly. This article examines the opportunities for Azerbaijan’s integration into the international green finance system, taking into account economic, institutional, and environmental factors. Unlike previous studies that primarily offer descriptive results, this work provides new empirical evidence by quantitatively assessing the impact of green foreign direct investments (GFDI) on renewable energy (RE) production and CO₂ emissions in the Azerbaijani context. The methodological approach combines a qualitative analysis of institutional reforms with qu-antitative econometric modeling using ARDL and VECM techniques. The study incorporates national reforms, including the hosting of COP29, ESG reporting initiatives, and the Green Banking Ro-admap, to evaluate their effects on GFDI inflows. The results demonstrate a significant long-term positive effect of renewable energy production on GFDI and a negative relationship between CO₂ emissions and green investments, confirming the direct influence of the energy transition and institutional reforms on investor behavior. Strategic recommendations are proposed to strengthen the regulatory framework, develop gre-en finance instruments, implement ESG rating systems, and expand access to international green funds. These findings contribute to the literature by providing empirically grounded, policy-relevant evidence on how transition economies can leverage green finance to achieve sustainable economic development.