Kazakhstan faces challenges in following the global decarbonization trend. Our country has one of the highest energy and carbon intensities in the world due to the continued reliance on coal as a primary source of energy. A rapid transition to renewable energy could lead to systemic issues of energy security. International organizations demand a shift away from hydrocarbon fuels as they contribute to greenhouse gas emissions and climate change. However, a sudden abandonment of coal and oil in Kazakhstan would result in the collapse of the entire economy.
We recognize the significance of climate risks and opportunities on the activities of the Fund Group as a whole. Therefore, we assess them at the Fund level and task portfolio companies with implementing climate risks and opportunity assessments in accordance with TCFD. The adoption of TCFD recommendations strengthens and develops corporate risk management practices, preparing the Fund for anticipated regulatory tightening in financial markets.
On the one hand, the climate agenda is seen as challenges to the traditional energy system and carries significant transitional risks for the Fund. For instance, coal mining and coal-fired electricity generation, which are integral to the production processes of the Fund’s portfolio companies, employ 40,000 workers across the country. Therefore, the Fund emphasizes a gradual and sensible transition to low-carbon technologies without completely abandoning traditional energy sources. Achieving carbon neutrality by 2060 should be based on a balance between energy and environmental security. Thus, alternative energy, particularly nuclear energy, plays a crucial role in the step-by-step reduction of Kazakhstan’s coal dependency.
On the other hand, the transition to carbon neutrality presents new growth opportunities for us. Our key capabilities in a a gradual and sensible energy transition:
- Acceleration of portfolio diversification;
- Development of new industries;
- Creation of new jobs and enhancing workforce skills;
- Accessing finance and investments;
- Technology transfer and knowledge sharing.
With respect to the risks associated with climate change, we have assessed and recognised provisions for decommissioning and remediation of environmental damage by the Fund’s portfolio companies that extract resources from the subsoil. Such provision as at 31 December 2022 amounted to KZT363 064 million. GRI 201-2
In order to implement jointly initiatives and projects, attract investments, the Fund will expand the practice of interaction with major international organizations and sovereign wealth funds. Moreover, in addition to attracting investments for the sustainable development of the country’s economy, cooperation with international strategic partners will have a positive effect through the transfer of advanced knowledge, practices and technologies. Strengthening global partnership initiatives along with geographical diversification will allow the Fund to gain access to new markets and increase international investment experience, combining resources and competencies through investment mechanisms and enhancing the image of the Republic of Kazakhstan and the Fund.
We are convinced that achieving carbon neutrality by 2060 should be based on a rational balance between energy and environmental security. Therefore, alternative energy, in particular, nuclear generation, plays a key role in the gradual withdrawal of Kazakhstan’s economy from coal dependence.