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Recognising the critical role of sustainable transport for economic growth and regional integration of the Western Balkans, the EBRD supports EU objectives for the sector’s development and has been investing considerable resources into revitalisation and better rail connectedness in the region.

Furthermore, the EBRD is the key strategic partner of the Western Balkans countries, supporting their efforts to rebuild railways and promoting the shift from road to rail as a greener mode of transport. The Bank provides investment finance and comprehensive policy support aimed at improving the governance and management of national railway companies. To date, the Bank has lent more than €1.6 billion to Western Balkans countries to finance investments in the rail sector.

In Serbia, for instance, the EBRD is providing significant funding to upgrade the railway infrastructure as part of the pan-European Corridor X, which is vital for linking Western Europe to the Balkans and potentially further to Bulgaria and Greece, making it a key trade route for the region. In particular, the funding of €2.2 billion is jointly provided by the EBRD (investment loan of €550 million), the European Union (investment grant of €598 million) and the European Investment Bank (investment loan of €1.1 billion) to modernise the 230-kilometre high-speed rail link connecting Belgrade to the country’s second-largest city, Niš.3

In North Macedonia, the EBRD is financing construction of the line on Corridor VIII that connects the Adriatic Sea to the Black Sea with a €175 million loan that is part of a total financing package of up to €560 million.4 In Albania, the Bank is supporting the rehabilitation of the country’s rail network with €136 million invested in the upgrade of two of the main lines between Tirana and Durres and Vore and Hani i Hotit.5

In addition to the construction and rehabilitation of the railway lines, the EBRD also provides financing as part of other important investments in the railway sector, such as the passenger and freight operators’ renewal of rolling stock, construction of depots and purchase of critical maintenance equipment.

Reform support FOR authorities and railway companies

All these critical investments are supported by important policy techical assistance projects that aim to further develop the market, support private-sector participants and commercialise the SOEs to capitalise on the extensive assets of the rail sector. In late 2023, for example, the EBRD launched a comprehensive reform programme to support Serbian rail development. The package includes:

• supporting the capacity and independence of the Serbian rail regulator to oversee the rapidly growing market by developing a forecast scenario of the future structure of the market, capacity building in key areas required for market function and a reform plan based on comparisons with Organisation for Economic Co-operation and Development (OECD) indicators for the governance of sector regulators and selected peers
• supporting Serbian Railways Infrastructure to improve its corporate governance practices and operational efficiency. This includes implementation of best OECD and international principles and standards in corporate governance, as well as identifying opportunities to increase commercial revenues, developing and implementing best practices for asset managment (linked to ISO 55,001 and ISO 9,001), together with training in project management, procurement and the use of International Federation of Consulting Engineers contracts.

Technical assistance to Serbia’s railway sector also played a part in ensuring a platform for engagement with the authorities on an overarching reform of state ownership and corporate governance standards for SOEs. This engagement produced a gap analysis in relation to the relevant global standards (such as the OECD Guidelines on Corporate Governance of SOEs) and best practices, while providing clarity to the government on priority actions needed to strengthen the regulatory and institutional frameworks horizontally across SOEs. This, in turn, informed a state-wide Strategy of State Ownership and Management of Companies Owned by the Republic of Serbia 2021-2027, and a new law (adopted in September 2023) for governance of SOEs developed pursuant to it, which introduces a centralisation of the state’s ownership function and improvements to SOE corporate governance standards.

This important reform also features in the stand-by arrangement between the International Monetary Fund and Serbia that reinforces the importance of its timely and diligent implementation.6 Looking ahead to the implementation of the new legislative framework, railway SOEs will also be among the first to implement the new requirements and will serve as an example to be followed by other companies owned by the Serbian state.

Similar examples can be seen in Albania, where the financing and technical support from the EBRD and the European Investment Bank will push forward the country’s reform agenda by helping the railway company prepare for the operational phase of new lines by developing a framework public-service obligation in line with international best practice. The same is true in Montenegro, where financing to the infrastructure management company comes with support for improving its corporate governance and developing partnerships with vocational training schools to attract more young workers to the railway sector.

Strengthening external partnerships through policy dialogue

A core objective for the EBRD is promoting transition within its countries of operation (and clients) towards a more competitive, integrated and well-governed economic model. A key aspect of this objective is ensuring alignment and complementarity with wider institutional objectives such as the implementation of the EU acquis communautaire in candidate countries and supporting related wider policy initiatives from key stakeholders. Within the Western Balkans rail (and wider transport) sector, this is primarily guided by the Transport Community Treaty7 signed in 2017 and broader supporting institutions and policies – such as the Transport Community and Western Balkans Growth Plan.

The EBRD seeks to support the implementation of the Transport Community action plans as the foundation for the reform of the rail sector and to promote “transition” in wider related areas such as the governance, operational efficiency and regulation of SOEs. It also aims to provide capacity building and support for the reform of key market-building institutions such as the sector regulator.

Making a strong case for reforms and finding the right level of ambition and complementarity requires close collaboration with external partners such as the International Monetary Fund, the European Investment Bank, local EU delegations, the World Bank and Agence Française de Développement, which also play a key role in terms of financing and parallel technical support. The EBRD relies on all these important partnerships to identify and pursue the most useful and impactful reforms attached to its indispensable financing in the Western Balkans.

The special case of government procurement markets

WTO rules do not cover all sectors, markets or economies of WTO members. Investments and spending from state budgets and by state-owned enterprises (SOEs) in the utilities sector, defined together as government or public procurement, are not directly subject to standard WTO trade rules primarily aimed at commercial exchanges between private enterprises.

As a result, explicit discrimination in government procurement against foreign suppliers remains a barrier to international trade. Unlike most WTO agreements, the MFN principle does not apply automatically to the government procurement markets of WTO members. Governments maintain discrimination through government procurement laws, administrative guidelines and/or tacit understandings between government and industry. In addition, as traditional forms of trade discrimination have declined, policies containing local content requirements have emerged in the last decade. The 2017 OECD taxonomy of measures affecting trade in government procurement processes11 describes several categories of direct and indirect trade barriers in government procurement.

Direct and indirect trade barriers in government procurement rules and practices affect important development priorities aimed at promoting sustainable growth. The consistent availability of and access to efficient public services are fundamental to the performance of national economies, social cohesion and national safety and security. Poor or inefficient infrastructure imposes huge economic costs, both visible and hidden, on businesses. Not only does it boost transport costs, but it also raises other costs in an economy, such as higher inventory levels, lower productivity and higher prices for consumers, with implications for the international competitiveness of domestic firms forced to operate in this environment. Some key prerequisite infrastructure for better economic performance – affordable, efficient and accessible public infrastructure and services (public transport systems, information and communications technology infrastructure, quality water supply, drainage and sanitation systems, a reliable and stable energy supply) – is absent in many regions.

Transport constraints can have a severe impact on an economy, resulting for instance, in a 7 per cent reduction in export volumes and a 16 per cent delay in shipment of goods – costs that are higher still in the case of time-sensitive goods.12 Effectively resolving supply chain and transport constraints could mean a six-fold rise in world gross domestic product compared with tariff reductions, yielding added benefits in terms of jobs, lower prices and greater balance in the distribution of the gains of trade both in-country and internationally.13

Efficient global supply chains constitute an essential prerequisite for global growth, and these supply chains themselves depend on accessible and reliable infrastructure and public services. Citizens and businesses depend on this, in turn relying on national government procurement laws and procurement practices that typically remain outside the WTO system. Economic globalisation in the 21st century is more complex than the case of imports crossing borders. The combination of technological advances and economic reforms facilitating new types of commerce means that goods, services, employees, customers, investments and intellectual property cross borders at an ever-increasing rate. In a world of substantial flows of foreign direct and indirect investment, and where regional production networks and supply chains have extended their reach across many sectors and countries (as demonstrated by the pandemic), government procurement markets benefit only indirectly from borders open to international trade and foreign direct investment.

Development economists highlight the importance of liberalising government procurement markets for a good reason. The 12 largest, most complex and technically advanced infrastructure projects in the world, as presented in Table 1 below, are not at all commercial. Commercial investors fund just three of these projects: Dholera Solar Power Plant (India), the Thames Tideway Tunnel (United Kingdom) and Madison Square Garden Sphere (United States of America). The other projects are commissioned by public-sector clients, with investors ranging from the government of China to a subsidiary of Transport for London in the United Kingdom and international financial organisations. Governments execute different levels of control over SOEs, but effectively a final bill for the SOEs’ public infrastructure projects goes to the taxpayer.

Source: V. Davies (2023) and F. Farhadi (2023).

How the WTO GPA 2012 integrates procurement into the global trading system

Given the importance of government procurement markets for the development potential of both advanced and transition economies, most modern bilateral and regional free trade agreements include government procurement-related commitments. However, these are inherently fragmented and do not ensure globally standardised rules for government procurement markets. This is the benefit of the WTO’s “code of fair practices on government purchases”,14 the Agreement on Government Procurement, signed under GATT in 1994 and revised in 2012. The WTO GPA 2012 is binding on 49 WTO members and is the main legal instrument in the WTO framework globally regulating trade in government procurement markets. It is underpinned by WTO principles of transparency and non-discrimination. The agreement aims to liberalise and expand international trade, facilitate integrity in government procurement systems and foster the efficient and effective management of public resources.

The WTO GPA 2012 is not part of standard WTO rules and is not binding on countries that join the WTO. It is voluntary and plurilateral. Members negotiate their terms of accession to the agreement and those that accede must adopt procurement policies and practices ensuring that the treatment of the goods, services and suppliers of other GPA parties is “no less favourable” than that given to their domestic goods, services and suppliers. In other words, only accession to the WTO GPA 2012 extends the WTO standard global trading rules of competition and transparency to the national regulation of public contracts. In this regard, the WTO GPA 2012 brings legal certainty, transparency and good governance into government procurement markets covered by the agreement.

The WTO GPA 2012 governs procurement by public-sector clients by any contractual means, including concessions and public-private partnerships. It applies to laws, regulations and purchasing practices regarding any covered public contract. The agreement does not cover every sector or market; upon joining, parties negotiate market access commitments with new acceding countries on a reciprocal basis. It may thus cover procurement by central and subcentral government entities, as well as utilities and other government enterprises that a party designates. Each GPA party’s commitments specify public-sector entities – as well as categories of goods, services and works of estimated value equal to or above specified minimum financial threshold values – that are open to procurement bids by companies from other GPA parties.

Goods are covered in general, services that are covered are explicitly specified, and all GPA parties cover construction services in full. In addition, the WTO GPA 2012 provides for binding public procurement policy standards on tendering, selection and awarding requirements, qualification of suppliers, offsets and complaint mechanisms. The agreement also contains exceptions, excluding defence and national security contracts, as well as set-asides for small and minority-owned businesses.

Benefits and challenges of WTO GPA 2012 accession

The procurement market covered by the WTO GPA 2012 is worth more than US$ 1.7 trillion, according to WTO estimates.15 Recent empirical evidence suggests that the agreement promotes competition by boosting the probability that a contract will be awarded to a foreign firm. It also fosters cost-effective public procurement by lowering the probability that the procurement price is higher than estimated contracts with single bidders and by decreasing the total number of wins by a single company and/or its subsidiaries. Research has also found that compliance with the WTO GPA 2012 does not translate to higher costs of procurement.16

The list of challenges differs from accession to accession. However, they are typically related to the domestic market’s overall openness to international trade and quality of national government procurement laws. Timing and political circumstances of negotiations also play a role.

Political risks of withdrawal from negotiations/affiliation. Some GPA parties criticise the WTO GPA 2012 as “imbalanced” and “too extensive”. Others support the idea of more extensive coverage of government procurement markets and promote incorporation of the revised GPA text directly into the WTO’s standard global trading system rules, which would then be binding upon securing WTO membership.

Separate bilateral market access negotiations. The GPA is open to all WTO members and is negotiated individually and administered by the Committee on Government Procurement, composed of all the parties to the agreement. Any member may accede on terms agreed between that member and all GPA parties. The accession process is based on bilateral negotiations with the acceding party on the procurement that it will cover and a determination by the GPA parties that its national government procurement regime complies with the mandatory policy standards of the WTO GPA 2012.

Regulatory compliance check. Unique among WTO trade agreements, the GPA sets the basic policy standards for transparency and competition in cross-border public procurement, in addition to market access. Upon accession, GPA parties incorporate the agreement’s mandatory policy requirements in their national public procurement laws.

Potential new procurement practices and digital tools to implement. GPA parties need to ensure that their procurement procedures do not preclude competition or create unnecessary obstacles to international trade, including the procurement of SOEs in the utilities sector. The WTO GPA 2012 establishes general rules on permitted procurement methods (that is, open, selective and limited tendering procedures) and the electronic systems through which suppliers engage in competitive bidding for cross-border government procurement contracts.

Helping transition economies navigate WTO GPA 2012 negotiation, accession and implementation

As a part of the EBRD’s mandate to improve the investment climate of the economies where the Bank works, the EBRD’s Legal Transition Programme (LTP) helps these governments improve the way they manage public-sector contracting, making procurement systems more transparent, effective and competitive. Building on the Bank’s procurement expertise and experience, the LTP started collaborating with the GPA Secretariat in 2011 in a bid to encourage EBRD economies to modernise their national public procurement laws to meet WTO public procurement policy standards, and to consider opening GPA negotiations. Accession to the WTO GPA 2012 is perhaps the most notable milestone in achieving these goals, as it promotes meeting and maintaining international standards for public procurement regulatory frameworks.

Upon revision of the GPA in 2012, the Bank set up a dedicated technical cooperation programme, the EBRD GPA Technical Cooperation Facility, to promote GPA accession among transition countries in the EBRD regions, in collaboration with the WTO Secretariat.

The revised WTO GPA 2012 motivated several such economies to consider accession as a step in their public procurement reforms. Building on this momentum, the EBRD GPA Technical Cooperation Facility has enjoyed considerable success in assisting transition economies’ breakthrough in their GPA negotiations. Since its launch, this facility has supported all transition economies that acceded to the WTO GPA 2012 – notably Armenia, Moldova, Montenegro, North Macedonia and Ukraine (all other GPA signatories are highly developed economies).

The EBRD GPA Technical Cooperation Facility provides regulatory advice and technical support to governments seeking accession to the agreement by providing (1) capacity-building activities, (2) country-specific technical cooperation and (3) accession negotiation assistance to economies in the EBRD regions that wish to accede. Most importantly, the Bank helps transition economies overcome any institutional, legal and/or trade policy challenges related to WTO GPA 2012 accession they may face during the negotiations and after the accession.

Perhaps the most valuable TC support entails help with designing the negotiation strategy, support during parallel bilateral negotiations and post-accession technical assistance with implementation of WTO GPA 2012 policy standards and commitments in national legislation and local procurement practice. Under the EBRD GPA Technical Cooperation Facility, the LTP enjoys an excellent working relationship with the WTO Secretariat. It has developed strong links with key GPA parties (Canada, the European Union, Japan, the United States) and effectively promotes innovative public procurement policy thinking to GPA working groups (SMEs, Market Statistics).

Conclusions

The WTO GPA 2012 crystallises current best practices in government procurement, approved and accepted by WTO members. It is harmonised with other relevant international legal instruments, including the 2014/2017 European Union directives on public procurement and the 2011 UNCITRAL Model Law on Public Procurement. It therefore complements other efforts by developing and transition economies to reform their government procurement systems.

The advantages of more countries in the EBRD regions joining the GPA are evident: EBRD economies would work towards more open and globally harmonised procurement rules for public contracts. The harmonised procurement policies, combined with access to the markets of the GPA parties, are expected to create new international trade opportunities: the WTO estimates the value of GPA market access commitments under the agreement at more than US $1.7 trillion a year. Results of the latest empirical studies suggest that joining the WTO GPA 2012 has a positive impact on the trade of both goods and services between parties, as well as on outward foreign affiliate service sales. The number of GPA parties has a small marginal negative effect on trade in goods. Service exports also rise slightly when more parties participate in the GPA. The growth of government procurement contracts above the threshold under the GPA also fosters service imports, exports and outward foreign affiliate sales.

The role of the WTO GPA 2012 in supporting development is to provide transparent, predictable and non-discriminatory government procurement regimes that foster good governance, attract investment, promote competitiveness and contribute to economic transformation. Accession to the WTO GPA 2012 can create market access opportunities for developing and transition economies, build trade capacity, align their government procurement policies with international best practice and extend WTO international trade rules to government procurement markets. This can lead to more cross-border trade, job creation, infrastructure development and integration into global value chains, contributing to sustainable growth.

The experience of the EBRD GPA Technical Cooperation Facility in terms of TC with the WTO Secretariat and technical assistance and capacity building provided to transition economies spotlights the potentially critical role that international organisations may play to help bring investment-sensitive government procurement markets under the WTO system of international trade rules.

ESG challenges for SMEs

Many studies clearly demonstrate the link between good corporate governance and benefits such as improved firm performance, better access to capital and greater sustainability. Failure to enact good corporate governance practices may result in underperformance or, in extreme cases, the failure of the business. Common SME weaknesses include the lack of established strategy and business planning, non-formalised practices and weak internal controls.

In addition, SMEs often fail to recognise and integrate environmental and social (E&S) risks and opportunities in their strategies and have limited capacity to develop and implement appropriate E&S risk management practices. The situation in many SMEs is complicated even further by the succession risk and the increased role of extended family in the affairs of family-owned firms.

Due to their smaller size and various stages of development, SMEs have their own unique characteristics and challenges. Consequently, the governance and broader ESG guidance for SMEs should not be a simplified version of the governance requirements applicable to listed companies or banks. For example, SMEs often do not have the separation between owners and managers typical of larger companies. Instead, the ownership of SMEs is usually highly concentrated, and the owners are involved in both the strategic decision-making and day-to-day management. They usually oversee the relevant areas of the company’s work (including finance, operations, marketing and sales).

The most compelling reason for SMEs to improve their ESG performance is to ensure their long-term viability and competitiveness in a rapidly changing marketplace. To do so, SMEs should put in place suitable arrangements to direct and control the company effectively. This can be achieved by establishing internal functions and governance bodies as well as developing policies on topics ranging from cash management, budgeting and financial reporting to health and safety and sustainability, as appropriate for the size, sector and stage of development of the company (that is, start-up, active growth, organisational development and business expansion).20

The governance solutions for SMEs should aim to: (i) improve strategic decision-making; (ii) oversee the performance of management (from overview of expenditures to strategy implementation); (iii) establish strong management controls that also help to ensure the integrity of the company’s financial reports; and (iv) build a strong internal culture and staff morale.

In the current environment, sustainability issues represent major risks and opportunities for all companies. In this context, the corporate governance frameworks should be designed to support the sustainability of firms. On the one hand, the larger ones face more complex challenges, but often have sophisticated governance structures and sufficient capacity to understand and manage the sustainability issues. SMEs, on the other hand, frequently lack sufficient awareness and expertise to analyse their material ESG areas and need to put in place a suitable governance framework to help them develop solutions to mitigate any significant E&S risks and adapt to the effects of climate change. Given their growing importance, sustainability issues should be integrated into the SME strategy-setting process and risk management. SMEs should also develop capacity to regularly produce the additional non-financial reporting, including on ESG performance, that many financial institutions and supply-chain participants increasingly require.

OLL programme: what has been done so far and next steps

Enhancing corporate governance practices among SMEs is an important priority for the SME Finance and Development team at the EBRD. For instance, 51 per cent of the recently initiated 254 international advisory projects with SMEs explicitly incorporate corporate governance as either a core or a secondary objective. Such advisory support helps small businesses establish robust organisational frameworks, ensuring their long-term sustainability and growth.

As part of its efforts to improve the ESG practices of small firms, the EBRD and SECO launched a pilot OLL programme in 2023. An OLL is a financing instrument that combines an ordinary loan with a commitment of the borrower to achieve certain outcomes in the form of specific ESG performance improvements. The direct reward that the borrower receives is an incentive payment, which effectively lowers the interest rate on the loan and is proportionate to the achieved impact. The proceeds from an OLL could be used for capital expenditure (for example, new facilities and equipment), working capital or other legitimate business purposes.

There does not need to be a direct link with the ESG outcomes that the borrower aims to achieve (for example, the procurement and installation of solar photovoltaic panels on the company premises). Instead, the outcomes must focus on areas that are material, given the sector and business model of the borrower. The level of ambition in terms of the magnitude of the improvements needs to be substantial (usually going beyond the applicable local regulations). On this basis, the OLL programme supports companies seeking to become ESG champions and provide positive demonstration effects in the local market.

The structuring of an OLL involves the following steps:

1. ESG diagnostic: Aims to establish the main ESG risks and opportunities that the borrower faces and is usually carried out by an expert in the field.
2. ESG action plan: Specifies up to 10 key performance indicators (KPIs) that the borrower intends to tackle as part of the OLL, together with the applicable baseline values, the agreed ambitious targets and a timeline for their achievement.
3. Implementation arrangements: Specify the mechanics of the OLL structure, including the reduction in the interest payment to which the borrower would be entitled, if and when it achieves the targets stipulated in the ESG action plan. These also define appropriate advisory support (if any) that the EBRD would provide to the borrower to achieve the stipulated outcomes.
4. Reporting and verification: Define the features of the periodic (usually annual) reporting to the lender on the implementation of the ESG action plan and the performance against the KPIs. The lender verifies this performance by using its in-house resources or with the help of an external verification consultant.

The OLL programme targets SMEs aiming to address their ESG risks and opportunities, regardless of whether they already have internal capacity to adopt ESG improvements on their own. As most SMEs lack sufficient resources to tackle their ESG challenges on their own, the programme provides both external advisory support and a suitable financial incentive to engage in such activities. At this stage, the incentive needs to be significant (up to 10 per cent of the loan principal) and is frequently paid out of grant funding provided by various donors (in this case, by SECO). As the markets develop, the amount of the incentive will be reduced and gradually phased out.

The external advisory support is used not only to identify the main areas for potential ESG improvements, but also to help the company develop internal capabilities to design and implement suitable solutions. In our experience, the success of this programme depends not only on the quality of the consultant, but also on the commitment of the company.

Given the low starting position of most SMEs, the ESG diagnostic could identify many “easy wins” – that is, measures that could be implemented easily and without incurring significant costs. Such easy wins typically involve adopting processes to collect data and introducing policies to facilitate the implementation of best ESG practices. Once these are in place, the next steps focus on ESG measures that require greater preparation and may involve certain investments/costs. To help with these, the EBRD often offers the borrower assistance through its International Advisory programme.

Awareness and understanding of various ESG-related topics among SMEs in the EBRD regions are growing, but still relatively limited. Therefore, maximising the impact of an outcome-linked loan requires the lender to lead the design of the ESG action plan and to provide suitable technical assistance in the implementation phase, so the borrower can apply the agreed measures and report on the achieved impact.

By their very nature, OLL instruments are more complex to structure and monitor than conventional EBRD loans. This implies that they are a niche product that is attractive mainly to aspiring ESG champions. Making outcome-linked loans a mainstream product would require:

• increasing the quality and quantity of data on the ESG performance of SMEs – to make it easier to establish the baseline and set the level of ambition for each KPI
• streamlining and standardising the loan terms – to reduce the cost
• developing capacity among local commercial banks to implement such a product – to increase their ability to structure such loans without the involvement of a development finance institution like the EBRD
• recognising that such instruments can be supported with donor funding only in the beginning – that is, until the adoption gathers momentum. Once that is the case, the level of incentive would gradually decline and the OLLs will play the signalling role for which they were originally intended.

The initial experiences with the OLL programme in Central Asia are encouraging and would enable the EBRD to streamline the operational modalities further and scale the programme in other regions.21 As these loans become more popular and awareness of ESG improvements increases, the level of ambition of borrowers should rise while the need to provide incentives and technical assistance would diminish. This would gradually allow for ESG elements to be embedded in more financing instruments and would position those SMEs keen to use them on a more sustainable footing.

A new approach

As the urgency and economic costs of climate change became more apparent, governments began to consider the serious risks that a changing climate posed to the environment, economies and individual businesses. This led to global policy shifts, including international accords such as the Paris Agreement28 and the 2030 Agenda for Sustainable Development,29 which underscored the need for concerted action to mitigate climate change and adapt to its impacts.

A milestone was reached in December 2015 – the same year as Dieselgate – when the Financial Stability Board,30 in response to a request from G20 finance ministers and central bank governors for more transparent financial reporting of climate-related risks and opportunities, created the Task Force on Climate-related Financial Disclosures (TCFD). The primary objective of the TCFD is to help companies to understand what financial markets want from disclosure in order to measure and respond to climate change risks, and to encourage firms to align their disclosures with investors’ needs.

TCFD recommendations are structured around four thematic areas that represent core elements of how organisations operate (see Figure 1).

The central role of governance – as an enabler of all thematic areas – is clear from Figure 1. Each TCFD thematic area is, in itself, a governance aspect, where climate considerations are plugged in and shape the specific purpose of governance, thereby becoming the “enabler” for such climate considerations.

Generally, governance refers to the system of rules, practices and processes through which a firm is directed and controlled. It involves behaviours and encompasses the mechanisms through which executives – and, in turn, the company as a whole – are held accountable. This applies to performance, risk mitigation and environmental and social ambitions.

The TCFD approach is a horizontal approach, not a vertical one. It implies that effective interaction between shareholders, the board, management and stakeholders (first thematic area) is a precondition for developing an effective strategy (second thematic area), which, in turn, requires a solid structure for the assessment of risks and opportunities (third thematic area), which are to be disclosed using credible metrics (fourth thematic area). The linking of the four dimensions is key.

TCFD31 reporting – while largely voluntary – is increasingly being monitored and incorporated into jurisdictions’ regulatory frameworks. This shift makes companies more accountable for their climate-related financial disclosures and can potentially have legal implications if these disclosures – and the governance behind them – are found to be misleading or inadequate.

In some countries and regions, financial regulators, stock exchanges and industry groups are starting to encourage and require financial institutions and large companies to include TCFD-aligned information in their annual financial reports. Some stock exchanges, such as those in London, New York, Tokyo and Hong Kong, encourage or require listed companies to report in line with TCFD guidelines as part of their listing requirements.

On 6 March 2024, the US Securities and Exchange Commission (SEC) adopted final rules on the enhancement and standardisation of climate-related disclosures for investors, requiring corporations to disclose certain climate-related information in registration statements and annual reports.32 Those rules are aligned with many of the TCFD’s principles and recommendations. In particular, the SEC’s rules highlight the importance of disclosing how the board and management oversee climate-related risks and opportunities. This includes descriptions of the governance framework and the processes for identifying, assessing and managing climate-related risks.

A wave of new legislation and litigation

The United Kingdom was the first G20 country to enshrine mandatory TCFD disclosure in law. The legislation, adopted on 6 April 2022, requires more than 1,300 of the largest UK-registered firms and financial institutions to disclose climate-related financial information. This new requirement goes hand in hand with the United Kingdom’s Companies Act 2006, Section 172 of which requires directors to act in a way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole. This includes, among other factors, the need to consider the impact of the company’s operations on the community and the environment. Increasing shareholder activism and public pressure have led companies to integrate more detailed environmental considerations into their strategic decisions, potentially under the ambit of Section 172 obligations.33

In the European Union (EU), the new Corporate Sustainability Reporting Directive (CSRD)34 – an extension and revision of the earlier Non-Financial Reporting Directive (NFRD) – was adopted by the European Parliament in November 2022 and represents a significant step forward in the EU’s commitment to sustainable finance and corporate responsibility.

The new directive covers all large companies – whether they are publicly listed or not – as well as all companies listed on regulated markets. This means that around 50,000 companies in the EU will now need to comply, up from around 11,000 under the NFRD.

Companies are required to report on their impact on people and the environment. The directive will use mandatory EU sustainability reporting standards, which the European Financial Reporting Advisory Group is developing. Those reporting standards are expected to incorporate the principles and recommendations of the TCFD. Reporting will include detailed information on: (i) companies’ business models, strategies and targets; (ii) the roles of the administration, management and supervisory bodies as regards sustainability; and (iii) the principal adverse impacts connected with the company and its value chain. For the first time, an external auditor or certifier must audit or check the sustainability information reported under the CSRD.

In jurisdictions where TCFD reporting has become mandatory, companies are legally accountable for the accuracy and adequacy of their disclosures. Failure to comply can result in fines, sanctions and other regulatory action. Furthermore, investors are increasingly demanding reliable and standardised climate-related disclosures to assess risks associated with their investments. Companies that fail to provide meaningful and accurate data may face shareholder activism and reputational risks, potentially leading to divestment and challenges in raising capital.

These reforms have started to create a system of accountability for disclosures. There have been instances where companies have been sued for allegedly misleading investors about their exposure to climate-related risks or the robustness of their climate strategies. In this process, courts are pivotal in upholding ESG standards and adjudicating on disputes related to environmental and social issues. Litigation regarding climate-related disclosures is expected to increase as more firms begin to report these details and regulatory requirements tighten.

Notable cases include the proceedings that were brought in the United States against the oil and gas giant ExxonMobil, which was accused of misleading investors about the risks climate change posed to its business. Though ExxonMobil prevailed in this case,35 it highlighted the potential legal risks associated with climate-related disclosures. In another case filed in the Netherlands, ClientEarth initiated legal action against Shell’s board of directors. The group of shareholder activists alleged that Shell’s climate transition plan was inadequate and that the company’s directors had failed to adequately prepare for a transition to a low-carbon economy. In May 2021, The Hague District Court ordered Shell to reduce its carbon dioxide emissions by 45 per cent by 2030 relative to 2019 levels. This reduction pertains to the entirety of Shell’s operations and the energy products it sells, reflecting a substantial increase in the ambition of the company’s existing sustainability policies.

Litigation is not limited to corporations, either. The landmark case of Urgenda Foundation versus The State of the Netherlands,36 where the Dutch Supreme Court ordered the government to reduce its greenhouse gas emissions, exemplifies the role of the judiciary in enforcing environmental commitments. Courts can thus reinforce governance frameworks by ensuring legal accountability for ESG commitments and claims.

Conclusions

To sum up, the development of ESG has demonstrated the increasing role of governance in facilitating the transition to environmental and social sustainability. This “enabling” role is a cornerstone of the transition to sustainability. It requires horizontal integration of the ESG dimensions, with governance being the entry point and the glue that keeps the three together. Thus, in order to tackle climate risks, for instance, investors should be assured that the company has a sound risk management function in place where climate risks can be duly identified and analysed along with other operational risks. This does not go well with a vertical siloed approach, where environmental, social and governance-related elements are analysed and rated separately. Evidence shows that where ESG ambitions are siloed, they may not translate into tangible results.

Instead, an effective governance structure allows environmental and social goals to become corporate strategic priorities, while social and environmental challenges and risks are analysed holistically so they can, ideally, be turned into opportunities. This requires strong interaction between internal and external stakeholders, supported by a regulatory system that allows accountability and trust. The structure, culture and accountability that are required for this to happen are growing fast, but they still face some bottlenecks (for example, when it comes to the inclusion of stakeholders in decision-making, reliable disclosure and oversight) – especially in transition countries, where the ESG journey has only recently started and governance practices and frameworks may not yet follow best practices. The EBRD is helping its clients to systematically integrate climate considerations into their decision-making, risk management, investment and operational plans and targets through its CCG Facility.37 The CCG methodology is based on the TCFD and is regularly updated to reflect emerging international standards and good practices.

Corporate performance has, historically, been measured using globally agreed, monitored and regulated financial indicators, whereby management informs the board, shareholders and stakeholders of profits and losses. A robust, standardised and evolving governance framework supports the preparation, verification and disclosure processes, ensuring confidence and trust. The same approach should eventually apply to environmental and social considerations as well.

An alternative to courts in Moldova

Since 2013, the LTP has actively supported the MoJ, the Mediation Council and the Mediation Centre at the Chamber of Commerce and Industry in the development of alternative dispute resolution (ADR) in Moldova via the Commercial Mediation and Arbitration Project. This project is being implemented in four phases.

The use of mediation was limited when the project began in late 2013. The Law on Mediation of 14 June 2007 was ineffective due to a lack of clarity, and the only realistic path to resolving commercial disputes was through the court system. At the same time, the backlog of pending cases in the courts was significant and, coupled with litigation costs, this restricted access to justice. This had an adverse impact on the general business environment in Moldova.

Thanks to the project, which is set to end in 2024, mediation is slowly but surely becoming more available and a credible alternative to courts in Moldova on commercial cases. The number of commercial mediation cases resolved through mediation increased 10 times – from 99 to 1,078 – from 2017 to 2023.

The project also proposed improvements to the Moldovan arbitration framework. This was achieved by the EBRD partnering with:

• the Ministry of Justice and its Mediation Council for policy and law reform, as well as for digital governance
• the Mediation Council and the Mediation Centre at the Chamber of Commerce and Industry to train mediators to provide qualitative service
• with all three and the National Institute of Justice and courts to launch a continuous awareness campaign to promote ADR.

This would not have been possible without the support, including financial, from various donors: the government of Luxembourg, the UK government and the United States Agency for International Development (USAID). More partnerships were required to help with the expertise on mediation by the UK Centre for Effective Dispute Resolution and logistical implementation by the International Development Law Organisation.

Helping the banking sector save on enforcement costs

The enforcement of a court judgment is essential to protect creditors’ rights and an indispensable element of a business-friendly market. In Moldova, the time and costs associated with the exchange of communication between enforcement officers and commercial banks results in significant enforcement costs.

To address these issues, the EBRD partnered with the Association of Banks in Moldova, the National Union of Enforcement Officers and the Ministry of Justice to launch the Project on Streamlining Enforcement Procedures – Digitisation of Debt Enforcement by Bailiffs from Debtor Bank Accounts. This project seeks to identify and implement the best model for digitising the communication between enforcement officers and commercial banks in the process of debt collection.

Promoting digitalisation as a solution

In its five-year Strategic and Capital Framework for 2021-25, the EBRD emphasised the role of digital solutions as enablers of transition,43 noting that “[e]ffective partnerships will be crucial to success”. Indeed, identifying digital champions and maintaining strong and effective partnerships during the planning, delivery and use of digital solutions are vital for the ultimate acceptance and use of such solutions.

Like many EBRD economies transitioning to digital governance, Moldova has been keen to expand the role of digital tools in justice systems. In response to this need, the Bank in 2023 developed guidance for the Moldovan authorities and 16 other EBRD economies on how to provide better access to commercial justice services, with a focus on SMEs. The guidance is based on the results of an assessment that evaluated the degree to which 17 EBRD economies were ready to introduce,44 or had already developed, online courts45 for commercial disputes.

Digital tools are especially suitable in commercial justice where, usually, participants in proceedings have better digital skills and where the costs and speed of court cases directly affect the economic environment and its attractiveness to investors. The findings from the assessment and the guidance have been shared with the Moldovan authorities and will, hopefully, inform decisions on ongoing reforms in digital justice.

The promises of digital tools go beyond the improvement of court proceedings, however. More efforts are needed to ensure that businesses can effectively enforce judgments and ultimately recover their money. Such processes often entail the need to sell debtors’ assets. While the Moldovan government has committed to improving the framework on enforcement, a transparent, fast and effective electronic system for the sale of assets (property) is still needed.

This is an area where the Bank could leverage its experience in the development of MTender (Moldova) and ProZorro.Sale (Ukraine) to design and implement a digital solution that caters to the auctioning of assets by Moldovan actors, including commercial banks, enforcement officers and insolvency administrators. The expected impact of this solution is to prevent abuse, ensure equal access to sales data, increase the efficiency and cost-effectiveness of the recovery of debt in the country, and boost the number of potential buyers. It is likely that effective and transparent debt recovery would tremendously improve the resilience of the financial sector.

Empowering the government to adopt quality legislation

While the quality of legislation does not guarantee good implementation, it remains a crucial component. This is especially true for countries that pursue European aspirations and make significant efforts to transpose EU laws into their domestic legislation. The transposition requires considerable emphasis on adaptation of legal norms rather than their replication from one legal system to another. Yet, this is not always feasible, for a variety of reasons. It has been reported that the shortcomings of the EU acquis transposition – experienced by the latest EU members – result mainly from the lack of administrative capacity and pre-accession policy alignment.46

The EBRD Transition Report country assessment for Moldova 2023-24 identified the same challenges in Moldova and prioritised the need to strengthen administrative and institutional capacities ahead of EU accession negotiations.47 To minimise EU law transposition shortcomings in the post-accession period, the EBRD’s Competitiveness, Governance and Political Affairs team has rolled out its flagship Reform Support Teams programme in Moldova with the support of the government of France and the European Union to increase the capacity of the key ministries and agencies to deliver on major EU accession reforms.

Drawing on the EBRD’s experience – especially in Georgia, Ukraine and Uzbekistan – the Bank is embedding almost 40 reform experts for up to three years in the State Chancellery, the Ministry of Energy, the Ministry of Infrastructure and Regional Development, the Ministry of Environment, the Ministry of Economic Development and Digitisation, the Agency of Public Property and the Ministry of Agriculture and Food Industry.

The experts provide strategic advisory and day-to-day operational support with the EU chapter-screening process and the development of normative acts, with a primary focus on transposing the EU acquis into national legislation. The Reform Support Teams programme helps to build capacity within the government administration through a comprehensive, coherent and coordinated approach to reform implementation. The advantages of the programme go beyond capacity improvement. Recruitment campaigns target members of Moldova’s diaspora community and young specialists who choose to return to Moldova with a wealth of international experience to contribute to the European future of their country. It is also expected that the programme’s roles will be integrated into the government administration in the longer term as part of the wider public administration reform.

Conclusion

The EBRD has developed a unique role as both a major investor and development partner in Moldova. This has allowed the Bank to leverage its expertise in supporting much-needed reforms in the areas of commercial justice, enforcement of creditor rights, digital transformation and alignment with EU legislation. Partnerships established by the EBRD with the Moldovan authorities were the driving force behind these reforms. These partnerships play a crucial role in ensuring that efforts to make Moldovan laws effective and its investment climate more attractive and trusted are truly impactful.

Establishing national standards and a code of ethics

In the early days, the EBRD’s working relationship with the BSA proceeded in stages. First, the Bank helped the ministry to develop a set of official national standards and a code of ethics for the profession, with the assistance of Professor Ron Harmer and British insolvency practitioner Neil Cooper. These were initially adopted in 2004 and slightly revised with input from the BSA in 2009. The standards established, for the first time, rules and guidelines for insolvency practitioners in the day-to-day conduct of insolvency cases, in line with international best practice.

Second, the EBRD contributed to the substantive reform of the Law on Bankruptcy, completed in 2009.49 This was an important reform and has been the basis of Serbian insolvency legislation ever since, with amendments from time to time. Thereafter, the Bank worked with the BSA and its partners to develop a manual, published in 2010, to guide stakeholders on the application of the national standards and the related code of ethics. This helped the Agency to carry out its disciplinary functions, which were launched in April 2011 by legislative changes that empowered a newly created disciplinary board of the BSA to examine cases of professional misconduct involving a breach of national standards and/or the code of ethics.

Often considered by stakeholders in the EBRD regions to be the weakest area of performance of the insolvency practitioner profession, national standards and codes of ethics help to define common rules with respect to professional behaviour. In so doing, they also support the performance of regulatory functions, in particular the investigation of allegations of misconduct by practitioners and, if necessary, the initiation of disciplinary procedures. Professional standards and ethics are, therefore, among the most important issues to be addressed for the proper implementation of any country’s insolvency framework.50

In Serbia, the national standards cover the practical administration of the insolvency practitioners’ duties. These include matters such as the administration of the insolvent debtor’s bank accounts and monetary assets (National Standard 1) and the practitioner’s report on the economic and financial position of the bankrupt debtor (National Standard 3). The code of ethics provides complementary rules on ethical conduct and an overarching framework regarding the behaviour of insolvency practitioners in the performance of their duties and responsibilities. A critical rule is that insolvency practitioners must be objective, impartial and independent when performing their professional duties.

In September 2012 the EBRD surveyed insolvency practitioners and BSA staff on the impact of the Bank’s project with the BSA on the national standards and the code of ethics. There was a clear perception that the standards, while new at the time, had had a major, positive effect on the working practices of insolvency practitioners. The code of ethics, which prescribes an expected standard of professional behaviour and conduct, was considered more difficult to assess than the national standards, but the two documents – national standards and the code of ethics – were considered to be closely interlinked. Today, these are an established part of the Serbian regulatory framework for insolvency and a major achievement that has consolidated Serbia’s leadership in the insolvency field.

There was a pause in the EBRD’s active partnership with the BSA after 2012, although it continued to engage in the field of insolvency in Serbia through the LTP and remained in regular contact with the BSA. From 2013 to 2015 the EBRD worked closely with the Chamber of Commerce and Industry of Serbia to develop the framework for consensual restructuring cases administered by the Chamber pursuant to the Law on Consensual Financial Restructuring of Companies.51 This was followed, from 2017 to 2018, with a project that analysed impediments to the resolution of high levels of non-performing loans in Serbia, including some issues in the insolvency framework.

Digital initiatives – risk-based supervision and data governance

In 2021 there was an opportunity for the EBRD to reengage at another critical stage in the development of the BSA as a regulator. EBRD staff began working with a team led by Dragisa Petrovic, Director of the BSA, and including Jelena Todic, Director of the Supervision and Profession Development Unit, Dejan Milovanovic, Head of Department for coordination and control of internal organisational units, Milan Opacic, Assistant Director for information technology (IT) and communications, and Sladjana Guzijan, Profession Development Adviser.

The occasion for reengagement with the BSA was an initiative by the Serbian Ministry of Economy to create more efficient insolvency procedures, with shorter deadlines and lower costs. The ministry had prepared a set of amendments to the Bankruptcy Law (drafted in 2018) that envisaged greater responsibilities for the BSA in collecting insolvency-related data from relevant court decisions, notices and other legal acts and in preparing official insolvency statistics. With support from Luxembourg, the Bank agreed to work with the BSA to assess its existing IT and regulatory infrastructure, and prepare a methodology, IT concept and roadmap for the development of the BSA’s new responsibilities concerning data collection, analysis and the production of statistics.

As a regulator, the BSA uses two digital systems for statistical monitoring and data processing: the Electronic Reporting System (ERS) and the Risk Based Management System (RBMS). The ERS is an electronic reporting system administered by the BSA and officially used since 21 September 2009 by insolvency practitioners for reporting on activities performed in insolvency (bankruptcy) proceedings. The RBMS is a platform used by BSA supervisors to monitor insolvency practitioners. The RBMS uses data from the ERS to review the data of the reports submitted by practitioners in the ERS and identify areas of risk, facilitating the BSA’s supervisory functions. Part of the project that the EBRD launched in 2022 therefore analysed the need for a new system to replace the ERS as well as a new software system to replace the RBMS. Furthermore, the EBRD considered the need for new statistical software to extract data from the new ERS, RBMS, E-Sales platform and the BSA’s information system, ensuring the interoperability of the platforms.

Due to the specific multidisciplinary nature of the project, the Bank retained a team of data governance, policy, IT and legal experts. The team worked with the BSA to develop a methodology for the collection, processing and publication of statistical data and a roadmap for implementation, including the training of BSA employees on using the new software and the production of statistics and reports. One of the innovative features of the project was the development of an IT concept based on low-code/no-code technology that would enable the BSA to tailor its new system in-house to its processes, and so avoid the unnecessary expense and inflexibility of an off-the-shelf IT solution. EBRD staff further recognised, through consultations with the BSA and other stakeholders, the need to develop data-governance skills in parallel with any IT system, so they engaged experts from the National Statistical Office to guide the BSA on how it could produce insolvency statistics.

EBRD legal consultants Moravčević Vojnović i Partneri, in cooperation with Schoenherr, have prepared a draft regulation governing the BSA’s role relating to insolvency statistics and reporting to be adopted following amendments to the Bankruptcy Law. Both the BSA and the EBRD are now looking for funding to implement the roadmap and the next phases of the project once those amendments are enacted. The amendments will also support the BSA’s new responsibility as operator of a soon-to-be-introduced centralised platform for electronic sales in insolvency proceedings, a concept on which it partnered with the International Finance Corporation. Implementation of the roadmap and the improvements to the BSA’s IT and data governance toolkit are expected to strengthen the BSA’s regulatory function and will help the Serbian authorities align with their counterparts in the European Union. Undoubtedly, the publication of more data and statistics on the management and outcome of insolvency cases will bring greater transparency to creditors and other insolvency stakeholders.

The Bank recently worked closely with the BSA again by including Serbia in a regional insolvency training pilot. This means the EBRD has been able to support the BSA’s training for insolvency practitioners and the roll-out of the official 2024 BSA training curriculum, working with a national team composed of lawyers Luka Andric and Branka Vesovic from Andric Law Office, insolvency practitioner Djordje Jokic and Judge Ninoslav Volarevic, as well as international experts Dr Paul Omar and former UK insolvency practitioner Kerry Trigg (see Table 1). Professional training, as well as “on the job” experience, are essential for the proper implementation of any insolvency law. However, often what is missing – especially for insolvency practitioners – is training infrastructure and a responsible counterpart with the capacity to deliver training for the profession on a regular, continuing basis. This regional project is aimed at developing and delivering more scalable and comprehensive official training programmes for insolvency officeholders and judges, grounded in domestic law and practice. The objective of the project is to develop a full curriculum, training methodology and set of materials (workbooks and training slides) that can be used as a starting point and reference for any country project involving the training of insolvency practitioners.

The pilot in Serbia has adopted a mix of in-person training and remote (webinar-based) training, which became common during the Covid-19 pandemic. EBRD staff have worked with the BSA to deliver a proper needs assessment and identify key areas of training. One challenge under the project has been the fact that the insolvency practitioner profession is not homogeneous. Unlike in some countries, such as Greece, where insolvency practitioners are lawyers, in Serbia the profession today is made up of mostly sole practitioners from a range of backgrounds including law, business, accounting and engineering. Most practitioners, however, come from an accountancy background. This has been relevant when designing materials and agreeing on the focus of the training.

Another challenge has been the need to deliver any in-person training simultaneously in the three locations of Belgrade, Niš and Novi Sad. However, participants in these locations have welcomed the opportunity to connect in person. The BSA has been involved in all the training, including securing the facilities of its partner the Chamber of Commerce on a voluntary basis and organising internally the translation of international presentations and materials for the in-person training. Key topics of training conducted to date include the role of the insolvency practitioner internationally (a webinar) and case management, professional standards and ethics, and restructuring plans (all in-person events).

EBRD staff have learned a great deal from their activities with the BSA since the Bank began working with it in 2004. The vision, determination and sustained effort by the Serbian authorities to invest in their insolvency framework has brought demonstrable results. Serbia has performed highly in EBRD insolvency assessments and the features of its insolvency framework – an active regulator, a developed regulatory framework and disciplinary function, and a developed profession of insolvency practitioners – have laid a solid foundation for future development and growth, in line with its European Union peers.

A highlight for the BSA and a measure of how far it has come since its creation was its presidency in 2023 of the International Association of Insolvency Regulators. EBRD colleagues were able to attend the association’s annual conference, held in Belgrade in September 2023, and to present on their fruitful collaboration with the BSA to a wide audience of regulators from more than 20 economies including Australia, Canada, Hong Kong, India, Singapore, the United Kingdom and the United States of America, as well as other EBRD economies, including Albania, Estonia and Latvia, and fellow international financial institutions, such as the World Bank and the International Monetary Fund.

The BSA’s role will soon expand to cover the regulation of entrepreneur insolvency and/or consumer insolvency. These are not yet part of the Serbian insolvency framework, but are part of many national insolvency systems. The EBRD looks forward to continuing its work with the BSA and to implementing similar projects with other national regulators in the EBRD regions, using lessons learned from its partnership in Serbia.

Azerbaijan’s telecoms market

Although liberalised and competitive in several respects, Azerbaijan’s telecoms market can still be characterised as being at an earlier stage of development than others. This characterisation is largely borne out by the concentration of market power of its fixed incumbent operators, the presence of the state as a shareholder in several sector operators and the absence of an effective wholesale market for telecoms infrastructure.

Against this background, the government committed to major reform of the sector and has begun taking concrete steps to deliver on its commitments. These commitments have come in the form of the government’s 2016 ICT Sector Strategic Roadmap.54 This roadmap, implemented under the supervision of the Ministry of Digital Development and Transport, committed the government to revising the telecoms law as a means of adopting and implementing EU reflective regulatory governance and competition safeguards to anchor liberalisation in Azerbaijan.

The government has followed through in its commitment by establishing a sector-specific regulatory authority for telecoms, in the form of the Information Communications Technology Authority (ICTA), preparing a more modern telecoms law (expected to be approved in 2025) and by beginning to adopt and implement market mechanisms through which a liberalised telecoms market can properly function.

The EBRD has followed through on its cooperation commitments, with a key part coming in the form of technical cooperation support for ICTA, Azerbaijan’s new sector-specific telecoms regulatory agency. This support will help ICTA to implement some of the key parts of the new regulatory architecture for the sector.

EBRD/ICTA technical cooperation

The Bank launched its Regulatory Governance and Competition Safeguards technical cooperation programme with ICTA in September 2023. This programme has two main objectives: (1) help strengthen capacity within ICTA and the Ministry for Digital Development and Transport to implement the new regulatory and governance structures for which the government’s sector strategy and the forthcoming telecoms law provide and (2) aid ICTA in designing a methodology for analysing and determining the level of competition in key parts of the telecoms market, as well as helping to undertake the analysis itself.

Building ICTA’s capacity has taken the form of a custom-built training programme that focuses on its specific priorities, covering both the conceptual basis for modern regulation across key regulatory topic areas (for instance, licensing, network access, spectrum management and market analysis) and the practical measures necessary to implement those concepts. The training programme has been implemented in eight week-long components.

Support for the market-analysis activities has included assisting ICTA in the preparation of a methodology and enabling regulations for data gathering, analysis and determination, drawn from the EU telecoms framework. The EBRD programme is also tasked with helping to conduct the market analysis and consult on its methodology and outcome.

The market analysis exercise is, perhaps, one of the most fundamental and seminal activities necessary before effective competition can emerge in any telecoms environment. This market analysis is a legally mandated activity that provides the evidential basis on which to determine the market power of market participants and, with that, legitimacy to impose remedial measures that can be applied to address the misuse of any such power.

The Bank’s technical cooperation programme is helping ICTA to prepare the methodology and conduct analyses of the fixed broadband and the mobile markets in Azerbaijan. Any finding of dominance in a relevant market will give ICTA the basis and the means to apply a range of competitive safeguards to make sure competition can emerge or be sustained. Applying these safeguards will be critical to ensuring the emergence of an effective wholesale market for broadband in Azerbaijan.

Challenges in Azerbaijan

Continued state-ownership
Telecoms privatisation has yet to advance meaningfully in Azerbaijan, with the state retaining stakes in a number of operators. The triple role of the government – which sets policies, regulates and participates in the market – may lead to potential conflicts of interest and distort incentives for investments, product innovation and pricing.

However, Azerbaijan’s strategy to establish regulatory frameworks and enforcement mechanisms prior to privatisation aligns with global evidence. Indeed, the EBRD’s own research suggests that privatising after establishing an independent regulator improves sector performance in terms of fixed and mobile penetration and investment, relative to the alternative scenario where privatisation comes first. When governments privatise before they liberalise, full liberalisation tends not to follow until much later.

Telecoms regulatory authority
While the government has established ICTA as a sector-specific regulatory authority, the commitment to establish it as an independent authority has yet to be fulfilled. As it currently stands, ICTA remains within the Ministry for Digital Development and Transport structure, reporting to its minister. That said, while not nominally independent, what matters most in this respect is that ICTA operate with independent character, for example, making evidence-based, fully reasoned and published decisions on a transparent basis and with adequate and ongoing consultation with affected parties. Such an approach will, in time, build the confidence of industry participants and consumers alike.

Wholesale market development
Effective wholesale markets allow ease of market entry and are therefore attractive to investors given the prohibitive cost and high risk associated with duplicating incumbent infrastructure – especially ducts, other civil engineering works and last-mile connections. The most important wholesale element of the telecoms market involves an incumbent network operator granting another operator or service provider access to its network, especially to the critical and costly last-mile segment. This access enables other operators – particularly new entrants – to use existing infrastructure to offer services to end-users without the substantial initial investment required to build equivalent infrastructure. Over time, new players can generate enough revenue and experience to start investing in their own competing infrastructure and thus engage in infrastructure competition rather than merely reselling the services of the incumbent operators.

This “ladder of investment” view of market development has inspired regulatory bodies globally to mandate that incumbent telecoms operators provide access to their networks on a cost-based basis. Experience in liberalisation over the last three decades has shown regulators worldwide the importance of ensuring effective wholesale markets, given the potential for existing infrastructure owners (especially those that hold a strong market position) to obstruct the development of competition by refusing competing operators access to that infrastructure, or by offering access on terms and conditions (especially price) that undermine the viability of competing operators or hinder their progression up the investment ladder.

Under best-practice regulation, competitive markets have developed efficiently, with regulators often focusing entirely on wholesale markets, leaving retail markets unregulated. This balance has proved attractive to market players because it allows them to compete freely at the retail level, while having favourable (regulated) conditions to make economic decisions about whether, when and how to invest in infrastructure as a means of growing their business.

Azerbaijan’s telecoms market is now at the point where the most effective way to attract investment into the expansion of the sector and advance its technological growth is to ensure the creation and smooth operation of an effective wholesale market. While new players are starting to deploy networks to compete with the incumbents’ these remain limited to the country’s most profitable, urban areas.

The EBRD’s support for ICTA is laying important foundations for an effective wholesale market in Azerbaijan. Determining the level of competition in specific telecoms markets, through formal market analysis activities, will provide the basis for imposing regulatory measures that will help establish a functioning wholesale market. Specifically, where infrastructure owners are found to have a level of market power which allows them to prevent competing operators from accessing their infrastructure on a wholesale basis as a means of delivering services to their retain customers, ICTA can impose tried and tested competition safeguards to mandate such access. Among the measures that can be applied in such situations are transparency, accounting separation and cost-justified wholesale charges.

Conclusions

Azerbaijan exemplifies the complexity of transitioning to a liberalised telecoms market. In many EBRD countries, governments may be seen to be slow to introduce substantial competition when they own the primary operators, influenced by factors such as national sovereignty, scepticism towards private-sector management of crucial infrastructure and the direct revenues and benefits derived from state-owned enterprises. State-owned incumbents may also be ill-prepared for competition due to operational deficiencies, aging infrastructure and disproportionate public-service obligations. However, historical evidence consistently demonstrates that liberalised markets deliver superior outcomes for households and businesses in terms of service quality, reach and pricing – thereby amplifying the economic and social benefits of digital connectivity.

The EBRD’s dual approach of financial investment and technical cooperation is unique in endeavouring to address these challenges simultaneously. By financing state-owned operators, the Bank supports essential infrastructure upgrades and competitiveness improvements that prepare incumbents to withstand competition and lays the groundwork for broader market reforms. By sharing experience and global best practices with governments, the EBRD can illustrate the benefits of liberalisation for propelling national digitalisation goals. In the race to the future, who needs a DeLorean when you can have light-speed, fibre optic-delivered broadband?

a) Focus on climate and sustainability-related disclosures
First, there is widespread consensus that climate and sustainability-related data are essential in order to monitor progress towards achievement of the goals of the Paris Agreement, the stated climate ambitions of countries under nationally determined contributions (NDCs) and climate commitments at corporate level. This, coupled with concerns about the impact that unmanaged climate-related risks could have on markets’ financial stability, has triggered a wave of mandatory regulatory requirements and voluntary market-driven standards that require entities to identify, assess, manage and report on climate and sustainability-related matters. Clear and robust governance mechanisms, future-proof strategies, science-based targets and risk management mechanisms are at the core of those emerging standards.

For example, the Task Force on Climate-related Financial Disclosures (TCFD) emphasised governance as a building block of effective climate risk and opportunity management.55 Governance is one of the four foundational pillars of the TCFD’s recommendations. Subsequent sustainability disclosure standards have also followed this approach. The standards issued by the International Financial Reporting Standards Foundation’s International Sustainability Standards Board (ISSB) – which the G20 recognises as a global baseline for sustainability-related disclosures – explicitly set requirements for a reporting entity’s governance. Similarly, governance is one of the fundamental pillars of the European Sustainability Reporting Standards (ESRS), which are applicable to companies that fall within the scope of the EU’s Corporate Sustainability Reporting Directive.

From a governance perspective, the TCFD recommendations, the ISSB standards and the ESRS all require disclosures relating to a board’s oversight of climate-related risks and opportunities, as well as skills and competencies in respect of climate and sustainability-related decision-making. The ISSB standards and the ESRS, in particular, require the disclosure of an entity’s climate transition plan, which is the action plan adopted by an entity to address climate-related risks, impacts and opportunities. The ESRS go a step further and require a reporting entity to disclose whether the transition plan has been approved by its management and supervisory bodies.

Therefore, the prevailing disclosure regulations and standards implicitly place a responsibility on the management and supervisory bodies of an entity to effectively oversee, identify and manage climate related matters by requiring the disclosure of such internal governance arrangements. This, in turn, requires that boards have the knowledge, skills and experience needed to effectively discuss and decide on climate-related risks, impacts and opportunities and develop climate-conscious strategies.

b) Greater interest in sustainable investment
Second, market appetite for sustainable investment has risen sharply in recent years alongside investor and lender demand for increased climate and sustainability-related disclosure. The term “sustainable investment” refers to investments that consider the impact of climate change and other environmental, social and governance-related (ESG) issues. The 2024 Morgan Stanley Sustainable Signals survey56 finds that more than half of individual investors (54 per cent) plan to increase their sustainable investment in the coming year, and more than three-quarters of individuals (77 per cent) are interested in sustainable investing. Robust climate governance arrangements and high-quality disclosure of such arrangements can help companies to signal their climate resilience to investors, which will lead to enhanced access to finance through new instruments such as green bonds and sustainability-linked loans.

c) Risk of climate litigation directed at corporate officers
Third, litigation against company directors and senior management for their actions or perceived inaction on climate-related issues is growing. Such litigation is usually related to senior officers’ duties to oversee, identify and consider material climate-related matters in the entity’s day-to-day operations. These cases involve interpreting legal obligations under corporate and financial law to protect shareholders and investors. The objective of bringing such litigation is to disincentivise companies from continuing with high-emission activities or, in the case of the financial sector, to disincentivise investment in high-emission assets. Increasingly, courts are having to adjudicate on matters relating to private and public entities’ handling of climate-related impacts and risks, so directors and senior officers will increasingly be expected to assume responsibility for their company’s actions or inaction in relation to climate change.

As directors are accountable to shareholders for their organisation’s performance, they are increasingly being expected to address climate change and sustainability issues with the same level of scrutiny as any other issue posing a financial risk to the business. However, overseeing climate and sustainability-related matters presents new challenges for boards because of the significant uncertainty involved, the lack of historical data (which makes it difficult to accurately assess impacts, risks and opportunities) and the need to carry out forecasting in the absence of such data. Non-executive directors – sometimes also called independent directors – have a special role to play in holding management to account and asking difficult questions, and this now extends to matters pertaining to climate and sustainability risks, impacts and opportunities. In this context, it is interesting to note that in the 2024 EY Europe Long-term Value and Corporate Governance Survey,57 fewer than 10 per cent of non-executive directors and chairs reported complete satisfaction with their companies’ business rationale for sustainability.

The EBRD’s role in promoting climate awareness in the boardroom

Environmentally sound and sustainable development is central to the EBRD’s mandate and is promoted through every project and policy initiative. The Bank has committed to becoming a majority green bank by 2025 and has met this commitment over the last two financial years. Since 1 January 2023, the Bank has fully aligned its activities with the mitigation and adaptation goals of the Paris Agreement.58 Through policy reform and investment, the Bank also helps its clients and countries of operation to align their business models and economies with the goals of the Paris Agreement.

To enhance climate governance among senior managers of companies and financial institutions in its regions, the EBRD has established a dedicated Corporate Climate Governance (CCG) Facility. CCG refers to the set of rules, practices and processes that an entity puts in place to identify and manage the effects of climate change and improve decision-making and disclosure in relation to those impacts. The CCG Facility consolidates the policy reform and business advisory support that is provided by the EBRD in order to help private-sector and state-owned entities to develop and strengthen their climate-related governance, strategy, risk management, target-setting and disclosure practices.

A key form of business advisory support offered to clients under the CCG Facility is support with developing and implementing corporate climate governance action plans (CCGAPs). Notably, the CCG Facility provides: (i) support with entity-level assessment of governance gaps in respect of climate issues; and (ii) capacity-building support to improve the entity’s climate governance and disclosures, in accordance with international best practices and standards.

The Bank has developed policy products and partnerships for the benefit of corporate clients, financial institutions and other stakeholders, with donor support provided through the CCG Facility. For example, the Bank has a long-standing external nominee programme, through which it engages with a network of more than 100 non-executive directors on the boards of its investment companies. Under the CCG Facility, the EBRD has developed a climate toolkit in order to: (i) help its nominee non-executive directors to gain a robust understanding of the governance of climate-related risks, impacts and opportunities; and (ii) equip them with the tools and information they need to become strong drivers of climate action and sustainability in their respective companies. This toolkit helps non-executive directors to assess their company’s climate governance maturity and outline the steps needed to strengthen the company’s climate agenda.

Other directors and senior managers also have a critical role to play in the climate transition. Their engagement is vital for strategic guidance and oversight on climate action, as well as for the credibility of transition plans and organisational disclosures. However, effective fulfilment of this new role requires both organisational mandates and capacities that are often lacking, especially in emerging markets. In the 2022 Boston Consulting Group-INSEAD Board ESG Pulse Check,59 around 70 per cent of directors reported that they were only moderately effective or not at all effective at integrating sustainability into company strategy and governance. Among companies with a net-zero commitment, only 55 per cent of directors reported that their organisation had prepared and published a plan for meeting that target.

Looking specifically at the EBRD regions, several economies are particularly vulnerable to climate and sustainability risks. This stems from a combination of factors, including geographical characteristics and historical under-investment, which has resulted in infrastructure that is significantly exposed to the physical impacts of climate change. At the same time, there is a significant lack of awareness in these markets and a lack of readiness to effectively identify, consider and mitigate climate-related risks or leverage climate-related opportunities. Many companies in these economies still do not adequately consider the risks associated with the physical impacts of climate change and the transition to low-carbon economies when making business and investment decisions.

The actions of private and public-sector entities in the EBRD regions are crucial not only for addressing the climate crisis but also for building strong and resilient economies. Supporting directors and senior management on their climate journey can help to reduce the climate risk exposure of the EBRD’s investments. This support is also vital to achieve the Bank’s objective of greening its economies. To increase its impact beyond its projects and clients, the Bank has been working with the Climate Governance Initiative (CGI) on the Chapter Zero initiative since 2022, supported by the CCG Facility.

The EBRD’s partnership with the CGI

The EBRD’s partnership with the CGI aims to help senior management of companies and financial institutions in the EBRD regions to improve their capacity to identify and address climate risks, impacts and opportunities, carry out transition planning and prepare climate disclosures. The CGI was conceived in 2019 as a result of work by the World Economic Forum (WEF) focusing on climate action in the corporate world. It helps companies to set a climate target and develop a plan to meet it.

The foundation of the CGI’s work is the WEF’s eight Principles for Effective Climate Governance (see Figure 1),60 which range from board accountability (to ensure long-term resilience to climate risk) to knowledge exchange (keeping informed through dialogue with investors, policymakers and others). These principles build on existing corporate governance frameworks such as the International Corporate Governance Network’s Global Governance Principles, as well as other climate risk and resilience guidelines, including the recommendations of the TCFD.

The CGI launched Chapter Zero in 2019 in order to mobilise and educate directors and equip them with the skills and knowledge needed to address climate change at board level by applying the WEF’s Principles for Effective Climate Governance.

Chapter Zero in the EBRD regions

The EBRD has worked closely with the CGI and local host organisations to launch five Chapter Zero organisations – referred to as “chapters” – in Egypt, Kazakhstan, Türkiye, Ukraine and the Caucasus, and Uzbekistan.

Each chapter is set up as a network of boards, non-executive directors and senior managers who are working towards integrating climate risks and governance into the overall business strategy of their entity. It is designed as a platform enabling chapter members to exchange their organisation’s practical experience of managing climate-related governance risks, and strategies. Members of those chapters can learn from experts and peer companies that are advanced in the area of climate action in their respective countries by participating in knowledge-sharing events. Chapter members also have access to expert knowledge on climate-related risks, impacts, opportunities and strategies acquired by more advanced chapters, as well as access to leading consultants through webinars, training sessions and workshops organised with the support of the EBRD and the CGI.

For example, Chapter Zero Egypt,61 which was officially announced at the United Nations Conference of the Parties (COP27) in Egypt, has organised awareness-raising webinars for members on a wide range of topics – including carbon credits, sustainability disclosures, ESG reporting guidelines and the development of sustainability strategies. Chapter Zero Egypt is thereby supporting the green transition of the private sector in the region (see Box 1). Similarly, Chapter Zero Türkiye has organised, in collaboration with the Turkish Industry and Business Association (TÜSİAD), panel discussions and round tables with C-suite executives on the topic of industrial decarbonisation and navigation of the climate challenge at company level.

In some emerging-market economies, an additional challenge may lie in the corporate governance practices of the market, which need to be taken into account when framing the support offered by the chapter. In Uzbekistan, for example, the EBRD’s Corporate Governance in Transition Economies report62 revealed a significant lack of corporate governance awareness across the business community, identifying weaknesses in areas such as transparency, disclosure, and the structure and functioning of the board. Clear governance structures and independent boards with strong mandates are important in order for directors and senior management to address climate and sustainability matters effectively.

As these economies shape their governance landscapes, there is an opportunity to integrate climate governance principles while advancing corporate governance practices, adopting a forward-looking approach that prioritises climate considerations within corporate governance. The EBRD, with its considerable expertise in corporate governance and climate-related practices, is well placed to support its clients on this, as it has in the case of Chapter Zero Uzbekistan (see Box 2).

Last year, the CGI partnered with Kantar to conduct a Global Impact Study covering all Chapter Zero initiatives,63 which concluded that the more a board director engages with their local CGI chapter, the more likely they are to take positive action in climate discussions in the boardroom. The report also revealed a clear need for Chapter Zero support: nine out of ten respondents said that the climate challenge required new forms of leadership from boardrooms.

Conclusion

Advancing climate governance and climate action within the boardroom is a strategic imperative for modern businesses. As companies begin their climate journey, it is crucial to build awareness of climate and sustainability-related risks, impacts and opportunities, while understanding the evolving market and regulatory expectations. For those that are more advanced in terms of sustainability efforts, systematically integrating climate considerations into core business processes is essential.

Support provided through the EBRD’s CCG Facility – including the Chapter Zero initiatives – seeks to ensure that all companies, regardless of their maturity, size and sophistication, are aligned with the goals of the Paris Agreement and adhere to internationally recognised standards or local regulations. By integrating sustainability considerations into decision-making, boards can drive a systematic greening of their companies, suppliers and economies. Ultimately, robust climate governance and proactive climate action will pave the way for sustainable growth and resilience, positioning companies as leaders in a rapidly changing global landscape.

Regulatory aspects of entities offering factoring services

Key: Yes No

Source: EBRD Factoring Survey (2024).

The first aspect reviewed in the survey relates to the level of regulation applicable to the factoring industry. Stringent regulations tend to concentrate services in the banking sector, limiting smaller market players. The complete lack of regulation, on the other hand, fails to provide the necessary market credibility for the product. Among the surveyed jurisdictions, most lean towards regulating factoring, with Georgia being the exception due to the absence of dedicated regulations.

Seven jurisdictions (Armenia, Egypt, Greece, Kyrgyz Republic, Morocco, Türkiye and Ukraine) require a specific licence for non-banking financial institutions (NBFIs) to start providing factoring services. NBFIs in Romania must register with the National Bank and those in Uzbekistan need authorisation from the regulator. At the other end of the spectrum, Georgian NBFIs are not required to obtain any licences, certifications or authorisations.

Private and commercial law aspects of factoring transactions

Key: Yes No Yes with limitations

Source: EBRD Factoring Survey (2024).

The second section of the survey examines private and commercial law considerations that pertain to factoring transactions. While many of the EBRD’s jurisdictions have started working on, or already introduced, specialised laws on factoring, there are still jurisdictions that have no special provisions on factoring contracts or established and published court practice that would compensate for this lack of clarity. It appears that Egypt, Greece and Türkiye have adopted a specific law on factoring. Other jurisdictions covered by the survey either have specific provisions on factoring in their civil codes (Armenia and Ukraine) or rely on the general provisions for assignment of claims in their legal frameworks (Georgia, Romania, Kyrgyz Republic and Uzbekistan).

The definition of receivables that are eligible for factoring should be commensurate with the level of understanding and development of factoring in that market. Markets where factoring is still a nascent product are better off with a narrower definition of receivables (for example, receivables arising from the sale of goods or services with a predefined maturity). This ensures that the market is given a chance to develop a basic understanding of the product before deploying more complex structures. In seven jurisdictions surveyed, factoring is confined to receivables arising from the sale of goods or services, in line with international standards. However, in three jurisdictions (Georgia, Romania and Ukraine), eligibility extends beyond trade receivables.

The ability to assign future accounts receivable within factoring relationships is important for establishing a priority over future accounts receivable for factors. The assignment of future receivables (of certain receivables, a group of receivables or all of them) is generally allowed in every surveyed jurisdiction.

Anti-assignment clauses prevent suppliers from assigning their claims to third parties (without the consent of the buyer). In four surveyed jurisdictions (Egypt, Georgia, Morocco and Türkiye) the anti-assignment clauses in commercial agreements are effective against suppliers. The other six jurisdictions (Armenia, Greece, Kyrgyz Republic, Romania, Ukraine and Uzbekistan) render “anti-assignment clauses” as ineffective, but they fail to provide a complete override of such clauses. As such, the buyers/debtors may still claim for damages for breach of contract. International standards, including the UNIDROIT Model Law on Factoring, promote the inclusion of legal provisions that completely override and invalidate any anti-assignment clauses for the purposes of factoring transactions.

The survey also investigates whether surveyed jurisdictions allow for electronic execution of factoring contracts, which have a lower overall transaction cost and are more accessible and time-efficient. Egypt is the only jurisdiction where a factoring contract must be executed with a wet-ink signature. In all other nine jurisdictions, electronic execution is possible.

Registration of assignments is desirable for providing notice against third parties and determining priority among competing assignments. It also helps prevent fraud stemming from double factoring. In the surveyed jurisdictions, registries tend to be available only where receivables subject to factoring are not sold outright, but rather assigned by way of security. By contrast, where receivables subject to factoring are fully sold, there is typically not a registry that supports their registration, and they are often left unregistered.

Among the surveyed jurisdictions, only Romania mandates registration for both security and outright transfers to be effective against third parties and establish priority ranking. In Türkiye, there is a registry of factoring transactions where all the receivables used for factoring need to be registered. While such registry creates transparency over the receivables and prevents double-financing of invoices, it is not used to ascertain creditor priority. International standards, including the UNIDROIT Model Law on Factoring, promote the establishment of registries that cover all assignments of receivables, including assignments by way of security as well as outright assignments (sales of receivables).

Other legal considerations affecting the uptake of factoring

Key: Yes No Yes with limitations

Source: EBRD Factoring Survey (2024).

Foreign exchange plays an essential role in the development of the factoring industry. To mitigate foreign-exchange risks in international factoring, factors should be permitted to purchase cross-border receivables from domestic clients in the (usually foreign) currency of the receivable. Our survey found that four jurisdictions (Morocco, Türkiye for non-recourse factoring, Ukraine and Uzbekistan) have varying forex restrictions, often limiting acceptance of payments in foreign currency.

Financial institutions require robust information technology (IT) infrastructure to manage factoring operations efficiently. Subscribing to cloud-based IT solutions tailored to factoring often entails transferring data to the provider’s jurisdiction, although in-country storage options are available at a premium. National frameworks should facilitate cross-border data transfers to other jurisdictions, provided they ensure adequate protection thereof. The survey reveals that 8 of the 10 jurisdictions permit such transfers to “safe” jurisdictions or with data subject consent. In Egypt and Morocco, while this is still technically possible, additional approvals must be obtained from the authorities.

Electronic invoicing (e-invoicing) infrastructure is vital for the growth of factoring. In jurisdictions where such infrastructure exists, electronic invoicing is mandated for all or most business-to-business (B2B) and/or business-to-government (B2G) commercial relationships. This prompts all suppliers to issue invoices in a defined technical standard through the e-invoicing infrastructure. Armenia, Egypt, Kyrgyz Republic and Türkiye have centralised e-invoicing frameworks mandatory for both B2G and B2B transactions, while Romania mandates it for B2G only. Georgia, Ukraine and Uzbekistan have less developed, decentralised systems, whereas Greece and Morocco lack e-invoicing infrastructure entirely.

Combining legal reform with investment and partnership to strengthen impact

Over the last decade, the EBRD Legal Transition Programme has supported several jurisdictions in improving their legal and regulatory environments for factoring, namely: Croatia, Georgia, Jordan, Kosovo, Montenegro, North Macedonia, Serbia, Ukraine, Uzbekistan and the West Bank and Gaza.

The Bank’s legal reform efforts were traditionally doubled down by investment facilities to support cross-border trade (through cash advances and guarantees). Recently, however, the EBRD launched the Supply Chain Finance Framework, which is essentially a reverse factoring facility that aims to give suppliers in the EBRD economies access to affordable working capital finance. In addition to working capital finance for SME suppliers, such financing structures incentivise the adoption of environmentally friendly operations and practices within supply chains.

The EBRD also leverages external partnerships to amplify the messages and lessons learned from experience. One such example is the Bank’s long-standing partnership with Factors Chain International (FCI), the largest factoring association in the world.

Conclusions

The EBRD uses the information in its factoring survey primarily to understand the depth of reform required in each surveyed jurisdiction. As such, the surveys have traditionally formed a good basis for dialogue with regulatory authorities about the need for reform. As one of the only publicly available tools of this kind, the factoring survey has been used as a point of reference by other actors operating in this field.

Within the EBRD, the factoring survey is used to understand potential pitfalls in the legal frameworks as the Bank delivers on its promise to expand financing facilities in as many of the EBRD regions as possible. The survey draws heavily on the provisions and principles introduced in the main international standard for factoring legislation, particularly the UNIDROIT Model Law on Factoring, adopted in 2023.66 As an institutional observer in the Working Group that led the drafting of the UNIDROIT Model Law on Factoring, the EBRD uses the Model Law as a benchmark in its legal reform work. The survey is a fluid document, which the Bank aims to update and revise as the jurisdictions covered therein introduce any relevant changes. Additional jurisdictions may also be added in the future.