ESG integration in Kazakhstan’s financial institutions: methodological challenges of sustainability measurement and their impact on financial policy

Economic Annals-XXI: Volume 214, Issue (3-4), Pages: 38-48

Citation information
Onaltayev, D., Turarov, D., Assanova, A., Faizullina S., & Akimbayeva, K. (2025). ESG integration in Kazakhstan’s financial institutions: methodological challenges of sustainability measurement and their impact on financial policy. Economic Annals-XXI, 214(3-4), 38-48. doi: https://doi.org/10.21003/ea.V214-06

Darkhan Onaltayev
PhD (Economics),
Professor,
Al-Farabi Kazakh National University
71 Al-Farabi Ave., Almaty, 050040, Republic of Kazakhstan
darkhono@inbox.ru
ORCID ID: https://orcid.org/0000-0002-4247-5288

Dauren Turarov
PhD (Economics),
Senior Lecturer,
Al-Farabi Kazakh National University
71 Al-Farabi Ave., Almaty, 050040, Republic of Kazakhstan
dauren.turarov@kaznu.kz
ORCID ID: https://orcid.org/0000-0003-3345-8061
Corresponding author

Altynay Assanova
PhD (Economics),
Senior Lecturer,
Al-Farabi Kazakh National University
71 Al-Farabi Ave., Almaty, 050040, Republic of Kazakhstan
altin_assan@bk.ru
ORCID ID: https://orcid.org/0000-0003-3707-3206

Svetlana Faizullina
PhD (Economics),
Senior Lecturer,
Abai Kazakh National Pedagogical University
71 Al-Farabi Ave., Almaty, 050040, Republic of Kazakhstan
svetlanafai@bk.ru
ORCID ID: https://orcid.org/0000-0002-9925-5075

Karlygash Akimbayeva
PhD (Economics),
Senior Lecturer,
Al-Farabi Kazakh National University
71 Al-Farabi Ave., Almaty, 050040, Republic of Kazakhstan
karlygash.akymbaeva@kaznu.edu.kz
ORCID ID: https://orcid.org/0009-0001-1793-178X

ESG integration in Kazakhstan’s financial institutions: methodological challenges of sustainability measurement and their impact on financial policy

Abstract. Introduction: This study examines methodological challenges in ESG measurement across Kazakhstan’s diversified financial sector (2021-2024), encompassing banks, insurance companies, pension funds, and investment entities. The research investigates measurement framework heterogeneity, data quality constraints, and policy implications following regulatory ESG integration initiatives implemented from January 2024. Despite growing sustainability commitments aligned with Kazakhstan’s carbon neutrality strategy by 2060, fundamental inconsistencies in measurement methodologies undermine comparability, policy effectiveness, and capital allocation efficiency. 

Methods: Mixed-methods approach combining quantitative comparative analysis of ESG measurement frameworks with qualitative institutional assessment across 142 financial institutions including 21 banks, 27 insurance companies, the Unified Accumulative Pension Fund (UAPF), and development finance institutions. Analysis employed systematic framework comparison across six major ESG rating providers (MSCI, Sustainalytics, S&P Global, Refinitiv, Bloomberg, ISS ESG) applied to Kazakhstani financial institutions. Primary data collected through regulatory filings analysis (ARDFM, NBK, AFSA), institutional sustainability reports (2021-2024), and structured stakeholder interviews conducted March-September 2024. Methodological divergence quantified using correlation analysis, scope-measurement-weight decomposition, and systematic content analysis of disclosure variations.

Results: Correlation coefficients between major ESG ratings for Kazakhstan financial institutions averaged 0.44 (range 0.38-0.52), indicating fundamental methodological disagreement substantially exceeding credit rating convergence (0.89). Decomposition analysis reveals measurement differences contribute 58% of rating divergence, scope variations 36%, and weighting approaches 6%. Financial institutions demonstrate ESG score standard deviations averaging 18.7 points (scale 0-100) across providers, with banks showing highest variability (SD 21.3) compared to pension fund (SD 12.8). Only 34.5% of financial institutions achieved comprehensive ESG disclosure meeting international standards by 2024, despite mandatory requirements. Sector assets reached 61.6 trillion tenge (2024), with banks comprising 67.8%, pension assets 23.4%, insurance 6.2%, and other financial institutions 2.6%, yet measurement approaches demonstrate limited standardization across institution types.

Discussion: Methodological inconsistencies create substantial challenges for Kazakhstan’s financial policy implementation targeting carbon neutrality by 2060. Rating divergence undermines regulatory effectiveness, complicates investment decisions for international capital seeking sustainable opportunities, and generates compliance uncertainties for institutions navigating multiple frameworks. Measurement-driven divergence reflects fundamental disagreements regarding indicator selection, data interpretation, and materiality assessment rather than mere technical differences. Financial institutions face particular challenges adapting Western-developed frameworks to emerging market contexts characterized by data constraints, institutional capacity limitations, and distinct materiality profiles shaped by hydrocarbon dependence. Standardization efforts through ARDFM guidelines and ISSB framework adoption represent progress, yet implementation gaps persist, particularly among smaller institutions lacking specialized ESG infrastructure.

Scientific Novelty: Provides first comprehensive analysis of ESG measurement methodological challenges specifically within Central Asian financial sector context, quantifying rating divergence across multiple provider frameworks and institutional types. Demonstrates emerging market financial institutions face amplified measurement challenges (44% higher rating divergence) compared to developed market counterparts, attributable to data availability constraints, framework adaptation difficulties, and materiality conceptualization differences. Establishes empirical evidence that measurement methodology contributes disproportionately (58%) to rating disagreement, challenging assumptions that scope and weighting represent primary divergence sources. Documents systematic measurement bias whereby governance dimensions achieve 42% higher inter-rater reliability than environmental metrics, reflecting institutional capacity asymmetries rather than inherent measurement complexity.

Practical Implications: Findings inform regulatory framework design for emerging market financial sectors implementing mandatory ESG disclosure requirements. Results demonstrate necessity for phased standardization approaches prioritizing methodological alignment before expanding scope requirements. Evidence supports targeted capacity building focused on environmental measurement infrastructure where divergence concentrates most acutely. Recommendations include establishing regional ESG data commons reducing dependence on Western rating providers, implementing materiality-based disclosure frameworks reflecting emerging market priorities, and developing sector-specific measurement protocols addressing institutional heterogeneity. Policy implications extend to carbon neutrality implementation strategies requiring consistent sustainability measurement as foundation for transition risk assessment and green capital mobilization.

Keywords: ESG Integration; Banking Sector; Sustainability Disclosure; Emerging Markets; Kazakhstan; Financial Performance; Risk Management; Climate Transition Risk

JEL Classification: G21; M14; Q54; O16; G32

Acknowledgements and Funding: The authors received no direct funding for this research.

Contribution: The authors contributed equally to this work.

Data Availability Statement: The dataset is available from the authors upon request.

DOI: https://doi.org/10.21003/ea.V214-06

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Received 15.01.2025
Received in revised form 6.02.2025
Accepted 20.02.2025
Available online 29.04.2025