Page 41 - "Green Investments and financial technologies: opportunities and challenges for Uzbekistan" International Scientific and Practical Conference

“Yashil investitsiyalar va moliyaviy texnologiyalar: O‘zbekiston uchun imkoniyatlar va muammolar” mavzusida xalqaro
ilmiy-amaliy anjuman materiallari to‘plami (Toshkent, JIDU, 2025-yil 7-may)

Each category serves unique financial purposes, from capital raising and hedging to
liquidity enhancement and decentralised transaction execution (Hull, 2021).

The economic significance of financial instruments lies in their core functions:

• Capital Formation: Bonds, equities, and tokenised offerings channel
investor savings into productive investments. Equity markets incentivise
innovation and entrepreneurship, while sukuk and ESG bonds direct capital
toward socially and environmentally conscious projects (OECD, 2024)³.
• Risk Management: Derivatives enable participants to hedge against adverse
movements in interest rates, exchange rates, and commodity prices. Financial
Intermediation Theory posits that such tools reduce informational
asymmetries and improve resource allocation (Allen & Gale, 2007)⁴.
• Liquidity Creation: Instruments like repo agreements and ETFs allow for
asset fluidity, ensuring that financial markets remain operational and
responsive to short-term shocks.
• Price Discovery: As postulated by the Efficient Market Hypothesis (EMH),
financial instruments facilitate transparent price formation, signalling market
expectations and guiding economic decision-making (Fama, 1970).

The 21st century has witnessed the ascent of sustainable and digital finance tools:

• Sukuk: These Islamic finance instruments reflect asset-backed and Sharia-
compliant structures. They are particularly significant in bridging ethical
finance with capital market objectives. The global sukuk market has grown
by 13% annually since 2018, reflecting its increasing acceptance across both
Muslim-majority and global investor bases (IFSB, 2024).
• Green Bonds and ESG Instruments: Designed to fund projects with
environmental or social impacts. Their issuance surpassed USD 1.1 trillion
globally in 2023 (World Bank, 2024).
• Blockchain Instruments: Tokens and cryptocurrencies represent
programmable financial logic, allowing for automated smart contracts,
decentralised exchanges, and asset tokenisation. The tokenisation of real-
world assets is expected to surpass USD 10 trillion in market capitalisation by
2030 (BCG, 2023).

The development and adoption of modern financial instruments are highly
dependent on regulatory environments. Jurisdictions with mature financial
systems—such as the United States and Singapore—offer structured licensing
regimes, investor protection mechanisms, and regulatory sandboxes for innovation
testing. By contrast, fragmented or underdeveloped regulatory systems often hinder
innovation, increase systemic risk, or create financial exclusion.

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