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Turkey’s Next Step Towards a Greener Economy: Sustainable Finance Framework

Authors: Gamz Çiğdemtekin, Bahar Ferahköse


As Turkey intends to accelerate its transition into a greener and more sustainable economoy, Ministry of Treasury and Finance of Turkey (“MoTF”) publishes Sustainable Finance Framework (“Framework”) on November 12, 2021.

Purpose of the Framework

The Framework introduces the standards for Sustainable Financing Instruments to be issued by Turkey (“Sustainable Financing Instruments”) which include Green, Social, and Sustainability Bonds, Loans, and Sukuks. Pursuant to the Framework, the Sustainable Financing Instruments shall be issued in three types: (i) Green Financing Instruments, (ii) Social Financing Instruments and (iii) Sustainability Financing Instruments.

The revenues obtained from such instruments are planned to be allocated for financing or refinancing sustainable projects that are found to be eligible for funding pursuant to the criteria set in the Framework. 

Projects to be Funded Through Sustainable Financing Instruments

The Framework, establishes the eligibility criteria for projects to be funded under nine cagetories for Eligible Green Projects and six categories for Eligible Social Projects:

Green Eligible Categories: 

 i.          Renewable Energy

 ii.          Energy Efficiency 

iii.          Sustainable Water and Wastewater Management 

 iv.          Pollution Prevention and Control

  v.          Clean Transportation

 vi.          Sustainable Management of Living Natural Resources and Land Use, and Terrestrial and Aquatic Biodiversity Conservation

vii.          Climate Change Adaptation 

viii.          Circular Economy Adapted Products, Production Technologies and Processes 

 ix.          Green Building


Social Eligible Categories: 

 i.          Employment Generation and Programs for the Alleviation of Unemployment Impacts

 ii.          Access to Essential Services

iii.          Socioeconomic Advancement and Empowerment

 iv.          Affordable Basic Infrastructure 

  v.          Affordable Housing

 vi.          Food Security and Sustainable Food Systems 


In adition to the criteria set under the Framework for each category of projects, the projects may only be funded as long as they comply with International Capital Market Association’s Green Bond Principles 2021, Social Bond Principles 2021, and Sustainability Bond Guidelines (and Loan Market Association Green Loan Principles 2021 and Social Loan Principles 2021. 

Within this scope Framework is in line with the following four compenents of the principles mentioned above:

a)     Use of Proceeds

Proceeds from the Sustainable Financing Instruments shall be used for the Eligible Social and Green projecs as long as such projects take place no earlier than three years prior to the issuance of such instruments.

Framework also provides a list of activities which are to be excluded from the projects to be funded such as activities/projects associated with livestock and nuclear power generation.

b)      Process for Project Evaluation and Selection

With the assistance of the Working Group, the MoTF shall assess potentially qualifying projects and determine whether they meet the requirements and definition of Eligible Green and Social Projects. Working Group shall consist of Presidency of Strategy and Budget and 11 other ministries.

c)     Management of Proceeds

Proceeds of the Sustainable Financing Instruments shall be allocated and followed by the appropriate Ministries within the Working Group using a portfolio methodology.

In order to track the allocations of Sustainable Financing Instruments, an allocation register shall be kept by the MoTF.

d)     Reporting

Reporting regarding the Framework is planned to be conducted in allocation and impact basis.

The allocation disclosures which are to be made annually shall include the following information:

·       The total amount of Sustainable Financing Instruments outstanding

·       The amount equal to the net proceeds allocated to Eligible Green and/or Social Projects

·       The balance of unallocated proceeds

·       The amount or the percentage of new financing and refinancing, and the geographical distribution of the projects (to the extent available)

·       A breakdown of allocated amounts to Eligible Green and Social Categories, and the relevant

·       Ministry/Ministries responsible for the projects financed


In adition to reports on the allocation of the proceeds, expected environmental and social implications of the Eligible Green and Social Projects are also planned to be disclosed by the MoTF. Such disclosures may also include information on the impact metrics and calculations thereof.

Assesment of the Framework

In order to obtain a Second Party Opinion, Sustainalystics has been  choosen to asses the Framework and determine whether the international principles reffered to in the Framework have been complied with. According to the Second Party Opinion by Sustainalystic dated November 2, 2021, the Framework is found to be “credible and impactful and aligns with the Sustainability Bond Guidelines 2021, Green Bond Principles 2021, Social Bond Principles 2021, Green Loan Principles 2021, and Social Loan Principles 2021”.

In addition to the Second Pary Opinion, Turkey plans to obtain an annual assessment from an independent party on whether the allocations of the proceeds and their impacts are in line with the Framework.


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