Turkey preparing framework as it may issue its first sovereign green bond

The Turkish government is working on legal requirements that will enable it to raise money by selling debt tied to environmental performance, according to an unconfirmed report. Many domestic companies turn to green bond issuances linked to sustainability measures in order to fund their projects.

The Ministry of Treasury and Finance is developing the legal framework that would make it possible for Turkey to sell sovereign debt securities priced according to results of its social and sustainability projects, an unnamed official told Bloomberg. According to the source, work should be finished by the end of the year and Turkey may immediately issue the first green or social bond package.

Western countries have a highly developed market for environmental, social, and governance (ESG) debt securities. Turkish companies have been issuing green bonds since 2016, when TSKB raised USD 300 million. The five-year sustainability-linked securities are about to reach maturity.

The article adds, quoting Morningstar, that almost 25% of all bonds issued in Europe are tied to environmental performance and projects intended for positive social outcomes. Over half of investments in exchange-traded funds in the continent are directed to ESG-compliant schemes.

Government of Turkey would join growing world market

The European Union is planning to sell green bonds worth EUR 225 billion to partly fund its package for the economic recovery from the COVID-19 pandemic. Turkey has been struggling with deficits and inflation, so the said framework would enable it to tap on the growing global market.

Encouraging green bond issuance is part of ongoing economic reforms in Turkey

President Recep Tayyip Erdoğan said in March that economic reforms would make green bond issuance easier for companies in Turkey. At the time, the sustainability-linked securities accounted for USD 836 million out of USD 3.1 billion in total. The government is counting on investments in green energy, electric mobility and environmental measures.

Arçelik intends to raise EUR 350 million

Istanbul-based Arçelik, owner of Beko and Grundig, is preparing to sell a green bond package worth EUR 350 million with a tenure of five to seven years. The company, part of Koç Holding, said it would use the proceeds for renewable energy, pollution prevention and control, energy efficiency, water and wastewater management and green buildings.

The appliance manufacturer uses 100% green electricity for its Turkey and Romania operations. It aims to apply the rule on a global scale by 2030 and decrease the energy consumption in production by 45% by 2030.

In neighboring Greece, PPC and Mytilineos recently sold green bonds.