All institutions that want to exist in the future should make sustainability the focus of their corporate strategies. All financing instruments are expected to be sustainable in the next 10 years.
In recent years, the issue of sustainability has been one of the most important topics on the global agenda. Organizations that provide financing opportunities such as international organizations, multilateral development and investment banks, pension and investment funds are acting with increasing sensitivity on climate change. In a sense, access to finance now depends on the policies implemented for climate change.
50% INCREASE IN BOND ISSUES
Projects that reduce carbon footprint, protect the environment and aim at social development are in greater demand. Capital markets also play an important role in financing such projects. The Environmental, Social and Governance market, called ESG, is showing a very rapid growth performance. In the global ESG bond market, approximately $780 billion was traded in the first 9 months of this year. This amount corresponds to an increase of 50% compared to the same period of the previous year.
GREEN BONDS DOMINATE
Green bonds dominate the ESG bond market. Many countries such as Germany, England, Spain, Poland, Hungary and Chile are borrowing from the green bond market. The Ministry of Treasury and Finance took action to establish the infrastructure of the rapidly growing green bond market, which is in serious demand in international markets. Within the scope of international borrowing transactions, Sustainable Finance Framework Document has been published in order to be able to borrow in the ESG market. The Sustainable Finance Framework Document indicates which type of project or expenditure the bond to be issued in the ESG market can be used to finance. This document will provide the opportunity to issue different debt instruments such as social bonds and green lease certificates, in addition to issuing green bonds.
ROAD MAP WILL BE DRAWN
In this way, borrowing transactions that address the social dimension of ESG, as well as its environmental dimension, will be realized. Another step in this regard will be taken for the private sector’s green debt instruments and green lease certificate issuances. The guide on this subject is planned to be published by the end of the year. The draft of the guide was made public by the CMB. In addition, studies have started for the renewal of the sustainable banking infrastructure. In this context, the “Sustainable Banking Working Group” was established within the body of the BRSA. Until the end of 2021, a “Sustainable Banking Roadmap” will be prepared in line with the Green Reconciliation Action Plan, and guides and communiqués on the subject will be published in the ongoing process.
The CAPITAL Market Board (CMB) has prepared a draft regulatory framework to encourage the financing of investments that will contribute positively to environmental sustainability. It was reported that the Green Borrowing Instrument and the Green Lease Certificate Guideline Draft were opened for comments and suggestions. In the statement, it was stated that the “green bond” market in international financial markets is growing rapidly and that regulatory supervisory institutions such as the CMB have developed a regulatory framework for the healthy growth of these markets and the protection of investors within the framework of public disclosure obligations within the scope of developing the necessary financial instruments for investments aimed at adaptation to climate change and reducing the risks arising from climate change. The CMB Green Debt Instrument and Green Lease Certificate Guide Draft aims to reinforce investor confidence in green debt instrument transparency, and increase in green lease certificate issuances, and external evaluation (such as second-party opinion/verification) obligations in our capital market, and to diversify investment opportunities in projects that contribute to sustainable development. On the other hand, the Banks Association of Turkey (TBB) has prepared “Basic and Advanced Sustainability Digital Trainings” and training guides that provide supportive information in order to contribute to professional development in sustainable finance.
$3 TRILLION MARKET
While the size of the sustainable finance market in Turkey is over $4 billion, the sustainability-based borrowing market in the world has approached $3 trillion. Sustainability has ceased to be an issue in many institutions today and has become a business model. Especially all institutions that want to exist in the future should make sustainability the focus of their corporate strategies. This concept, which was first mentioned in the World Environment and Development Commission of the United Nations in 1987 and identified with development in the first place, gradually increased its scope and importance over time. Banking is one of the sectors with the greatest responsibility in this process, as it mediates the use of resources. According to experts, all financing instruments will be sustainable in the next 10 years, and fossil fuel companies that do not have a zero-carbon economy transition plan will not be able to access financing.
Source: Sabah / Translated by Irem Yildiz