TKYB's first sustainable bond issue

Turkey is experiencing the impacts of climate change, with severe droughts and heat waves combined with heavy rainfall and floods affecting the country and its economy. Turkey is also facing the challenge of reducing its emissions in the energy sector to remain aligned with global goals. Fossil fuels continue to supply more than half of domestic energy consumption, and Turkey’s energy dependence on imports exceeds 90% for oil and nat-ural gas. In a context where domestic energy demand continued to increase in recent decades, largely sup-ported by the country’s economic and demographic growth, expanded investment in renewable energy and energy efficiency has become a strategic necessity. However, the amount of green investment needed to meet the challenges of climate change is so large that public funds and bank loans will not be enough.

Bond markets play a key role in rechanneling the financial flows of capital markets towards green investments and hold great potential for the years to come, by supporting the development of investments in renewable energies and energy efficiency. It is in this context that the Development and Investment Bank of Turkey (TKYB) has requested AFD’s support, expertise and financing to prepare its first sustainable bond issuance with the aim of stepping up its sustainable finance activity. 

The project’s aim is to support investments in projects with climate co-benefits and social benefits in Turkey. It will be structured around two components:

• A €100 million subscription by AFD to TKYB’s sustainable bond issue for projects with climate co-benefits (minimum 75%) and social benefits.
• Capacity building for TKYB for a maximum amount of €220,000 aimed at supporting the Bank in the implementation of its gender strategy.

By accompanying this first bond issue of TKYB, the project will notably allow to anchor the theme of climate and climate finance within TKYB. The establishment of a certified framework in line with the ICMA Green and Social Bond Principles requires an institutional effort impacting the entire TKYB organization to ensure traceability and transparency in the use of the funds raised, appropriate procedures for identifying, appraising, monitoring and evaluating projects and their impacts and regular and audited annual published reporting. The project will thus establish the foundations of a new tool for financing green and social investments for TKYB. The bank will then be able to access the green and sustainable bonds market according to its needs, and at the same time strengthen its activities particularly the analysis of climate co-benefits projects. Finally, the project aims to support TKYB in the implementation of a gender strategy applicable both to the bank’s internal practices and its operations with its clients, and the establishment of a project evaluation system in line with the OECD Develop-ment Assistance Committee classification.