ESG considerations in Türkiye have started to play a more important role at both the corporate and regulatory levels alike. 

In 2012, Borsa Istanbul was one of the five stock exchanges to join the Sustainability Stock Exchanges (SSE) initiative, supported by the United Nations, which, as of 2023, has 120 partner stock exchanges. However, until recently, there was no mandatory legal framework relating to ESG reporting, nor were Borsa Istanbul companies specifically required to put in place internal corporate ESG reporting framework as a listing rule. 

In October 2020, the Capital Markets Board amended the existing corporate governance regulations to introduce the obligation of the listed companies to report on their sustainability performance, starting with their annual financial statements for the financial year 2020. The Capital Markets Board further provided the ESG principles applicable under the new regulation, but the ESG framework still operates on a voluntary basis insofar as the listed companies can explain the rationale for their non-compliance with the principles and evaluate its impact.

Although the regulatory involvement is very recent, there are other resources available to gather data on the corporate sustainability performance in Türkiye. Borsa Istanbul has been computing a BIST Sustainability Index since 2014 (with the code XUSRD) as a benchmark for listed companies to evaluate their performance on ESG matters on both the national and the global level. The assessment of the companies has been conducted by a third party, “Ethical Investment Research Services Limited” and the list of companies subject to assessment is revised annually and announced by Borsa Istanbul in December of each year. According to the agreement executed by and between Borsa Istanbul and Refinitiv Information Limited, as of 2021, Refinitiv’s sustainability assessment results will be used as reference for determining the companies to be considered for the BIST Sustainability Index.

Since 2017, Borsa Istanbul has also been publishing information relating to ESG performance and targets in its integrated annual reports. These reports, prepared in accordance with the International Integrated Reporting Framework, provide information on Borsa Istanbul’s efforts on ESG. According to the 2019 Annual Integrated Report, ESG-related issues rank high in terms of importance for the exchange’s stakeholders as well as the exchange’s short, medium and long-term performance. 

Recently, several major governmental actions have been taken to support the fight against climate change. The publication in July 2021 by the Ministry of Trade of the Green Deal Action Plan (YMEP) was the first initiative. A direct response to the European Green Deal announced in December 2019 by the European Union, YMEP aims to preserve and strengthen the commercial relationship between Türkiye and the EU through harmonizing Turkish law with European Green Deal regulations.

On October 7, 2021, the Turkish Parliament ratified an adapted version of the Paris Climate Agreement and passed the Law Regarding the Approval of the Paris Agreement relating to the mitigation, adaptation and financing of climate change initiatives in Türkiye. 

To support the financing of investments contributing to environmental sustainability, in February 4, 2022, the Capital Markets Board published the Guidelines on Green/Sustainable Debt Instruments and Green/Sustainable Lease Certificates on its website. The intention of the Guidelines is to regulate the core elements of and the principles for the issuance of green debt instruments and green lease certificates in Türkiye. 

There are also efforts from the Turkish lenders’ side to encourage companies to prioritize sustainability in their business operations. A number of Turkish private banks have issued green bonds, whereby the proceeds are ring-fenced in a way that could be used for lending solely to sustainable projects such as renewable energy, energy efficiency and/or circular economy projects.

These steps to be more responsive to the global climate crisis should sit well with global lenders and financial markets. Indeed, they are in line with the global trend to assess and place a premium on companies that have an overall ESG strategy.

Very recently, in mid-2022, a new Environmental Impact Assessment Regulation was published to replace the previous one and to set out new procedures and principles with respect to the environmental impact assessment process. Among other things, the content of the environmental impact assessment application and project presentation forms now include sections with respect to sustainability and ESG assessments for new projects. So-called "sustainability plans" comprising of zero-waste plans, traffic management plans, greenhouse gas reduction plans, environmental and social management plans are now also required to be included in both forms. The EIA application form also includes an assessment of the effect of the project on climate change as well as the effects of climate change on the project, going beyond the assessment of "greenhouse gas emissions" in the form attached to the old regulation.

Following the developments in the EU in terms of the net-zero emission target of the Green Deal, Türkiye is preparing to adopt its own carbon pricing mechanism and enact legislation to fight against climate change through the second Draft Climate Law, which brings considerable changes as compared to the first one and which was recently submitted to public’s view. Under the Draft Climate Law, an emission trading system will be established, as a carbon pricing mechanism, limiting or encouraging the limitation of greenhouse gas (“GHG”) emissions and GHG-causing activities through the trading of GHG emission allowances in parallel to the EU. Additionally, businesses, the operations of which result in carbon emissions, will become obliged to obtain a GHG emission permit to continue their operations within three years as of the enactment of the Draft Climate Law. Finally, a settlement system will be introduced by meeting the allowance obligations with carbon loans.

The new Carbon Border Adjustment Mechanism (CBAM regime) of the EU will have material effect on Turkish companies which are importing goods to this zone. Accordingly, each importer importing certain goods to the EU produced by industries having high emissions has become obliged to comply with new reporting and regulatory obligations (for example, obtaining CBAM certificate) to support EU’s carbon footprint reduction target. CBAM Regulation foresees a transition period between October 1, 2023, and December 31, 2025, during which the importers in the iron, steel, aluminum, fertilizers, electricity and cement sectors are obliged to make quarterly emissions reporting. During this period, obtaining CBAM certificate by the importers will be optional and not mandatory.

Finally, on December 27th, 2023, the Public Oversight, Accounting and Auditing Standards Authority (Authority) determined the scope of application of the Turkish Sustainability Reporting Standards (TSRS) in the preparation of sustainability reports by businesses, companies and institutions through the decision of its Board (Board). The Board also published the TSRS 1 and TSRS 2 standards for sustainability reports of the following companies, in line with the IFRS S1 “General Requirements for Disclosure of Sustainability-related Financial Information” and IFRS S2 “Climate-related Disclosures”, with the purpose of ensuring global validity and establishing uniformity. The Authority also announced criteria for certain corporations such as financial leasing companies and investment institutions which will be obliged to apply TSRS while preparing their sustainability reports.

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Inside Türkiye


Global Head of Corporate, M&A and Securities

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