Turkey to raise more ESG bonds
Turkey will resume ESG bond issuance this year as the country prepares for the UN-sponsored COP30 meeting in Belem, Brazil, in November, according to a senior minister.
Turkey is working on defining its nationally determined contributions – climate action plans that every country must submit before COP30 that are part of the Paris Agreement on climate change.
The country has made significant progress in the past 12 months, passing its first climate law in March to establish a Turkish green taxonomy and emissions trading system, after setting ambitious interim targets in October's 2035 Renewable Energy Roadmap.
'Subject to market conditions, our ministry is also planning to issue new ESG-labelled bonds in international markets in 2025,' Osman Celik, deputy minister of treasury and finance said on a panel at the Asian Development Bank meeting on May 4–7 in Milan.
Turkey made its green bond debut in April 2023 with a US$2.5bn, seven-year bond with a 9.125% coupon that was more than three times subscribed. Bank of America, ING, JP Morgan and Standard Chartered led the deal, which was issued under the country's 2021 sustainable finance framework.
Celik told IFR on May 5 on the sidelines of the ADB meeting that the ESG label had not yet been determined for the new issue and will be detailed in upcoming legislation.
Slovenia is planning to issue a sustainability-linked bond to finance its NDCs for COP30 and is waiting for favourable market conditions to become the first European sovereign to issue an SLB after publishing a framework in late March.
However, Turkey's increasing focus on renewable energy and development of a green taxonomy aligned with European standards could point to another green bond.
Going green
Turkey is aiming to reach 120GW of wind and solar power by 2035 that will nearly quadruple its renewable capacity and develop 5GW of offshore wind capacity and a hydrogen value chain with 5GW of electrolyser capacity in the same timeframe, as well as other measures including grid updates and adding battery storage.
The Renewable Energy Roadmap is expected to require investment of around US$108bn, comprising US$80bn for capacity expansion and US$28bn for grid upgrades to help Turkey reach its goal of net-zero emissions by 2053.
The National Energy Plan aims to increase the share of renewable energy within the total installed electricity capacity from 54% to 64.7% by 2035.
Celik said that the national green taxonomy would be aligned with EU standards 'to invite private sector sustainable investments'.
Turkey's taxonomy will also be harmonised with the EU's Green Deal, which sets the long-term vision and policy framework, and the EU's Fit for 55 package, which aims to cut emissions by 55% by 2030. Turkey created its own Green Deal Action Plan in November 2021.
It will also work with the EU's Carbon Border Adjustment Mechanism, which will come into full effect from January and penalise carbon-intensive imports. The world's first carbon tariff is in a transitional phase after coming into force in May 2023.
Turkey launched a programme in late November backed by the EBRD to mitigate the effects of CBAM on Turkish exporters. Turkiye Industrial Decarbonisation Investment Platform aims to deploy US$5bn in investments by 2030.
Celik said that Turkey will also continue to work with multilateral development banks including the World Bank, European Bank for Reconstruction and Development, Asian Infrastructure Investment Bank and other financial institutions such as Germany's KfW and commercial banks and has signed US$6.2bn in energy-related loan agreements in the past five years.
Turkey is the newest ADB regional member which will give it access to the bank's financial resources, technical assistance and capacity building and signed a non-sovereign operations framework in Milan that allows ADB to support Turkey's private sector development and drive economic growth.
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