Turkey aims to promote the issuance of more green bonds by preparing a legal framework that is expected to increase investments in clean energy, electric and hybrid vehicles, clean water and reduce carbon emissions.
Turkey's President Recep Tayyip Erdogan, in his announcement of the economic reform package last week, said the government is encouraging the issuance of green bonds by forming a Bonds Guarantee Fund to encourage companies in the real sector to issue bonds at lower costs, thus spurring investment demand.
Ebru Dildar Edin, executive vice president at Garanti BBVA, told Anadolu Agency in an exclusive interview that the green bond market offers huge potential for sustainable development.
The world needs investments of $5-7 trillion per annum to achieve the United Nation’s Sustainable Development Goals by 2030 but the financing gap in developing countries is about $2.5 trillion annually.
Edin said green bond issues are becoming increasingly popular as a sustainable debt instrument in the financial sector. However, she added “although the green bond market has developed greatly, there is still a long way to go given the potential of the market.”
The global cumulative bond market has hit $100 trillion but the cumulative worldwide green bond issues have only reached around $1 trillion, she said.
Isabelle Laurent, deputy treasurer and head of funding at the European Bank for Reconstruction and Development (EBRD) explained that the basis behind green bonds is to raise money to fund a project or a portfolio of projects that have positive environmental benefits.
And for the successful realization of projects that are financed from green bonds, she said that transparent reporting is crucial. She also suggested that Turkey should encourage non-financial reporting to better understand the risks involved.
As the EU and the US are already playing an active role in the green bond market, she said the growth of this market is expected to flourish and expand to other regions worldwide.
- Huge potential in Turkey but legal framework needed
Ebru Dildar Edin said that out of the total bond market of $3.1 billion in Turkey, green bonds account for $836 million. She said that although “Garanti BBVA made the majority of the contribution to this volume, these volumes are not at the levels we want to reach.”
Turkey has huge potential and has many opportunities to expand this market but needs the proper legal framework to do so.
“Turkey needs a legal framework to expand the green bond market and include sustainable development policies in overall country policies, aligned with Paris Agreement goals,' she said.
Laurent said the announcement to promote green bonds by Erdogan is important in terms of creating the legal framework to enable high investment interest in clean energy, clean water, electric and hybrid vehicles and for various incentive packages.
By Nuran Erkul Kaya