March 2022 – Turkey's Capital Markets Board ("CMB") has recently published green debt instruments, sustainable debt instruments, green lease certificates and sustainable lease certificates guideline ("Guideline"), which encourage financing for capital investments that can contribute positively to environmental sustainability. The basic principles to be followed and minimum elements of the framework document to be prepared are also set out in the Guideline.
The CMB has also announced that it has decided to apply a 50% discount on the board fees to be charged for the issuance of capital market instruments within the scope of the Guideline.
Below we summarise the main highlights of the Guideline.
Scope of the Guideline has been determined
The basic principles and obligations set forth in the Guideline on green debt also apply to sustainable debt instruments, green lease certificates and sustainable lease certificates. Capital market instruments specified in the Guideline can be qualified as green-themed capital market instruments provided that they meet the qualifications and fulfil the obligations set out in the Guideline.
For the issue of green debt instruments abroad, the framework document must be prepared in accordance with the foreign green debt standards and must be approved by the board of directors. A second-party opinion regarding compliance of the framework document with the foreign standards also must be submitted to the CMB and announced on the Public Disclosure Platform ("PDP") and on the issuer's website, together with the issuance document. In addition, the issuance of domestic blue debt instruments to be issued within the framework of the Green Bond Principles of the International Capital Markets Association ("ICMA") will also need to be carried out in accordance with the Guideline.
Obligations determined for issuers in the Guideline are to be fulfilled by the asset leasing company and/or fund user in green lease certificate issues. The issuer's framework document must determine the issues that they are responsible for and that the green debt instrument follows the Guideline and is approved by the Board of Directors before an application to the CMB can be made.
The basic principles of the green debt instrument have been outlined
For issuances to be made within the scope of the Guideline, a separate issue ceiling must be obtained from the CMB. Issuers must submit their framework document and a second-party opinion to the CMB stating that the framework document and the green debt instrument are compatible with the Guideline, together with other information and documents, during the application for the issue document or offering circular approval. Issuers must also publicly disclose their second-party opinion and the framework document together with the issue document regarding the issue ceiling or offering circular. The Guideline lists examples (not comprehensive) of eligible green project types that fall within the scope of the Guideline.
The elements that green debt instruments must have in order to be included in the Guideline are as follows:
- funds obtained from the issue of green debt instruments must be used for green projects as soon as possible, and the period foreseen for this must be included in the framework document;
- the green debt instrument issuer should disclose the project evaluation and selection process to investors, together with the elements determined in the Guideline;
- the net funds obtained from the green debt instrument issue must be managed by allocating them exclusively to the relevant project; and
- relevant reports must be made as specified in the Guideline.
The following conditions must be met for the issue of green debt instruments:
- the issuer must confirm in the framework document that the issue will be carried out in accordance with the principles set out in the Guideline;
- funds obtained from the issuance will be used as specified in the framework document; and
- an institution providing external review services must verify that the green debt instrument is in compliance with the Guideline.
The usage, management and external evaluation procedures of funds have been determined
The net fund balance should be allocated to eligible green projects in the relevant period and managed as long as the green debt instrument is in circulation. The issuer must publicly disclose the information on how it intends to manage the net funds and must also include in the framework document the time period foreseen for the implementation of the green projects for which the funds will be used. Funds from the issue of green debt instruments can be managed on a per-issue basis or aggregated for more than one green bond, such as in the portfolio approach.
Issuers must disclose to the public once a year from the date of issue—and in any case, after all funds obtained from the issue are utilised—up-to-date information on the use of funds as well as important developments, if any, within the scope of the fund utilisation report, together with the estimated and/or actual environmental impacts within the scope of the impact report. These reports will continue until the entire fund amount is used. The fund utilisation report is to be prepared after all the funds obtained from the issuance are utilised, and the verification opinion on the use of the funds must be announced to the public on the PDP and on the issuer's website.
According to the Guideline, the types of external evaluation services that issuers can receive are specified as second-party opinion, verification, certification, and green debt instrument scoring/rating.
*This summary has been prepared from publicly available sources and does not constitute legal or other advice. Please contact us for more detailed information or legal advice on the subject.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
