Concepts & Achievements: The Turkish Case

Concepts & Achievements:The Turkish Case

Sustainable Development Banking

Who are we?

To promote investments of private initiative in the Turkish Industry

To assist the participation of domestic and foreign capital to companies

To contribute to the development of the Turkish capital markets

TSKB’s Mission (since 1950):

Privately Owned Development Bank withPublic/Private Mission

TSKBDFI’s

(as fund and knowhowproviders)

PrivateSector

(both as client & shareholder)

Government

(as guarantor)

Approach Difference

Demand Based Banking: Main concern is meeting thedemand of clients.

Supply Based Banking: DFI’s try to identify and developinstruments to meet upcoming needs and problems in advance when there is virtually no demand.

Evolving needs and evolving TSKB

5

1950’s

1960’s

1970’s

1980’s

1990’s

• Export promotion activities• Extension of Samurai Bonds and

‘tailor made’ TL bank bonds• Consultancy activities

• Sector development activities (contribution to the establishment of SPO)

• Funds for equity participation and IPOs

• Regional development• Loans for SMEs and support of

‘open to public’ (Gastarbeiter) companies

• Project based investment loans and technical assistance

• Advisory services to Privatization Administration

• Fund originated (government) loans

• ‘Thematic’ loans (for shipyards, earthquake etc.)

• Investment banking activities

The needs in 21st century

6

Coordinating Secretary of “Istanbul Approach”, consultancy activities

Buy side – sell side consultancy and brokerage

Distribution of EIB, IBRD, IFC, CEB, JBIC, KfW, AFD, EBRD, IDB, OEB loans

APEX (wholesale) banking

“REL” Renewable Energy Loan

Risk Based Loan Pricing (flexible collateral based on the phases of the project investment)

Energy efficiency

Sustainable banking

Resource efficiency

Innovation

1

2

3

4 5

6

7

8

910

Sustainability Journey of TSKB

1980 2005 2007 2008 2009 2010 2011 2012 2013 2014

• EnvironmentalFactor in CreditEvaluation Process

• EnvironmentalManagement System

• ISO 14001 Certificate

• CarbonNeutral

• UNEP FI• GRI Corporate

Stakeholder• Cevreciyiz.TV

• GRI ApprovedSustainability Report

• CDP• UN Global Compact

Commitment

• Global Compact 1st COP Report

• First Turkish Bank withsuccessful ISO 14064 Greenhouse Gas EmissionsAudit

• Global Compact 2nd COP Report

• Sustainability Management System

• GRI A+ SustainabilityReport

• Global Compact 3rd COP Report

• SustainabilityCommittee

Management Structure of Sustainability

Sustainability Committee

Sustainability Sub-Committee

ISO 14001 & ISO 14064

Reporting and Sustainability

Index

New Product & Opportunities

Stakeholder Communication

and Social Responsibility

ERET since 2006

Risk Category A : High risk Level

Risk Category B + : Middle Sensitive Risk Level

Risk Category B - : Middle Risk Level

Risk Category C : Low Risk Level

Environmental and Social Risk Evaluation (ERET) since 2006

ERET Results of 2014 (January – November)

Risk Category Client Side Project Side

A 1 0

B+ 9 6

B- 19 21

C 27 29

Total 56 56

ERET Results of 2013 (January – December)

Risk Category Client Side Project Side

A 2 1

B+ 9 3

B- 15 24

C 24 22

Total 50 50

• Environmental Risk Evaluation Tool (ERET):an environmental risk evaluation modelwhich questions 36 subjects and rates theanswers

• As a result of ERET rating model, anenvironmental-social risk category isassigned for both «existing activities of theclient» and «proposed project»

• According to assigned environmental-socialrisk category, a pre-determined action planis applied

WHY ARE SUSTAINABLE INVESTMENTS IMPORTANT FOR TURKEY?

Current Account Deficit Problem

GDP and Electricity Consumption Growth

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E

GDP Electricity Consumption

Electricity Generation by Type of Fuel

17.7% 19.5%

37.2%44.6% 45.9% 43.8%

48.1%

6.3%6.9% 12.2%

13.8%

25.1%20.7%

6.9%6.7%

7.5%

4.3% 2.5%1.9%

1.8%

25.6%

43.9% 35.1% 32.5%

30.6%

20.2% 18.4% 13.3%

15.4%

48.8%

35.2%40.2% 41.2%

24.7% 24.6% 26.3% 28.8%20.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

1980 1985 1990 1995 2000 2005 2010 2013 2014

Natural Gas Imported Coal Oil Domestic Coal Hydro/Renewables

Turkey’s Greenhouse Gas Emissions (Million CO2 Equivalent Tons)

188

2139

297

331

422440

459

0

50

100

150

200

250

300

350

400

450

500

1990 1995 2000 2005 2011 2012 2013

• Turkey’s greenhouse gas emissions have gone up by 110% CO2 equivalent between 1990-2013.• Energy production and consumption account for 70% of emissions.

107 renewable energy projects were financed.

(2003 - 2014)

• Total installed capacity: 3,885MW

• TSKB evaluated more than 300 REprojects

• Total investment cost of REprojects reached to USD 7.6billion. Funds committed to theseprojects by TSKB is USD 2.3billion.

56 energy efficiency projects financed. (2009 –2014)

• Total emission will be reduced by1,2 million ton CO2 equivalent

• 2 billion mega calories of energywill be saved. This amountcorresponds to approx. 212,000households heat energyconsumption per annum

• Share of energy efficiencyfinance in total outstandingloans is around 8.2%

7 resource efficiency projects were financed. (2013 –2014)

• Financing ‘‘Resource Efficiency’’since November 2013

• Chemical, steel, salt andautomotive sectors were financed

• Total emission will be reduced by77,350 tons CO2

Projects Financed by TSKB

Renewable Energy Energy Efficiency Resource Efficiency

Diversified funding structure

Guaranteed LT Funding

Unguaranteed LT Funding

Syndication & P/N etc.

FX Securities Issued

Repo

Long Term Funding Base

X7 Asset Size (NPL %0,5)

2015/1Q

%6

%6

%17

%63%9

%26

2002

%8%63

%2

Guaranteed LT Funding

Domestic Bank

Borrowings

Other Borrowings

Repo

%63

%29

%7 %2

Awards

Sustainable Bank of the year: TSKB

We are awarded as ‘‘Sustainable Bank of the Year’’for the East Europe by FT and IFC in 2008, 2009 and

2010.

In 2011 and 2013 we were in the short list (one of the final three) for the whole Europe.

• Highest Corporate Report Transparency rating given to a bank by Transparency International (2015)

• Low Carbon Hero Award – Sustainable Production and Consumption Association,SPCA (2015)

• Corporate Governance Association of Turkey (TKYD) – Highest Corporate Governance Rating

(2012,2014,2015)

• “Climate Change Leaders" awards – CDP Turkey (2013)