Environmental & Social Information • Jan 14, 2025
Environmental & Social Information
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Sustainalytics is of the opinion that the Yapı Kredi Sustainable Finance Framework is credible, impactful and aligned with the Sustainability Bond Guidelines 2021, Green Bond Principles 2021, Social Bond Principles 2023, Green Loan Principles 2023 and Social Loan Principles 2023. This assessment is based on the following:
USE OF PROCEEDS The eligible categories for the use of proceeds1 are aligned with those recognized by the Green Bond Principles, Social Bond Principles, Green Loan Principles and Social Loan Principles. Sustainalytics considers that investments in the eligible categories will lead to positive environmental or social impacts and advance the UN Sustainable Development Goals, specifically SDGs 1, 2, 3, 4, 6, 7, 9, 11, 12, 13 and 15.
Yapı Kredi's Sustainable Finance Working Group will be responsible for the review and approval of eligible assets in accordance with the eligibility criteria and the Yapı Kredi's internal policies. Sustainalytics considers this process in line with market practice. Yapı Kredi has an Environmental and Social Risk Assessment System applicable to all allocation decisions made under the Framework. Sustainalytics considers this risk management system to be adequate, and the project and evaluation process to be in line with market practice.
MANAGEMENT OF PROCEEDS The net proceeds will be managed by the Treasury and Sales Departments using a portfolio approach. When necessary, existing assets will be substituted with new eligible assets in the portfolio. Pending allocation, proceeds will be temporarily held in cash or cash equivalents or other liquid marketable instruments. This process is in line with market practice.
REPORTING Yapı Kredi commits to report on allocation on its website annually until full allocation or until maturity for revolving credit facilities. Allocation reporting will include: i) total amount of sustainable finance instruments outstanding; ii) amount of proceeds allocated to eligible loans; iii) balance of unallocated proceeds; iv) share of financing or refinancing; and where possible v) geographical distribution of the projects. In addition, Yapı Kredi commits to reporting on relevant impact metrics, where possible. The process of allocation and impact reporting is aligned with market practice.
| Evaluation Date | July 12, 2024 |
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| Issuer Location | Istanbul, Türkiye |
| Introduction 2 | |
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| Sustainalytics' Opinion 3 |
For inquiries, contact the Sustainable Corporate Solutions project team:
Project Manager [email protected] (+31) 20 797 1563
Javier Frisancho Salinas (Amsterdam) Project Support
Ayaka Okumura (Amsterdam) Project Support
Han Xing (Toronto) Project Support
Diego Gomez (London) Client Relations [email protected] (+44) 20 3880 0193
The Yapı Kredi Sustainable Finance Framework includes deposits as an eligible financial product. Sustainalytics is of the opinion that the principles of impact and transparency that underlie the sustainable investment industry, as well as many of its norms and standards, are applicable to deposits, and that Yapı Kredi's internal processes and the use of funds aligns with those principles.
1 The eligible use of proceeds categories are: Renewable Energy; Green Buildings; Clean Transportation; Energy Efficiency; Environmentally Sustainable Management of Living Natural Resources and Land Use; Terrestrial and Aquatic Biodiversity Conservation (Including the Protection of Coastal, Marine and Watershed Environments); Sustainable Water and Wastewater Management; Pollution Prevention and Control; Eco-efficient and/or Circular Economy Adapted Products, Production Technologies and Processes; Climate Change Adaptation; Access to Essential Services – Healthcare; Access to Essential Services – Education; Access to Essential Services – Disaster and Emergency Relief Following Natural Disasters or During Health Pandemics; Affordable Basic Infrastructure – Water and Sanitation; Affordable Basic Infrastructure – Telecommunications; Affordable Basic Infrastructure – Transportation; Affordable Basic Infrastructure – Energy Accessibility; Food Security – Access to Food; Employment Generation and Programmes Designed to Prevent and/or Alleviate Unemployment Stemming from Socioeconomic Crises, Including Through the Potential Effect of MSME Financing; Affordable Housing.
Yapı ve Kredi Bankası A.Ş. ("Yapı Kredi" or the "Bank") is a private bank established in 1944 and headquartered in Istanbul, Türkiye. The Bank provides services in retail banking (comprising Payment Systems, Individual Banking, Business Banking, Private Banking and Wealth Management), Commercial and SME Banking, as well as Corporate Banking. The Bank's operations are supported by domestic subsidiaries in asset management, brokerage, leasing and factoring as well as international banking subsidiaries in the Netherlands and Azerbaijan. As of March 2024, the Bank had a total assets of TRY 2.1 trillion (EUR 61.6 billion), with 15,421 employees and 781 branches across Türkiye. 2
Yapı Kredi has developed the Yapı Kredi Sustainable Finance Framework dated July 2024 (the "Framework") under which it intends to issue the following Sustainable Finance Instruments: green, blue, social and sustainability financial instruments, such as bonds, private placements 3 , commercial papers, loans, promissory notes, trade finance instruments (cash and contingent (non-cash) facilities including loans, forfaiting, documentary collections, letters of credit, letters of guarantee, promissory notes, customer deposits and other related sustainable finance liabilities. 4 Yapı Kredi intends to use the proceeds from the Sustainable Finance Instruments to finance or refinance, in whole or in part, existing or future projects expected to deliver positive environmental and social outcomes.
The Framework defines eligibility criteria under the following environmental and social categories:
Yapı Kredi engaged Sustainalytics to review the Framework and provide a Second-Party Opinion on the Framework's environmental and social credentials and its alignment with the Sustainability Bond Guidelines 2021 (SBG), Green Bond Principles 2021 (GBP), Social Bond Principles 2023 (SBP), 5 Green Loan Principles 2023 (GLP) and Social Loan Principles 2023 (SLP) 6 . The Framework has been published in a separate document.7
2 Yapı Kredi, "Corporate Profile", at: https://www.yapikrediinvestorrelations.com/en/about-yapi-kredi/detail/Corporate-Profile/12/16/0
3 Yapı Kredi has confirmed to Sustainalytics that the private placements are debt private placements and do not include equities.
4 Sustainalytics has only reviewed the financial instruments expressly listed here.
5 The Sustainability Bond Guidelines, Green Bond Principles and Social Bond Principles are administered by the International Capital Market Association and are available athttps://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/
6 The Green Loan Principles and Social Loan Principles are administered by the Loan Market Association, Asia Pacific Loan Market Association and Loan Syndications and Trading Association and are available at: https://www.lsta.org/content/green-loan-principles/# and https://www.lsta.org/content/social-loan-principles-slp/
7 The Yapı Kredi Sustainable Finance Framework is available on Yapı Kredi's website at: https://www.yapikrediinvestorrelations.com/en/debt-capitalmarkets/list-document/Sustainable-Bonds/571/0/0
Sustainalytics' Second-Party Opinion reflects Sustainalytics' independent8 opinion on the alignment of the reviewed Framework with current market standards and the extent to which the eligible project categories are credible and impactful.
As part of the Second-Party Opinion, Sustainalytics assessed the following:
For the use of proceeds assessment, Sustainalytics relied on its internal taxonomy, version 1.15 which is informed by market practice and Sustainalytics' expertise as an ESG research provider.
As part of this engagement, Sustainalytics held conversations with various members of Yapı Kredi's management team to understand the sustainability impact of their business processes and planned use of proceeds, as well as management of proceeds and reporting aspects of the Framework. Yapı Kredi representatives have confirmed (1) they understand it is the sole responsibility of Yapı Kredi to ensure that the information provided is complete, accurate and up to date; (2) that they have provided Sustainalytics with all relevant information and (3) that any provided material information has been duly disclosed in a timely manner. Sustainalytics also reviewed relevant public documents and non-public information.
This document contains Sustainalytics' opinion of the Framework and should be read in conjunction with that Framework. Any update of the present Second-Party Opinion will be conducted according to the agreed engagement conditions between Sustainalytics and Yapı Kredi.
Sustainalytics' Second-Party Opinion, while reflecting on the alignment of the Framework with market standards, is no guarantee of alignment nor warrants any alignment with future versions of relevant market standards. Furthermore, Sustainalytics' Second-Party Opinion addresses the anticipated impacts of eligible projects expected to be financed with bond and loan proceeds but does not measure the actual impact. The measurement and reporting of the impact achieved through projects financed under the Framework is the responsibility of the Framework owner.
In addition, the Second-Party Opinion opines on the potential allocation of proceeds but does not guarantee the realised allocation of the bond and loan proceeds towards eligible activities.
No information provided by Sustainalytics under the present Second-Party Opinion shall be considered as being a statement, representation, warrant or argument, either in favour or against the truthfulness, reliability or completeness of any facts or statements and related surrounding circumstances that Yapı Kredi has made available to Sustainalytics for the purpose of this Second-Party Opinion.
Sustainalytics considers the Yapı Kredi Sustainable Finance Framework to be credible, impactful and aligned with the four core components of the GBP, SBP, GLP and SLP. Sustainalytics notes that in addition to these principles, Yapı Kredi intends to align the Framework with the IFC Guidelines for Blue Finance. 9 Sustainalytics highlights the following elements of the Framework:
8 When operating multiple lines of business that serve a variety of client types, objective research is a cornerstone of Sustainalytics and ensuring analyst independence is paramount to producing objective, actionable research. Sustainalytics has therefore put in place a robust conflict management framework that specifically addresses the need for analyst independence, consistency of process, structural separation of commercial and research (and engagement) teams, data protection and systems separation. Last but not the least, analyst compensation is not directly tied to specific commercial outcomes. One of Sustainalytics' hallmarks is integrity, another is transparency.
9 The IFC "Guidelines for Blue Finance" aim to provide a list of eligible use of proceeds to support private investments aligned with the GBP and GLP.
IFC, "Guidelines Blue Finance: Guidance for financing the Blue Economy, building on the Green Bond Principles and the Green Loan Principles", (2022), at: https://www.ifc.org/content/dam/ifc/doc/mgrt/ifc-guidelines-for-blue-finance.pdf
pools; iii) peat and 10% or more feedstock from uncertified sources; iv) palm oil that is not RSPO-certified.
10 BEP-TR: https://beptr.csb.gov.tr
11 European Commission, "Energy Performance of Buildings Directive", at: https://energy.ec.europa.eu/topics/energy-efficiency/energy-efficientbuildings/energy-performance-buildings-directive\_en
residential and commercial buildings in Türkiye. Considering that only 10% to 15% of the total building stock in Türkiye is rated by a BEP-TR certificate, it is very likely that buildings with a BEP-TR rated B belong in the top 15% in Türkiye. Sustainalytics encourages Yapı Kredi to favour buildings that qualify in the top 15% most energyefficient buildings to align with market practice.
12 European Commission, "Nearly Zero-Energy Buildings", at: https://energy.ec.europa.eu/topics/energy-efficiency/energy-efficient-buildings/nearly-zeroenergy-buildings\_en
13 LEED: https://www.usgbc.org/leed
14 BREEAM: https://bregroup.com/products/breeam/
15 DGNB:https://www.dgnb.de/en
16 EDGE: https://edge.gbci.org/
17 B.E.S.T:https://www.cedbik.org/best
18 YeS-TR is a green building certification system developed by the Turkish Ministry of Environment and Urbanization.
content/EN/ALL/?uri=CELEX%3A32020R0852
19 FAO, "Framework Regulation for energy labelling", at: https://www.fao.org/faolex/results/details/en/c/LEX-FAOC207937/
20 European Commission, "Regulation (EU) 2017/1369 of the European Parliament and of the Council of 4 July 2017 setting a framework for energy labelling and repealing Directive 2010/30/EU," at: https://eur-lex.europa.eu/eli/reg/2017/1369/oj
21 European Commission, "Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088," at: https://eur-lex.europa.eu/legal-
22 Green Technology Selector: https://techselector.com/turkiye-en/ ,
23 FAO, "Framework Regulation for energy labelling", at: https://www.fao.org/faolex/results/details/en/c/LEX-FAOC207937/
24 Rainforest Alliance: https://www.rainforest-alliance.org/
25 Better Cotton Initiative:https://bettercotton.org/
26 USDA Organic: https://www.usda.gov/topics/organic
27 EU Organic: https://agriculture.ec.europa.eu/farming/organic-farming/organics-glance\_en
Sustainalytics does not consider the use of BCI as an eligibility criterion that detracts from the credibility of the Framework.
36 ProTerra: https://www.proterrafoundation.org/
28 FSC:https://fsc.org/en
29 PEFC: https://www.pefc.org/
30 MSC: https://www.msc.org/
31 ASC: https://asc-aqua.org/
32 BAP:https://www.bapcertification.org/
33 RSPO: https://rspo.org/
34 SFI:https://forests.org/
35 UTZ: https://www.rainforest-alliance.org/utz/
37 RSB: https://rsb.org/
38 ISCC:https://www.iscc-system.org/
39 Conservation Agriculture (CA) is a set of management practices that helps maintaining the soil health, enhance biodiversity and natural biological processes above and below the ground surface, such as through conservation tillage; sowing of diverse cover crops; multiple crop rotation; soil restoration and management; nutrient and waste management; and no or minimal pesticides or synthetic fertilizers. FAO promotes the adoption of CA principles "that are universally applicable in all agricultural landscapes and cropping systems. Food and Agriculture Organization of the United Nations (FAO), Conservation Agriculture:http://www.fao.org/conservation-agriculture/en/
activities under this category. Yapı Kredi has also confirmed that it will avoid double counting the projects financed under this category with those under the Green Buildings category.
in many parts of the world. Sustainalytics recommends Yapı Kredi to promote the removal of increasing amounts of recyclables, especially plastics and metals, and the monitoring of thermal efficiency of the financed facilities.
42 RTRS:https://responsiblesoy.org/?lang=en
40 Bonsucro: https://bonsucro.com/
41 ISCC:https://www.iscc-system.org/certification/iscc-certification-schemes/iscc-plus/
43 Climate Change Laws of the World, "Türkiye's National Climate Change Adaptation Strategy and Action Plan", at: https://climate-
laws.org/documents/Türkiye-s-national-climate-change-adaptation-strategy-and-action-plan\_cc01?id=Türkiye-s-national-climate-change-adaptationstrategy-and-action-plan\_75e0
44 IFC, "Public-Private Partnership Stories", at: https://ppp.worldbank.org/public-private-partnership/sites/ppp.worldbank.org/files/2022- 03/IFC%2BPPP%2BStories%2BTurkey%2BAdana.pdf
45 Ministry of Youth and Sports, at: https://kygm.gsb.gov.tr/Sayfalar/3227/3200/yurt-hizmetleri.aspx
46 OECD, "Education GPS - Türkiye", at: https://gpseducation.oecd.org/CountryProfile?primaryCountry=TUR&treshold=10&topic=EO
47 OECD, "Education at a glance - Türkiye", at: https://www.oecd-ilibrary.org/sites/9bb9830a-en/index.html?itemId=/content/component/9bb9830a-en
48 The Disaster and Emergency Management Authority, "About Us", at: https://en.afad.gov.tr/
corporates; ii) the Bank will offer favourable terms to the beneficiaries.49 Sustainalytics notes that the Framework does not place a restriction on the size of the businesses that may receive financing. Sustainalytics recognizes that such financing is likely to benefit entrepreneurs affected by a disaster or health pandemic, however, considers it good practice to prioritize financing SMEs because they typically face greater challenges in accessing capital than larger companies. Therefore, Sustainalytics considers financing loans to non-SMEs as business-as-usual lending and a deviation from what it considers good practice.
49 Favourable loan terms could include lower interest rates, longer grace period and longer tenor.
50 IFOAM, "About us", at: https://www.ifoam.bio/about-us
51 Food and Agriculture Organization (FAO), "Reduction of food loss and waste in Central Asia, Azerbaijan and Turkey", at: https://www.fao.org/in-
action/fao-turkey-partnership/projects/project-detail/en/c/1363051/#
52 MSMEs are defined following the Official Gazette (Mevzuat Bilgi Sistemi), at:
https://www.mevzuat.gov.tr/mevzuat?MevzuatNo=7297&MevzuatTur=21&MevzuatTertip=5
55 The Basel Convention, " Text of the Convention", at: https://www.basel.int/TheConvention/Overview/TextoftheConvention/tabid/1275/Default.aspx
53 TOKİ, "Housing Programs", at: https://www.toki.gov.tr/en/housing-programs.html
54 CITES, "What is CITES?", at:
[https://cites.org/eng/disc/what.php#:~:text=CITES%20(the%20Convention%20on%20International,the%20survival%20of%20the%20species](https://cites.org/eng/disc/what.php#:~:text=CITES%20(the%20Convention%20on%20International,the%20survival%20of%20the%20species)
56 RAMSAR, "The Convention on Wetlands", at: https://www.ramsar.org/about/our-mission/international-cooperation
Sustainability Division, Corporate Banking, Commercial and SME Banking Management, Investor Relations Department, Retail Banking Department and Credits Department.
Sustainalytics has determined that the Yapı Kredi Sustainable Finance Framework with the four core components of the GBP, SBP, GLP and SLP.
Sustainalytics is of the opinion that the Framework is credible and that the deposits 57 will fund overall impactful social and environmental projects. Sustainalytics further notes the alignment of the Framework with the concepts underpinning the sustainable finance market, namely those of impact and transparency.
Transparency is recognized as a key principle with regards to sustainable finance, as it provides assurance that investments are delivering positive impact. Sustainalytics highlights the following elements of the Framework that facilitate transparency to clients:
Yapı Kredi's Sustainability Strategy comprises four main pillars, namely: i) Climate crisis and environment; ii) Sustainable finance; iii) Risk management and corporate governance; and iv) Human and society.58 Yapı Kredi's Sustainability Strategy and business practices are based on the United Nations SDGs, the Paris Climate Agreement, Türkiye's national development plans and Intended Nationally Determined Contribution Statement, as well as national and international initiatives and best practices. Yapı Kredi's Sustainability Committee is responsible for the integration of sustainability strategy into the Bank's business model and monitors overall sustainability performance. The Sustainability and Corporate Social Responsibility Unit supervises the activities of the Sustainability Working Groups and ensures proper implementation of the Bank's sustainability targets and commitments. 59
On the environmental front, Yapı Kredi has made a commitment to achieve net zero by 2050 and support the decarbonisation of Türkiye's economy, in addition to submitting a commitment to the Science Based Targets Initiative (SBTi) and joining the Net-Zero Banking Alliance (NZBA) in 2023.60 Furthermore, it has been an official supporter of the TCFD since 2021 and is a signatory of the United Nations Environment Programme
responsibility/integrated\_annual\_report\_2022.pdf
57 Sustainalytics notes the Framework allows for deposits, including those from retail customers of Yapı Kredi. It further notes that the Framework does not define the term of the deposits (fixed-term or perpetual saving accounts).
58 Yapı Kredi, "2022 Integrated Annual Report", (2023), p.73, at: https://assets.yapikredi.com.tr/WebSite/\_assets/pdf/en/corporate-social-
59 Yapı Kredi, "Sustainability Management System", at: https://www.yapikredi.com.tr/en/sustainability/our-sustainability-approach/sustainabilitymanagement-system
60 Yapı Kredi, "2023 Integrated Annual Report", (2024), p.128, at: https://www.yapikrediinvestorrelations.com/en/images/pdf/annual-reports/2023/yk23 integrated-annual-report.pdf
Finance Initiative (UNEP FI)61 and UN Global Compact and Türkiye's Declaration of Sustainable Finance62 , demonstrating its commitment to promoting responsible lending and sustainable financial activities.
To achieve its commitments, Yapı Kredi started a project to understand the emissions associated with its financing activities under the Carbon Transformation Programme initiated by Koç Holding63 in 2021.64 Since then, the Bank has been calculating emissions from its financed loan portfolio related to Category 15 (Investments) scope 3 emissions according to the PCAF (Partnership for Carbon Accounting Financials) methodology.65 In 2023, the Bank developed interim net zero emissions reduction targets and submitted them to the SBTi for approval.66
In addition, Yapı Kredi incorporated the results of the first climate change risk assessment of its entire loan portfolio in 2021, incorporating physical and transition risks into its strategy and objectives for climate change risk management.67 In 2022, the Bank started integrating climate change risk into its credit risk assessment processes and models, and relevant training and workshops were organized to improve the technical knowledge capacity of the Bank's sustainability team.68 In the future, Yapı Kredi aims to integrate climate change risk into all lending processes. The Bank has also declared that it will not finance any new projects involving coal-fired power stations or coal mining from 2021.69
The Bank also offers a number of financial products that are environmentally focused, including sustainabilityrelated loans, renewable energy and energy efficiency loans, nature-friendly mortgages, nature-friendly car loans and clean energy funds. 70 Similarly, it is enhancing investment in renewable energy, with a 22% renewable energy financing rate in total project financing as well as 2.4 million tonnes of CO2e avoided with renewable energy financing in 2022.71 Yapı Kredi collaborated with investment funds sources such as the Green for Growth Fund, 72 providing EUR 15 million for renewable energy and energy efficiency projects.73
In the social context, Yapı Kredi has a range of initiatives in SME financing, support for women entrepreneurs, as well as disaster recovery assistance. In 2022, Yapı Kredi signed a protocol with the Credit Guarantee Fund (CGF)74 to support SMEs and non-SMEs through three of CGF's programmes: the Enterprise Expenditures Support Package (TRY 953 million, approximately USD 48.87 million), the Export Support Package (TRY 1.7 billion, approximately USD 87.17 million) and the Investment Support Package (TRY 1.1 billion, approximately USD 56.41 million). 75 In 2023, the CGF Support Loan 3 programme was launched and TRY 1.7 billion (approximately USD 1,833 million) credit was provided to support SMEs.76 To support women entrepreneurs, Yapı Kredi participated in the TURWIB programme in April 2022, in cooperation with the European Bank for Reconstruction and Development (EBRD), which aims to provide financial support and promote women's active participation in economic activities. Through this initiative, Yapı Kredi provided loans totalling TRY 350 million (approximately USD 10.9 million) to enterprises led by women business owners.77 The Bank has extended its loans under the scope of the CGF Investment Support Package and Export Support Package
61 UNEP Finance Initiative, "About United Nations environment Programme Finance Initiative", at: https://www.unepfi.org/about/
62 United Nations Global Compact, "Global Compact Network Türkiye publishes the "Declaration on Sustainable Finance", at:
https://www.unglobalcompact.org/news/4281-10-23-2017
63 Yapı Kredi's 20.22% of the shares are directly owned by Koç Holding A.Ş. and 40.95% of the Bank's shares are owned by Koç Financial Services ("KFS"), which is 100% owned by Koç Group.
64 Yapı Kredi, "2022 Integrated Annual Report", (2023), p.235, at: https://assets.yapikredi.com.tr/WebSite/\_assets/pdf/en/corporate-socialresponsibility/integrated\_annual\_report\_2022.pdf
65 Yapı Kredi, "2022 Integrated Annual Report", (2023), p.621, at: https://assets.yapikredi.com.tr/WebSite/\_assets/pdf/en/corporate-socialresponsibility/integrated\_annual\_report\_2022.pdf
66 Yapı Kredi, "2023 Integrated Annual Report", (2024), p.130, at: https://www.yapikrediinvestorrelations.com/en/images/pdf/annual-reports/2023/yk23 integrated-annual-report.pdf
67 Yapı Kredi, "2022 Integrated Annual Report", (2023), p.120, at: https://assets.yapikredi.com.tr/WebSite/\_assets/pdf/en/corporate-socialresponsibility/integrated\_annual\_report\_2022.pdf
68 Yapı Kredi, "2022 Integrated Annual Report", (2023), p.88, at: https://assets.yapikredi.com.tr/WebSite/\_assets/pdf/en/corporate-socialresponsibility/integrated\_annual\_report\_2022.pdf
69 Yapı Kredi, "2022 Integrated Annual Report", (2023), p.87, at: https://assets.yapikredi.com.tr/WebSite/\_assets/pdf/en/corporate-socialresponsibility/integrated\_annual\_report\_2022.pdf
70 Yapı Kredi, "2022 Integrated Annual Report", (2023), p.124, at: https://assets.yapikredi.com.tr/WebSite/\_assets/pdf/en/corporate-socialresponsibility/integrated\_annual\_report\_2022.pdf
71 Yapı Kredi, "2022 Integrated Annual Report", (2023), p.75, at: https://assets.yapikredi.com.tr/WebSite/\_assets/pdf/en/corporate-socialresponsibility/integrated\_annual\_report\_2022.pdf
72 Green for Growth Fund, "About the Fund", at: https://www.ggf.lu/about-green-for-growth-fund
73 Yapı Kredi, "2022 Integrated Annual Report", (2023), p.161, at: https://assets.yapikredi.com.tr/WebSite/\_assets/pdf/en/corporate-socialresponsibility/integrated\_annual\_report\_2022.pdf
74 Presidency of Türkiye, "Credit Guarantee Fund", at: https://www.cbfo.gov.tr/en/licensing-organization/credit-guarantee-fund
75 Yapı Kredi, "2022 Integrated Annual Report", (2023), p.161, at: https://assets.yapikredi.com.tr/WebSite/\_assets/pdf/en/corporate-socialresponsibility/integrated\_annual\_report\_2022.pdf
76 Yapı Kredi, "2023 Integrated Annual Report", (2024), p.174, at: https://www.yapikrediinvestorrelations.com/en/images/pdf/annual-reports/2023/yk23 integrated-annual-report.pdf
programmes with the equity protocol signed by Export Development Corporation (İGE) in 2021.78 Within the scope, two separate programmes for women entrepreneurs and green transformation were launched in 2023, the Export Women Support Package provides loans of up to TRY 3 million (approximately USD 93,000) to female entrepreneurs who are exporters or potential exporters and the Energy Efficiency Programme for SMEs aims to facilitate the green transformation process of SMEs by providing financial support for energy and resource efficiency investments by exporters and potential exporters, with a guarantee from İGE.79 In addition, the Bank aims to support a total of 20,000 women entrepreneurs with its products and service packages over a five-year period until 2026. 80 In disaster relief, the Bank also provided TRY 580 million (approximately USD 29.57 million) in donations to the Agency for Disaster and Emergency Management (AFAD) immediately after the Istanbul earthquake in February 2023, and delivered more than 370,000 commodities, including water and food, and 5,000 container units for temporary shelters. 5,000 container units for temporary shelters were delivered to the affected areas. Overall, the Bank provided approximately TRY 650 million (approximately USD 33.14 million) in disaster relief funds. In addition, the Bank extended loans to all customers in severely affected cities for a period of one month without interest. Similarly, all retail loans, including to SMEs in the heavily affected cities, were also extended for six months without interest.81
Sustainalytics is of the opinion that the Yapı Kredi Sustainable Finance Framework is aligned with the Banks's overall sustainability strategy and initiatives and will further Yapı Kredi's action on its key environmental and social priorities.
Sustainalytics recognizes that the proceeds from the instruments issued under the Framework will be directed towards eligible projects that are expected to generate positive environmental and social impacts. However, Sustainalytics is aware that such eligible projects could also lead to negative environmental and social outcomes. Sustainalytics acknowledges that Yapı Kredi is not directly accountable for the environmental and social risks associated with the transactions financed but notes that the Bank is exposed to some key risks, including environmental and social risks associate to lending activities, predatory lending, money laundering and business ethics, and community relations.
Sustainalytics is of the opinion that Yapı Kredi is able to manage and/or mitigate potential risks through implementation of the following:
• In order to minimize the environmental and social risks associated with its lending activities, Yapı Kredi implemented the Environmental and Social Risk Assessment (ESRA) system in 2017. The ESRA system, which was based on local legislation and the International Finance Corporation's (IFC) Environmental and Social Performance Standards, 82 requires each loan application to comply with Yapı Kredi's Environmental and Social Policy and Exclusion List, in addition to the Bank's credit policies.83 As part of this assessment, all loan applications undergo a screening process based on the established threshold for various risk factors included in the Environmental and Social Risk Assessment Model, which was established as part of Yapı Kredi's Sustainability Management System. Through this process, the Bank determines risk categories based on the identified impacts and monitors the measures taken by the beneficiary institution to mitigate the risks and comply with the prepared Environmental and Social Action Plan.84 In addition, all new investments and project finance with an investment value of USD 10 million or more are subject to conduct an environmental and social assessment, which classifies the risk category (Category A to C) of the respective investment against the sector criteria of national and international standards.85 If the investments are categorized as Category A and B+ (high and medium-high risk), Yapı Kredi conducts further due diligence, including: i) Environmental Impact Assessment (EIA) documentation, 86 ii) annual monitoring and reporting of the projects by external and independent third parties, and iii) implement
84 Yapı Kredi, "Environmental and Social Policy", at:
78 Ibid.
79 Ibid.
80Yapı Kredi, "2022 Integrated Annual Report", (2023), p.124, at: https://assets.yapikredi.com.tr/WebSite/\_assets/pdf/en/corporate-socialresponsibility/integrated\_annual\_report\_2022.pdf
81 Yapı Kredi has shared its Social Term Loan Facility Lenders Presentation with Sustainalytics on a confidential basis.
82 IFC, "IFC Performance Standards on Environmental and Social Sustainability", (2012), at: https://www.ifc.org/wps/wcm/connect/c02c2e86-e6cd4b55- 95a2-b3395d204279/IFC\_Performance\_Standards.pdf?MOD=AJPERES&CVID=kTjHBzk
83Yapı Kredi, "2022 Annual Integrated Report", (2023), p.120, at: https://assets.yapikredi.com.tr/WebSite/\_assets/pdf/en/corporate-socialresponsibility/integrated\_annual\_report\_2022.pdf
https://www.yapikrediinvestorrelations.com/en/images/pdf/codeofethicsandpolicies/2020/yk\_environmental\_and\_social\_policy.pdf 85 Yapı Kredi, "2022 Annual Integrated Report", (2023), p.122, at: https://assets.yapikredi.com.tr/WebSite/\_assets/pdf/en/corporate-social-
responsibility/integrated\_annual\_report\_2022.pdf
86 Food and Agriculture Organization of United Nations, "Regulation on Environmental Impact Assessment", at: https://www.fao.org/faolex/results/details/en/c/LEX-FAOC151849/
an Environmental and Social Status Assessment/Action Plan and Monitoring Plan in accordance with IFC's Environmental and Social Sustainability Performance Standards.
Based on these policies, standards and assessments, Sustainalytics is of the opinion that Yapı Kredi has implemented adequate measures and is well positioned to manage and mitigate environmental and social risks commonly associated with the eligible categories.
All use of proceeds categories are aligned with those recognized by GBP, SBP, GLP or SLP. Sustainalytics has focused below on where the impact is specifically relevant in the local context.
Türkiye's total GHG emissions amounted to 564,4 MtCO2e 95 in 2021, increasing 7.7% against the previous year and 157.1% against 1990. 96 The energy sector accounted for 71.3% of the country's non-land-use GHG emissions in 2021.97 Within the energy sector, modern renewable energy98 met approximately 14% of the final
87 Yapı Kredi, "Code of Ethics and Business Conduct", at:
https://www.yapikrediinvestorrelations.com/en/images/pdf/codeofethicsandpolicies/2021/YKB\_Code\_of\_Ethics\_and\_Business\_Conduct.pdf 88 Yapı Kredi, "Responsible Lending Statement", at:
89 Yapı Kredi, "2022 Annual Integrated Report", (2023), p.114, https://assets.yapikredi.com.tr/WebSite/\_assets/pdf/en/corporate-socialresponsibility/integrated\_annual\_report\_2022.pdf
90 UN Global Compact, "The Ten Principles of the UN Global Compact", at: https://unglobalcompact.org/what-is-gc/mission/principles 91 Yapı Kredi, "2022 Annual Integrated Report", (2023), p.114, https://assets.yapikredi.com.tr/WebSite/\_assets/pdf/en/corporate-social-
responsibility/integrated\_annual\_report\_2022.pdf
92 Yapı Kredi, "Human Rights Statement", at:
https://www.yapikrediinvestorrelations.com/en/images/pdf/codeofethicsandpolicies/2020/yk\_human\_rights\_statement\_and\_appendices.pdf 93 Yapı Kredi, "Corporate Policy on Prevention of Laundering of Proceeds of Crime and Financing of Terrorism", at:
https://www.yapikrediinvestorrelations.com/en/images/pdf/ethical-principles-and-
policies/2022/Financial\_Group\_Corporate\_Policy\_on\_Prevention\_of\_Laundering\_Proceeds\_Of\_Crime\_and\_Financing\_of\_Terrorism.pdf 94 Yapı Kredi, "Environmental and Social Policy", at:
https://www.yapikrediinvestorrelations.com/en/images/pdf/codeofethicsandpolicies/2020/yk\_environmental\_and\_social\_policy.pdf 95 The total GHG emissions exclude emissions associated land use, land use change and forestry.
96 Turkish Statistical Institute, "Turkish Greenhouse Gas Inventory1990-2021", (2023), at:
https://enerji.gov.tr/Media/Dizin/EVCED/tr/%C3%87evreVe%C4%B0klim/%C4%B0klimDe%C4%9Fi%C5%9Fikli%C4%9Fi/UlusalSeraGaz%C4%B1EmisyonE nvanteri/Belgeler/Ek-1.pdf
97 Ibid.
98 Modern renewable energy sources are those that exclude traditional uses of biomass, such as burning collected wood.
energy consumption in Türkiye in 2022.99 In the same year, the share of electricity generated from renewables was 41.9% in Türkiye. 100 According to the Climate Action Tracker, Türkiye would need to phase out coal-fired power generation by 2030, increase the share of renewable electricity in its generation capacity to 80% by 2030 and fully decarbonize its electricity generation by 2050 to achieve its climate targets.101 Additionally, Türkiye needs to invest an estimated USD 5.3 billion to USD 7 billion annually until 2030 to finance its energy transition.102
In 2021, Türkiye committed to achieving nationwide net zero GHG emissions by 2053103 and updated its National Determined Contribution in 2023,104 setting a target to reduce GHG emissions, including land use, land use change and forestry by 41% compared to a business-as-usual scenario by 2030.105 Türkiye's 2022- 2035 National Energy Plan, aiming to contribute to regional and global energy security, as well as increase the share of domestic and renewable energy in electricity production,106 includes renewable energy targets of achieving 52.9 GW, 29.6 GW and 5.1 GW in solar, wind and geothermal and biomass power, respectively, by 2035.107 In 2023, the Turkish government has announced an investment of USD 10 billion in the electricity grid as part of its 2024-2030 energy efficiency plans, which also include a target of reducing 100 million tonnes of carbon emissions by 2030.108
Based on the above, Sustainalytics is of the opinion that Yapı Kredi's investments in renewable energy and energy efficiency projects will facilitate domestic renewable energy generation and energy efficiency improvement, create environmental benefits and contribute to Türkiye's national climate-related goals.
The Sustainable Development Goals were adopted in September 2015 by the United Nations General Assembly and form part of an agenda for achieving sustainable development by 2030. The instruments issued under the Yapı Kredi Sustainable Finance Framework are expected to help advance the following SDGs and targets:
| Use of Proceeds Category |
SDG | SDG target |
|---|---|---|
| Renewable Energy | 7. Affordable and Clean Energy |
7.2 By 2030, increase substantially the share of renewable energy in the global energy mix |
| Green Buildings | 11. Sustainable Cities and Communities |
11.3 By 2030, enhance inclusive and sustainable urbanization and capacity for participatory, integrated and sustainable human settlement planning and management in all countries |
| Clean Transportation | 11. Sustainable Cities and Communities |
11.2 By 2030, provide access to safe, affordable, accessible and sustainable transport systems for all, improving road safety, notably by expanding public transport, with special attention to the needs of those in vulnerable situations, women, children, persons with disabilities and older persons |
99 IEA, "Türkiye", at: https://www.iea.org/countries/turkiye/renewables
100 IEA, "Türkiye", at: https://www.iea.org/countries/turkiye/renewables
101 Climate Action Tracker, "Scaling up climate action: Türkiye", (2019), at: https://climateactiontracker.org/documents/672/CAT\_2019-11-
29\_ScalingUp\_TÜRKIYE\_FullReport\_ENG.pdf
102 Shura, "Financing the Energy Transition in Türkiye", (2019), at: https://www.shura.org.tr/wp-
content/uploads/2019/10/Financing\_the\_Energy\_Transition\_in\_Türkiye\_Executive\_Summary.pdf?\_ga=2.198476841.762103424.1667371630- 1005410882.1667282016
103 UNDP, "UNDP supports Türkiye in charting a course to net zero by 2053", (2021), at: https://www.undp.org/turkiye/press-releases/undp-supports-Türkiye-charting-course-net-zero-2053
104 UNFCCC, "Republic of Türkiye Updated First Nationally Determined Contribution", at: https://unfccc.int/sites/default/files/NDC/2023- 04/T%C3%9CRK%C4%B0YE\_UPDATED%201st%20NDC\_EN.pdf
105 Climate Action Tracker, "Türkiye", (2023), at: https://climateactiontracker.org/countries/Türkiye/targets/
106 Government of Türkiye, Ministry of Foreign Affairs, "Türkiye's International Energy Strategy", at: https://www.mfa.gov.tr/Türkiyes-energystrategy.en.mfa
107 Government of Türkiye: Ministry of Energy and Natural Resources, "Türkiye National Energy Plan", (2022), at:
https://enerji.gov.tr/Media/Dizin/EIGM/tr/Raporlar/TUEP/T%C3%BCrkiye\_National\_Energy\_Plan.pdf
108 Government of Türkiye: Ministry of Energy and Natural Resources, "Türkiye's reliance on imported energy resources declines in 2022: Energy Minister", (2023), at: https://enerji.gov.tr/news-detail?id=21219
| Energy Efficiency | 7. Affordable and Clean Energy |
7.3 By 2030, double the global rate of improvement in energy efficiency |
|---|---|---|
| Environmentally Sustainable Management of Living Natural Resources and Land Use |
15. Life on Land | 15.2 By 2020, promote the implementation of sustainable management of all types of forests, halt deforestation, restore degraded forests and substantially increase afforestation and reforestation globally |
| Terrestrial and Aquatic Biodiversity Conservation (Including the Protection of Coastal, Marine and Watershed Environments) |
15. Life on Land | 15.1 By 2020, ensure the conservation, restoration and sustainable use of terrestrial and inland freshwater ecosystems and their services, in particular forests, wetlands, mountains and drylands, in line with obligations under international agreements |
| Sustainable Water and Wastewater Management |
6. Clean Water and Sanitation |
6.3 By 2030, improve water quality by reducing pollution, eliminating dumping and minimizing release of hazardous chemicals and materials, halving the proportion of untreated wastewater and substantially increasing recycling and safe reuse globally |
| Pollution Prevention and Control |
12. Responsible Consumption and Production |
12.4 By 2020, achieve the environmentally sound management of chemicals and all wastes throughout their life cycle, in accordance with agreed international frameworks, and significantly reduce their release to air, water and soil in order to minimize their adverse impacts on human health and the environment |
| Eco-efficient and/or Circular Economy Adapted Products, Production Technologies and Processes |
12. Responsible Consumption and Production |
12.5 By 2030, substantially reduce waste generation through prevention, reduction, recycling and reuse |
| Climate Change Adaptation |
13. Climate Action | 13.1 Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries |
| Access to Essential Services – Healthcare |
3. Good Health and Well Being |
3.8 Achieve universal health coverage, including financial risk protection, access to quality essential health-care services and access to safe, effective, quality and affordable essential medicines and vaccines for all |
| Access to Essential Services – Education |
4. Quality Education | 4.a Build and upgrade education facilities that are child, disability and gender sensitive and provide safe, non-violent, inclusive and effective learning environments for all |
| Access to Essential Services – Disaster and Emergency Relief Following Natural Disasters or during Health Pandemics |
9. Industry, Innovation and Infrastructure |
9.1 Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder infrastructure, to support economic development and human well-being, with a focus on affordable and equitable access for all |
| Affordable Basic Infrastructure – Water and Sanitation |
6. Clean Water and Sanitation |
6.2 By 2030, achieve access to adequate and equitable sanitation and hygiene for all and end open defecation, paying special attention to the needs of women and girls and those in vulnerable situations |
| Affordable Basic Infrastructure – Telecommunications |
9. Industry, Innovation and Infrastructure |
9.1 Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder infrastructure, to support economic development and human well-being, with a focus on affordable and equitable access for all |
|---|---|---|
| Affordable Basic Infrastructure – Transportation |
11. Sustainable Cities and Communities |
11.2 By 2030, provide access to safe, affordable, accessible and sustainable transport systems for all, improving road safety, notably by expanding public transport, with special attention to the needs of those in vulnerable situations, women, children, persons with disabilities and older persons |
| Affordable Basic Infrastructure – Energy Accessibility |
7. Affordable and Clean Energy |
7.1 By 2030, ensure universal access to affordable, reliable and modern energy services |
| Food Security – Access to Food |
2. Zero Hunger | 2.1 By 2030, end hunger and ensure access by all people, in particular the poor and people in vulnerable situations, including infants, to safe, nutritious and sufficient food all year round |
| Employment Generation and Programmes Designed to Prevent and/or Alleviate Unemployment Stemming from Socioeconomic Crises, including through the Potential Effect of MSME Financing |
1. No Poverty | 1.4 By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership and control over land and other forms of property, inheritance, natural resources, appropriate new technology and financial services, including microfinance |
| Affordable Housing | 11. Sustainable Cities and Communities |
11.1 By 2030, ensure access for all to adequate, safe and affordable housing and basic services and upgrade slums |
Yapı Kredi has developed the Yapı Kredi Sustainable Finance Framework under which it may issue green, blue, social and Sustainability Finance Instruments, namely bonds, private placements, commercial papers, loans, promissory notes, trade finance instruments (cash and contingent non-cash facilities that include loans, forfaiting, documentary collections, letters of credit, letters of guarantee, promissory notes), customers deposits and other related sustainable finance liabilities. Yapı Kredi intends to use the proceeds to finance projects in the following categories: Renewable Energy; Green Buildings; Clean Transportation; Energy Efficiency; Environmentally Sustainable Management of Living Natural Resources and Land Use; Terrestrial and Aquatic Biodiversity Conservation (Including the Protection of Coastal, Marine and Watershed Environments); Sustainable Water and Wastewater Management; Pollution Prevention and Control; Ecoefficient and/or Circular Economy Adapted Products, Production Technologies and Processes; Climate Change Adaptation; Access to Essential Services - Healthcare; Access to Essential Services - Education; Access to Essential Services - Disaster and Emergency Relief Following Natural Disasters or During Health Pandemics; Affordable Basic Infrastructure - Water and Sanitation; Affordable Basic Infrastructure - Telecommunications; Affordable Basic Infrastructure - Transportation; Affordable Basic Infrastructure – Energy Accessibility; Food Security - Access to Food; Employment Generation and Programmes Designed to Prevent and/or Alleviate Unemployment Stemming from Socioeconomic Crises, including through the Potential Effect of MSME Financing; Affordable Housing. Sustainalytics considers that the eligible projects are expected to provide positive environmental and social impacts.
The Yapı Kredi Sustainable Finance Framework outlines a process for tracking, allocation and management of proceeds, and makes commitments for reporting on allocation and impact. Sustainalytics considers that the Yapı Kredi Sustainable Finance Framework is aligned with the overall sustainability strategy of Yapı Kredi and that the use of proceeds will contribute to advance the UN Sustainable Development Goals 1, 2, 3, 4, 6, 7, 9, 11, 12, 13 and 15. Additionally, Sustainalytics is of the opinion that Yapı Kredi has adequate measures to identify, manage and mitigate environmental and social risks commonly associated with the eligible projects.
Based on the above, Sustainalytics is confident that Yapı Kredi is well positioned to issue the Sustainable Finance Instruments and that the Yapı Kredi Sustainable Finance Framework is robust, transparent and in alignment with the four core components of the Green Bond Principles 2021, Social Bond Principles 2023, Green Loan Principles 2023 and Social Loan Principles 2023.
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