Recent Developments
The Communiqué on Banks’ Calculation of Green Asset Ratio (the “Communiqué“), which stipulates the procedures and principles regarding the calculation and reporting of the green asset ratio and other key performance indicators determined for the calculation of banks’ contribution to the financing of environmentally sustainable economic activities was published in the Official Gazette dated 11 April 2025 and numbered 32867.
What Does the Communiqué Offer?
Primary Key Performance Indicator
According to the Communiqué, the primary key performance indicator for the determination of Turkish banks’ contribution to environmental sustainability is the green asset ratio.
The green asset ratio is calculated by dividing the compliant assets in banks’ unconsolidated balance sheets by the total assets within the scope of green asset ratio. Total assets within the scope of the green asset ratio are calculated as the sum of the gross amount of on-balance sheet financial assets measured at amortized cost after subtracting receivables from public administrations under the central government, central banks and supranational assets, and assets held for trading accounts.
Eligible and Compliant Assets
The Communiqué provides that compliant assets are eligible assets which satisfy certain requirements. In this regard, eligible assets are calculated as the sum of the gross amount of on-balance sheet financial assets that are related to all economic activities covered by the technical screening criteria, regardless of whether they meet the criteria, within the total assets covered by the green asset ratio, measured at amortized cost.
The requirements for eligible assets to be considered as compliant assets are as follows:
- contributing significantly to one or more of the environmental objectives;
- posing no significant harm to other environmental objectives; and
- providing minimum social security measures.
Compliant assets are calculated as the sum of the gross amount of on-balance sheet financial assets measured at amortized cost that are related to economic activities and satisfy all three requirements above at the same time.
Pursuant to Article 5 of the Communiqué, environmental objectives cover;
- climate change mitigation;
- adaptation to climate change;
- transition to a circular economy;
- sustainable use and conservation of water and marine resources;
- prevention and control of pollution; and
- preservation and restoration of biodiversity and ecosystems.
However, for the time being, Article 11 sets “climate change mitigation” as the only environmental objective to be taken into account in determining compliant assets, and authorizes the Banking Regulatory and Supervisory Authority (the “BRSA“) to include one or more of the environmental objectives within the scope of green asset ratio calculation.
The BRSA will also determine (i) the criteria for “posing no significant harm to the environment”, (ii) the minimum social security measures and (iii) the technical screening criteria.
Secondary Key Performance Indicators
According to the Communiqué, secondary key performance indicators for Turkish banks’ contribution to environmental sustainability will be “compliant assets/eligible assets” and “eligible assets/total assets covered by green asset ratio” ratios.
Reporting
Under the Communiqué, banks will be obliged to establish documentation, classification, monitoring and control processes and related policies for the assets covered by the green asset ratio, make the necessary arrangements in their databases and establish a reporting system.
Banks’ reporting obligation under the Communiqué will start on 30 June 2025 and banks will make their green asset ratio reporting within the periods to be determined by the BRSA. The BRSA will also be authorized to determine and differentiate the reporting obligation on the basis of bank type and size.
Conclusion
The Communiqué introduces a mandatory measurement of banks’ contribution to the financing of environmentally sustainable economic activities.
