The Capital Markets Board (the “CMB“) published the Guidelines on Green and Sustainable Debt Instruments and Lease Certificates on 24 February 2022 through the its principle decision numbered i-SPK 128.18 (dated 24 February 2022 and no 10/296) (the “Guidelines“) within the scope of the actions and priorities of the 11th Development Plan, 2021 Economy Reforms Package and Paris Climate Treaty. The Guidelines are prepared based on the ICMA Green Bond Principles dated June 2021.
Green debt instruments and lease certificates subject to the Guidelines are debt instruments and lease certificates, which are framed with the four main components of the Guidelines, as explained below and the funds received from which are used exclusively for the financing or re-financing of convenient green projects.
Sustainable debt instruments and lease certificates are defined under the Guidelines as debt instruments and lease certificates, the funds received from which are exclusively used for the financing or re-financing of projects having environmental and social positive impacts.
With the Guidelines, the CMB aims the execution of the issuance of green and sustainable debt instruments and lease certificates in line with the good practices of the international standards and the increase in the transparency, honesty, consistency and comparability in the green financing projects contributing to the environmental sustainability by regulating the fundamental principles to be followed during green project financing and setting forth the minimum components of the framework certificate.
The Guideline also state that capital markets instruments such as blue debt instruments, asset guaranteed securities or covered bonds, asset and mortgage backed securities and project backed securities, real estate certificates may qualify green/sustainable debt instruments provided that they have the necessary qualifications set forth under the Guidelines and the undertakings set forth under the Guidelines are fulfilled by the issuer.
Conditions: As per the Guidelines, green/sustainable debt instruments shall meet the following conditions:
- The issuer shall undertake that the issuance will be made in line with the procedures and principles set forth under the Guidelines under the framework certificate.
- The fund received as a result of the issuances shall be used for the whole or partial financing or refinancing of the new and/or current green projects defined as the projects contributing to environmental purposes such as decrease of the effects of the climate change, adaptation to the climate change, protection of natural resources and bio-diversity, prevention and control of pollution.
- The compliance of the framework certificate with the Guidelines shall be assessed by the second party among independent agencies experienced in environmental issues.
Four Main Components: The Guidelines set forth four main components of green/sustainable debt instruments issuance, which are summarized below:
- Use of Funds Received from the Issuance: The funds received from the issuance shall be used for green projects as soon as possible and the framework certificate shall refer to the anticipated period for the use of funds received from the issuance.
- Project Assessment and Election Process: In the framework certificate, the Issuer shall disclose certain information to the investors as specified under the Guidelines such as the relationship of the convenient green projects with the international undertakings i.e United Nations Sustainability Development Purposes and Paris Climate Treaty.
- Management of Funds Received from the Issuance: Net fund balance shall be managed by allocating to convenient green projects so long as the green debt instruments are in circulation. The issuer shall disclose how it plans to manage the fund balance until allocated to the convenient green projects.
- Reporting: The issuers shall disclose the material developments, if any, and recent information regarding use of funds at the Public Disclosure Platform, if the issuer is a member, or at its website once a year upon issuance and in any case upon use of all funds.
Verification opinion on internal monitoring method regarding the use of funds and the use of funds report to be prepared upon use of all funds received from the issuance shall be disclosed at the Public Disclosure Platform, if the issuer is a member, or at its website once a year upon issuance and in any case upon use of all funds.
External Audit: Issuers may obtain second party opinion, verification, certification and rating/certification of green debt instrument services from independent external audit firms during the process of issuance of green debt instruments.