Turkey: Turkish Capital Markets Board Issues Guideline on Green Debt Instruments, Sustainable Debt Instruments, Green Lease Certificates and Sustainable Lease Certificates
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March 2022 – Capital Markets Board of Turkey (“CMB“) recently published guidelines on green debt instruments, sustainable debt instruments, green lease certificates and sustainable lease certificates (“Guideline“), which encourage the financing of capital investments that can contribute positively to environmental sustainability. The basic principles to be followed and the minimum elements of the framework document to be prepared are also set out in the guideline.
The CMB also announced that it had decided to apply a 50% reduction on the fees of the board of directors to be charged for the issuance of capital market instruments under the guideline.
Below we summarize the main highlights of the guideline.
The scope of the guideline has been determined
The basic principles and obligations set out in the Green Debt Guideline also apply to sustainable debt instruments, green lease certificates and sustainable lease certificates. The capital market instruments specified in the guideline can qualify as green-themed capital market instruments provided that they meet the conditions and fulfill the obligations set out in the guideline.
For the issuance of green debt instruments abroad, the framework document must be prepared in accordance with the standards for foreign green debt and must be approved by the board of directors. A second-party opinion regarding the compliance of the framework document with foreign standards must also 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 blue domestic debt securities to be issued under the International Capital Markets Association’s Green Bond Principles (“ICMA“) will also need to be done in accordance with the guideline.
The obligations determined for the issuers in the directive must be fulfilled by the asset leasing company and/or the user of the funds in the issuances of green lease certificates. The issuer’s framework document must identify the matters for which it is responsible and that the green debt instrument meets 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 exposed
For emissions to be made under the Guideline, a separate emission cap must be obtained from the CMB. Issuers must submit their framework document and a second party opinion to the CMB indicating that the framework document and the green debt instrument are compatible with the Guideline, as well as other information and documents, when applying for a approval of the offering document or offering circular. Issuers must also publicly disclose their second party notice and framework document as well as the issuance document regarding the issuance cap or information memorandum. The guideline lists (non-exhaustive) examples of types of eligible green projects that fall within the scope of the guideline.
The elements that green debt instruments must have to be included in the guideline are:
- the funds from the issuance of green debt instruments should be used as soon as possible for green projects, and the period provided for this should be included in the framework document;
- the issuer of green debt instruments should disclose the project evaluation and selection process to investors, as well as the elements determined in the guideline;
- the net funds from the issuance of the green debt instrument must be managed by allocating them exclusively to the project concerned; and
- relevant reports should be written in accordance with the guidelines.
The following conditions must be met for the issuance of green debt securities:
- 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;
- the funds 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 complies with the guideline.
The procedures for the use, management and external evaluation of the funds have been determined
The net balance of the fund should be allocated to eligible green projects during the relevant period and managed as long as the green debt instrument is in circulation. The issuer must publicly disclose information on how it intends to manage the net funds and must also include in the framework document the expected period for the implementation of the green projects for which the funds will be used. Funds from green debt issuance can be managed on a case-by-case basis or aggregated across multiple green bonds, 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 from the issue have been used – up-to-date information on the use of funds as well as as on significant developments, if any, within the framework of the report on the use of funds, as well as the estimated and/or actual environmental impacts within the framework of the impact report. These reports will continue until the full amount of the fund is used. The use of funds report should be prepared after all the funds obtained from the issuance have been used, and the audit opinion on the use of funds should be announced to the public on the PDP and on the website of the transmitter.
According to the guideline, the types of external valuation services that issuers can receive are specified as second party opinion, verification, certification and rating/rating of green debt instruments.
*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 on the subject. Specialist advice should be sought regarding your particular situation.
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