According to the Organization for Economic Co-operation and Development (OECD) projections, the future level of climate finance, including the $100 billion target, depends on the number of private sector sources that can be mobilized for climate investment. This situation inevitably raises the question: What can the public sector do to help the private sector mobilize more climate finance?
As agreed in the Paris Agreement, developed countries have high historical responsibilities and should therefore be the leading mobilizers of climate finance flows to developing countries. Turkey’s historical responsibility for global climate change is less than 1%. As a developing country, it has therefore repeatedly emphasized the need for climate justice in the provision of climate finance.
On the other hand, there are steps that developing countries can take at the national level to help channel finance from different sources for climate investment.
A hub for investments
As a developing country with high mitigation potential and a long track record of successful climate protection projects, Turkey continues to be an attractive destination for climate protection investments. In recognition of this fact, a Memorandum of Understanding (MoU) on climate finance has been signed between Turkey and the members of the World Bank Group (the International Bank for Reconstruction and Development (IBRD) and the International Finance Corporation (IFC)), the European Bank for Reconstruction and Development (EBRD), the UN, France and Germany. The MoU pledges over $3.2 billion (TL 47.4 billion) in climate finance to Turkey over three years.
However, it is evident that Turkey needs larger amounts of climate finance to transition to a low-carbon economy and achieve its long-term climate goals, including its net-zero emissions target by 2053. The emphasis in Turkey is on inclusive, sustainable and humanitarian development the hallmark of their green development revolution. Therefore, Turkey’s development vision sees climate change as an opportunity, not a threat. Turkey supports the transition from a linear to a circular economy and recognizes the importance of pursuing development priorities in a sustainable and responsible manner.
The UK-Turkey Conference
The UK-Turkey Green Finance Conference recently held in London was an event that gave Turkey the opportunity to share its development vision with international investors. The conference, held in the heart of London’s financial district, was well attended by hundreds of participants ranging from investment banks to public institutions.
Its main objective was to facilitate cooperation between public and private financial actors in both countries and to help accelerate the public policy and regulatory framework that improves green finance in Turkey. Accordingly, one of the focal points of the conference was the actions taken by the Turkish public sector to facilitate private sector access to climate finance and pave the way for climate investments.
During the conference, the Turkish public sector shared the details of its supportive and regulatory role in mobilizing financial markets and the private sector for climate-friendly investments. Public policies, projects and targets in multiple sectors such as renewable energy (particularly geothermal, wind and solar), green hydrogen, sustainable waste management, clean transport and green buildings were featured during the event.
For more climate finance
In this context, Turkey is preparing seven key policies that will facilitate climate finance and boost investor confidence.
The country is working on drafting a national climate protection law this year. The law will mark the legal process to reach Turkey’s goal of net-zero emissions by 2053. By adopting a binding commitment on climate change in the form of legislation, Turkey is sending a strong signal to international investors that it is fully committed to playing its part in the global action against climate change.
Turkey will update and publish its nationally determined contribution this year, which will announce more ambitious sectoral and country-wide climate targets. It will guide private sector investment decisions by announcing which sectors and activities will be prioritized in Turkey’s climate change mitigation efforts.
With the ratification of the Paris Agreement, Turkey’s fight against climate change has gained new impetus. Turkey’s net-zero emissions targets will also contribute to the Paris Agreement’s 1.5 degrees Celsius target. Turkey will develop a long-term climate strategy that will identify and promote the actions needed to achieve its net-zero emissions target. Many investors have a long-term investment horizon; Therefore, they often need long-term commitments to tie their money into climate-friendly investments from developing countries.
Developing countries can also encourage investment by creating long-term plans and strategies specifically for climate finance. Turkey will develop a National Climate Finance Strategy, outlining our country’s overall strategy to make financial flows compatible with low-carbon and climate-resilient development as enshrined in the Paris Agreement.
At the end of 2020, global wealth managers managed more than $100 trillion. Approximately one-third of these assets are managed by investors sensitive to environmental, social and corporate governance issues. In Turkey, the main players in the financial markets are banks; They therefore play a crucial role in redirecting financial savings into clean investments. For example, in September 2021, banks in Turkey provided $22.6 billion in financing for renewable energy alone. In this context, Turkey will develop a national green taxonomy, which will classify which economic activities are considered green based on a set of technical criteria, as a guide for international and domestic financial stakeholders. The taxonomy will help protect investors from the risk of greenwashing.
Carbon pricing mechanisms force companies to internalize the cost of the carbon they emit and to include the carbon price in their economic decisions. As of 2021, 45 national jurisdictions have introduced carbon pricing mechanisms, many of which are countries with net-zero emissions commitments. Turkey will start pilot implementation of an emissions trading scheme in 2024.
The global financial markets are characterized by the variety of green financial instruments such as green bonds, green sukuks, green loans and mortgages. Turkey will encourage the use of such instruments by its financial institutions and companies, which will help diversify and expand its existing investor base. For example, many of our public institutions have already taken steps to encourage the use of green financing instruments. In 2022, the Capital Markets Board of Turkey (SPK) published Guidelines on Green and Sustainable Debt Instruments and Lease Certificates, which defined these green financial instruments and laid down principles for their use in line with existing international standards. In 2021, the Banking Regulation and Supervision Agency of Turkey (BDDK) published its Sustainable Banking Strategic Plan (2022-2026) to set out the overall strategy and policy for the Turkish banking sector to lay the foundations for sustainable banking practices. Finally, in 2021, the Ministry of Finance and Finance published its Sustainable Finance Framework to issue green or sustainable government bonds or leasing certificates in line with international standards.
The cost of the investments we implement for the green transition is less than the cost of the climate change catastrophes we face if we do not step up our mitigation and adaptation efforts. Climate finance permeates all aspects of climate change policy, as finance is essential for the implementation of climate investments. Turkey’s national efforts recognize the importance of climate finance for its national climate goals and aim to enhance Turkey’s status as an attractive destination for global climate finance flows. Turkey’s growing support for climate finance from its international partners will continue to yield results that contribute to the global fight against climate change.
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