August | Sustainability Bulletin

1. The Association of Air Conditioning Exporters Unveils Sustainability Action Plan

The Association of Air Conditioning Exporters (“İSİB”), which brings together all exporting companies in the air conditioning sector and works to enhance the sector’s export potential, has announced its Sustainability Action Plan.

The primary objective of this plan is to encourage companies within the sector to take steps towards sustainability and green transformation, with the ultimate goal of increasing the sector’s international competitiveness.

The action plan, announced during a press conference organized by the Turkish Exporters Assembly (“TİM”), encompasses six key areas: awareness, governance, financial sustainability, environmental sustainability, social sustainability, and technology and innovation. Additionally, the plan outlines strategic goals such as analyzing the current level of awareness and needs through stakeholder engagement and surveys, promoting the use of software programs for calculating greenhouse gas emissions, and leveraging international incentive programs, as well as initiating discussions to enhance national support mechanisms.

TİM President Mustafa Gültepe emphasized that with the green deal process, the global trade system will change, and leading companies must take initiative in this reporting process. İSİB Chairman Mehmet Şanal highlighted that the air conditioning sector is energy-intensive and that the plan aims to contribute to the sector’s transformation through awareness, governance, and sustainability—financial, social, and environmental—alongside technology and innovation.

Şanal also stressed the significant risks posed by energy directives and the green deal in Europe, noting that the introduction of these measures could potentially reduce Turkey’s market share in Europe. However, he also pointed out the substantial opportunities within the sector, such as in heat pumps, indoor air quality solutions, and insulation, and expressed confidence that the action plan will enhance the sector’s competitiveness by encouraging investments in these areas. Şanal concluded by underscoring that sustainability has become a necessity and that this transformation will be achieved through the collaboration of public institutions, the private sector, and civil society organizations. He added that efforts would continue in areas such as the adoption of clean and smart technologies, circular economy practices, and the use of renewable energy, noting that last year, the sector achieved exports worth $7.2 billion, with 44% directed to EU countries.

For more information: https://www.isib.org.tr/Dokumanlar/surdurulebilirlik-eylem-plani-raporu-2024.pdf

• Green Deal Working Group Annual Activity Report Published

The Ministry of Trade has released the Green Deal Working Group Annual Activity Report for 2023 on June 25, 2024.

The report details activities in various areas, including border carbon regulations, green and circular economy, green financing, clean, economic, and secure energy supply, sustainable agriculture, sustainable smart transportation, combating climate change, diplomacy, and awareness-raising activities.

Furthermore, the report comprehensively covers the activities of organizations such as the Turkish Exporters Assembly, the Union of Chambers and Commodity Exchanges of Turkey, the Foreign Economic Relations Board, the Turkish Industry and Business Association, the Independent Industrialists and Businessmen’s Association, the Organized Industrial Zones Supreme Organization, the Istanbul Chamber of Industry, the PAGEV Turkish Plastics Industry Research Development and Education Foundation, and the Turkish Enterprise and Business Confederation.

Key developments within the scope of the action plan include:

• Green and Circular Economy: Strategies for circular economy have been developed, and incentives have been provided for recycling and waste management projects.
• Border Carbon Regulations: Efforts to align with carbon border regulations have been accelerated, with goals set to enhance the competitiveness of exporting companies.
• Green Financing: The use of green financing instruments has been encouraged, and new financing sources have been provided for sustainable projects.

For more information: https://ticaret.gov.tr/dis-iliskiler/yesil-mutabakat/yesil-mutabakat-eylem-plani-ve-calisma-grubu/yesil-mutabakat-calisma-grubu-yillik-faaliyet-raporlari/ymcg-2023-yili-faaliyet-raporu

• Turkey Wealth Fund Governance and Sustainability

The Sovereign Wealth Fund annually ranks all sovereign wealth funds based on criteria related to governance, sustainability, and resilience. This ranking is based on a total of 25 different factors, comprising 10 for governance, 10 for sustainability, and 5 for resilience.

According to the 2024 report, the Turkey Wealth Fund (“TVF”) has achieved a Governance, Sustainability, and Resilience (GSR) score of 76%, ranking 4th among the top five funds with the highest improvement and placing within the top 20 funds with the highest scores.

The Global SWF Report highlights TVF’s recent strides in the field of ESG. Aiming to enhance the sustainability performance of its portfolio companies, TVF presents its efforts to stakeholders through an integrated annual report. These reports, published annually by TVF, are prepared in accordance with the internationally recognized Global Reporting Initiative standards to evaluate and report on companies’ environmental, governance, and social performances.

For more information: https://www.tvf.com.tr/iletisim/duyurular/iletisim-duyurular-2024-1644496478044/tvfden-yonetisim-ve-surdurulebilirlik-alaninda-uluslararasi-basari

• ING Turkey Renews Sustainability-Linked Syndicated Loan

ING Turkey, a subsidiary of the ING Group, has successfully renewed its sustainability-linked syndicated loan, raising €176 million with demand exceeding its target by 2.5 times, thanks to an increased number of participating banks from various countries. The loan, which is intended to finance foreign trade, has a 367-day maturity and bears a cost of SOFR + 2.50% for USD and Euribor + 2.25% for EUR, in line with market dynamics. As part of the renewed loan, ING Turkey has met three sustainability performance criteria. Additionally, should the bank achieve the performance criteria related to the amount of green and social loans provided and its Organizational Health Index (OHI) score, the costs of the syndicated loans will be improved.

Commenting on the matter, ING Turkey’s CEO Alper Gökgöz stated, “We believe that the financial sector has a transformative power in achieving a sustainable future, and we are progressing towards our operational goal of net-zero carbon emissions. We approach sustainable finance with a strategic and holistic perspective. Through this approach, we not only support our clients in creating their sustainable finance roadmaps but also contribute to their access to international credit and debt capital markets.”

For more information: https://www.ing.com.tr/F/Documents/INGTurkiye_surdurulebilirlik_baglantili__sendikasyon__kredisini__yeniledi-16072024.pdf

• Ecodesign Regulation for Sustainable Products Published in Official Gazette

The Ecodesign Regulation for Sustainable Products (“ESPR”), published in the EU Official Gazette in June 2024, came into effect as of July 2024. The ESPR plays a crucial role in achieving the goals of the 2020 Circular Economy Action Plan, contributing to the European Union’s climate and environmental objectives, doubling the circularity rate in material use, and achieving energy efficiency targets by 2030.

The ESPR aims to significantly improve the energy performance and other environmental sustainability aspects of products offered in the EU market. This marks a significant step towards promoting more sustainable business models and enhancing the overall competitiveness and resilience of the EU economy.

This regulation replaces the existing Ecodesign Directive (2009/125/EC) and establishes a framework for setting ecodesign requirements for specific product groups. In the implementation process of this framework legislation, a prioritization study will be conducted first. Subsequently, a work plan outlining the products to be addressed under the ESPR and the measures applicable to these products will be published within a specific timeframe. Thereafter, the development of product rules will commence, based on inclusive planning, detailed impact assessments, and regular stakeholder consultations.

For more information: https://green-business.ec.europa.eu/implementing-ecodesign-sustainable-products-regulation_en

• Germany’s Federal Court of Justice Rules Companies Must Justify ‘Climate-Neutral’ Claims in Advertising

The German Federal Court of Justice has ruled that the term “climate-neutral” is vague and should only be used in advertising when it carries a specific meaning. The court warned that if advertising claims are unsubstantiated, it could constitute a violation of the German Unfair Competition Act.

The ruling arose from a case involving a German company that produces fruit gum and licorice products. The company’s advertisement, which claimed that “since 2021, the company has been producing all its products in a climate-neutral manner” and referenced a website featuring a logo indicating “climate-neutrality,” was deemed misleading. The firm argued that the production process was not carbon-neutral and that the advertisement contained misleading statements. In its press release, the court highlighted that the advertisement was ambiguous, noting that the term “climate-neutral” could be understood to mean both reducing CO2 emissions and providing compensation for CO2 emissions.

This decision by the German Federal Court of Justice may pave the way for similar lawsuits and lead to new regulations aimed at stricter scrutiny of advertising claims. In the future, companies using terms like “climate-neutral” in their advertising will be required to provide more transparent and detailed explanations. This will help protect consumers from misleading information and encourage companies to present their environmental claims more accurately.

For more information: https://juris.bundesgerichtshof.de/cgi-bin/rechtsprechung/document.py?Gericht=bgh&Art=pm&pm_nummer=0138/24

• China Development Bank Increases Financial Support for Green and Low-Carbon Industries

China has committed to peaking carbon emissions by 2030 and achieving carbon neutrality by 2060. In line with this commitment, the China Development Bank has significantly increased its financial support for green and low-carbon industries. In the first five months of the year, the bank provided over 200 billion yuan (approximately $28 billion) in green loans, with around 110 billion yuan allocated to carbon reduction loans. The bank will continue to diversify its green financial products and services to ensure sustainable economic and social development, actively supporting sectors such as carbon reduction, energy conservation, greening, and disaster prevention.

The China Development Bank has taken a major step by substantially increasing its financial support for green and low-carbon industries. In the first five months of the year, the bank provided more than 200 billion yuan in green loans, with 110 billion yuan of this amount dedicated to carbon reduction loans. The proportion of green loans outpaced the growth rate of other types of loans offered by the bank.

Moving forward, the China Development Bank plans to enhance the quality and efficiency of its green financial services and expand its support for the green transformation in key sectors such as energy, water resources, transportation, and urban-rural construction. These initiatives demonstrate China’s commitment to its goal of peaking carbon emissions by 2030 and achieving carbon neutrality by 2060.

For more information: https://www.finansgundem.com/haber/cinden-28-milyar-dolarlik-yesil-kredi/1804452

• ESMA Issues Public Statement on the Implementation of ESRS

On July 5, 2024, the European Securities and Markets Authority (“ESMA”) issued a public statement regarding the initial implementation of the European Sustainability Reporting Standards (“ESRS”).

The statement highlights critical areas for companies to consider as they prepare to publish their first CSRD reports. These areas include:

• Establishing governance structures and internal control systems that can support high-quality sustainability reporting,
• Accurately designing and implementing double materiality assessments, while maintaining transparency about the process,
• Clearly indicating the use of transitional relief measures,
• Preparing a sustainability statement that is clear and suitable for digitization,
• Ensuring alignment between financial information and sustainability data.

The development of robust internal control mechanisms and data collection systems to support sustainability reporting is emphasized as a key point in the public statement. A strong data collection process is crucial for compliance with ESRS reporting standards and for conducting transparent double materiality assessments.

For more information: https://www.esma.europa.eu/sites/default/files/2024-07/ESMA32-992851010-1597_-_ESRS_Statement.pdf