Sustainability and Capital Markets

31.07.2023 Melis Uslu


In 1987, the United Nations World Commission on Environment and Development published a report entitled “Our Common Future”[1]. The report drew attention to the causes of global environmental problems and defined sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.

Sustainability is shaping companies and capital markets as a transformative force. Capital markets are evolving towards an approach that takes into account not only direct financial gains but also social and environmental impacts. As a reflection of the sustainability transformation in capital markets, environmental, social and corporate governance criteria are becoming increasingly important. Investors and other capital market players now pay attention not only to financial performance, but also to companies’ environmental impact, social contributions and ethical governance practices. This leads to environmental, social and corporate governance criteria playing an important role in investment decisions.

The impact of sustainability on companies is reflected in the projects they undertake and the financing of these projects. In this context, green finance offers an innovative approach to financing environmentally friendly projects. Green bonds are used by companies to attract investors who are particularly interested in investing in environmental and energy efficiency projects.

Sustainability and Capital Markets
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Some Capital Markets Regulations on Sustainability

In line with international developments, conferences and decisions on sustainability, some of the capital markets regulations are amended and new practices are introduced.

Corporate Governance Communiqué and Sustainability Principles

The Corporate Governance Principles annexed to the Capital Markets Board’s Communiqué No. II-17.1 on Corporate Governance (“Corporate Governance Communiqué”) include general principles on sustainability such as “(...) annual reports shall include information on (...) social rights of employees and (...) corporate social responsibility activities related to company activities that have environmental consequences”; “The company shall be considerate of its social responsibilities and comply with regulations and ethical rules related to environment, consumers, public health.”. These regulations are not listed among the principles that corporations are obliged to comply with pursuant to Article 5 of the Communiqué on Corporate Governance.

With the amendments made to the Corporate Governance Communiqué on 02.10.2020[2], sustainability principles are introduced in capital markets legislation. Although the implementation of sustainability principles is not mandatory, companies[3] whose shares are publicly offered or deemed to be publicly offered shall disclose to the public whether they comply with the sustainability principles in line with the “comply or explain” principle. Accordingly, a justified explanation on whether the sustainability principles are applied or not, and an explanation on the effects of non-compliance on environmental and social risk management shall be included in the annual reports.

In line with the amendments to the Corporate Governance Communiqué, the Capital Markets Board published the Sustainability Principles Compliance Framework and the Sustainability Principles report sample. In the Sustainability Principles Compliance Framework, sustainability principles are analyzed under the headings of environmental, social and corporate governance principles. The Sustainability Principles Compliance Framework stipulates that companies shall establish internal policies, strategies and targets on environmental, social and corporate governance issues. These policies, strategies and targets are implemented and monitored by identifying responsible committees and key performance indicators. Transparency and reliability are emphasized in reporting.

BIST Sustainability Index

The BIST Sustainability Index, which includes companies with high sustainability performance, was created in order to raise awareness about sustainability among Borsa Istanbul companies and to provide investors with information on companies’ sustainability policies, projects and targets. In this way, companies with high sustainability performance can be more easily identified by investors who want to invest in companies that stand out in this respect.

In determining the companies to be included in the index, the sustainability valuation results of Refinitv Information Limited are used. Publicly available information is taken into account in the valuations.

Guidelines on Green Debt Instruments, Sustainable Debt Instruments, Green Lease Certificates and Sustainable Lease Certificates

Guidelines on Green Debt Instruments, Sustainable Debt Instruments, Green Lease Certificates, and Sustainable Lease Certificate (“Guidelines on Green Debt Instruments”) have been adopted with the Capital Markets Board’s principle decision numbered i-SPK 128.18. The Guidelines on Green Debt Instruments are based on the International Capital Markets Association (ICMA) Green Bond Principles.

In the Green Debt Instruments Guidelines, green debt instruments are defined as: “Any listed or non-listed debt instruments, framed by the four core components of this Guidelines, whose proceeds will be used exclusively for partial or total financing or refinancing of new and/or existing green projects in conformity with the eligible green project definition”; and a green project is defined as “A project, as specified in the Section of Use of Proceeds of this Guidelines, that contributes to environmental objectives such as mitigation of effects of climate change, adaptation to climate change, protection of natural resources, protection of biodiversity and control and prevention of pollution”. According to the Guidelines, the funds obtained from the issuance of green debt instruments should be used for green projects.

The green debt instrument issuer’s framework document shall provide information on the relationship of the envisaged green project with international commitments; the criteria used to demonstrate the environmental contribution of the green project; what has been done to identify and manage potential environmental and social risks; the period foreseen for the use of the funds obtained from the green debt instrument in the green project; and how the unused portion of the fund will be managed until it is allocated to the green project. The compliance of the framework document with the Green Debt Instruments Guidelines should be assessed by a second party opinion.

Proceeds obtained from the issue of green debt instruments can be managed on a per-issue basis or be aggregated for more than one green debt instrument with portfolio approach. The fund utilization report containing information on fund utilization and the impact report on environmental impacts are disclosed to the public once a year on the issuer’s website and on Public Disclosure Platform (KAP) if the issuer is a member of KAP.


Significant changes have not yet been made in Turkish legislation that impose substantial obligations on companies with regard to sustainability. However, companies are encouraged to take steps on sustainability, especially with the envisaged public disclosure obligations.

  • Brundtlan, G, Report of the World Commission on Environment and Development: Our Common Future, United Nations General Assembly Document, 1987.
  • Communiqué (II-17.1.a) Amending the Communiqué on Corporate Governance (II-17/1) published in the Official Gazette dated 02.10.2020 and numbered 31262
  • Pursuant to Article 5/5 of the Communiqué on Corporate Governance, publicly traded companies whose shares are not traded on the stock exchange; companies whose shares are traded on markets or platforms other than the National Market, the Second National Market or the Corporate Products Market; among companies that apply to the Capital Markets Board for the initial public offering and/or for the commencement of trading on the stock exchange; those whose shares will be traded on markets or platforms other than the National Market, the Second National Market or the Corporate Products Market; and companies that are deemed to be resident abroad pursuant to Decree No. 32 are exempt from this regulation.

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