Possible Impacts of the Communiqué on Green Asset Ratio Calculation by Banks

The Communiqué on the Calculation of Green Asset Ratio of Banks, published in Turkey’s Official Gazette on April 11, 2025, introduces a significant environmental sustainability regulation for the banking sector. This regulation establishes the Green Asset Ratio (GAR) as a new financial indicator to measure banks’ funding allocation to environmentally sustainable activities within their total assets, with results reported to the Banking Regulation and Supervision Agency (BRSA).

What is Green Asset Ratio?

GAR represents the ratio of environmentally sustainable economic activities in banks’ balance sheets to total assets. The calculation focuses on “appropriate assets” that meet three criteria: making significant contributions to environmental objectives, causing no harm to other environmental objectives, and complying with minimum social security standards. This framework parallels the European Union Taxonomy and positions GAR as both a performance metric and strategic guidance tool for banks’ financial decisions and risk management. The BRSA may establish minimum GAR thresholds or implement incentive/penalty mechanisms in the future.

EU Alignment and Differences

Turkey’s GAR implementation aligns with EU Green Asset Ratio regulations, applying similar triple criteria based on biodiversity protection, environmental harm prevention, and social security standards. Like the EU system, Turkish banks must report annually to the BRSA. However, key differences exist: while EU regulations cover banks, insurance companies, asset managers, and large corporations, Turkey’s regulation applies only to banks. Additionally, the Turkish Communiqué lacks the EU’s detailed technical screening criteria, sectoral classifications, and specific compliance practices, though it maintains a parallel legislative approach.

Auditing and Reporting Framework

Unlike the EU system requiring independent auditing, the Communiqué establishes only BRSA reporting requirements without clear independent audit procedures. Environmental compliance reporting by deposit and participation banks involves determining whether balance sheet assets contribute to environmentally sustainable activity financing rather than scientific reporting.

Technical screening criteria must be documented through emission reports, feasibility studies, energy efficiency reports, recognized certificates, green technology tools, or investment expenditure documents prepared by independent verifying parties. The first reporting deadline was June 30, 2025.

Expected Changes and Impact

Banks will need to align loan portfolios with environmental taxonomy as GAR targets increase. This shift will enhance interest in loans for energy efficiency, renewable energy, sustainable transportation, and environmentally friendly buildings, offering regulatory and reputational advantages.

Credit agreements for qualifying projects may increasingly include early repayment clauses, interest rate adjustments, or environmental compliance penalties. Borrowers’ sustainability standard compliance will become a credit evaluation criterion.

The regulation will facilitate financing access for companies’ sustainable projects, encouraging environmental compliance in financing conditions and promoting environmentally sustainable investment priorities.

Conclusion

The GAR implementation enhances transparency and market discipline regarding environmental impacts in banking. By systematically integrating environmental criteria into lending processes, this regulation strengthens environmental awareness among banks, supports financial stability, contributes to climate change mitigation, and advances Turkey’s climate goals and international commitments through sustainability-oriented banking culture development.