Combine green and social use of proceeds in one bond

Submitted through the COP31 Sustainable Transformation Awards · SKD Türkiye (WBCSD Global Network Partner)

The company is a bank operating across Türkiye in the financial services sector, with more than 10,000 employees and a nationwide branch network.

Labelled bonds in the market are typically built around a single theme. A green bond funds environmental assets and a social bond funds inclusion, and an issuer choosing one implicitly leaves the other to a separate transaction, a separate framework and a separate investor conversation.

That separation does not match how the two problems present themselves. Emissions reduction and unequal access to finance occur in the same economy and often in the same customer segment: small and medium-sized enterprises that need to invest in efficiency and are also structurally underserved when led by women or by young entrepreneurs.

The company's assessment was that a single instrument could address both, and that combining them would widen the development effect of one transaction rather than dividing it. The design objective was a financing structure that integrates climate action with social inclusion while aligning the loan portfolio with international sustainability frameworks and the company's 2050 net zero commitment.

The company also developed its climate transition plan in line with the Paris alignment matrix for financial institutions of the partner development bank, and published it in January 2026, becoming the first private bank in Türkiye to disclose its climate risk practices publicly (1).

Location of the initiative: Türkiye, with replication foreseen in emerging markets across the Middle East, Central Asia and Europe

The instrument is a sustainable bond of USD 100 million with a five-year tenor, issued in December 2025 in collaboration with a European multilateral development bank. It was developed under the company's sustainable finance and product framework and is aligned with the green bond principles and social bond principles of the International Capital Market Association.

Its defining feature is a split use of proceeds within one instrument. Sixty-five per cent of the issue proceeds are allocated to renewable energy, energy efficiency, green buildings and low-carbon production investments, and 35 per cent to financing for small and medium-sized enterprises led by women and by young entrepreneurs. The name of the instrument refers to the three impact dimensions it targets: emissions reduction, women's economic empowerment and youth entrepreneurship.

That structure gives six eligible use-of-proceeds categories under one framework and one reporting cycle, where a conventional approach would require two separate instruments.

Eligibility criteria for both the green and the social themes were set jointly with the development bank, and the transaction had to satisfy the bank's Paris alignment matrix for financial institutions, which required the company to develop and publish a climate transition plan as part of the process.

Impact assessment follows a structured methodology covering the allocation process for proceeds, project-level eligibility criteria and regular monitoring and reporting. The issue date of the bond is the baseline for impact measurement, and before-and-after comparison is carried out through use-of-proceeds reporting and a project-level monitoring mechanism. Impact data is published annually across the life of the bond, integrated with the company's sustainability reporting and supported by independent external assurance that verifies both alignment with the International Capital Market Association framework and the reliability of the impact data.

Borrowing customers are supported beyond the loan through the company's digital platform for small businesses, which offers carbon footprint measurement and sustainability performance monitoring, so social financing carries an environmental capability with it.

Sustainability Impact

Climate

The bond does not target the company's own Scope 1 or Scope 2 emissions. Its climate effect is in the financed portfolio, which falls under Scope 3, Category 15: Investments, and within that it funds reductions in the borrowers' own emissions.

Sixty-five per cent of proceeds are allocated to environmentally sustainable investment, covering renewable energy, energy efficiency, green buildings and low-carbon production, which is the mechanism through which the instrument reduces the carbon intensity of financed activity.

The transaction sits within the company's alignment with international sustainability frameworks and its 2050 net zero commitment, and the climate transition plan published in January 2026 under the development bank's Paris alignment matrix provides the pathway against which the portfolio is assessed.

The issue date of the bond is the baseline for impact measurement, with before-and-after comparison run through use-of-proceeds reporting and project-level monitoring, and results published annually.

Nature

Green buildings and low-carbon production are eligible categories, both of which reduce resource intensity and local environmental pressure at the financed site in addition to their emissions effect.

Beyond that, the instrument's environmental scope is defined by energy rather than by ecosystems, and no nature-specific indicators were set for this transaction.

Social

Thirty-five per cent of the issue proceeds are allocated to financing small and medium-sized enterprises led by women and by young entrepreneurs, which is the share of the instrument directed at structural barriers to accessing finance rather than at environmental assets.

The target group is defined by the barrier rather than by the sector: entrepreneurs who face structural difficulty in accessing finance because of gender or age, and for whom the constraint is availability of credit rather than the viability of the business.

The intended outcomes are women's economic empowerment, equality of opportunity in access to finance, and inclusive economic growth through financing for young entrepreneurs.

Supported customers also receive access to the company's digital platform for small businesses, which provides carbon footprint measurement and sustainability performance monitoring, so inclusion financing builds environmental capability in the same customer group.

Business Impact

Benefits

The transaction raised USD 100 million of five-year funding from a European multilateral development bank, secured through a single structuring process rather than through two separate thematic issues.

Combining green and social use of proceeds in one instrument reduces the cost of accessing both markets. One framework, one investor negotiation, one assurance engagement and one reporting cycle cover what would otherwise require two of each.

The instrument aligns the loan portfolio with international sustainability frameworks and with the company's 2050 net zero commitment, which supports future access to development finance and to sustainability-focused investors.

Developing the climate transition plan required by the development bank's Paris alignment matrix produced a corporate capability that extends well beyond this transaction, and publishing it first in the domestic private banking market establishes a disclosure position with investors and regulators.

The social allocation also builds a customer segment. Women-led and youth-led small businesses reached through this funding become long-term customers, and the digital platform offered alongside the lending deepens that relationship.

Costs

A dual-theme instrument is more demanding to structure than a single-theme one. Eligibility criteria had to be agreed for both the green and the social themes, and extensive negotiation with the development bank was needed to settle those criteria, the transition plan requirements and the reporting standards.

Meeting the Paris alignment matrix was a precondition rather than an optional extra, which required the company to develop and publish a climate transition plan and to accept the disclosure obligations that follow from it.

Reporting runs across the life of the bond. Allocation tracking, project-level monitoring and annual public disclosure apply to both themes, and independent external assurance is engaged to verify framework alignment and the reliability of the impact data.

The fixed allocation split constrains lending flexibility. Committing 65 per cent to green and 35 per cent to social use of proceeds means the bank must originate eligible volume in both categories, and a shortfall in either constrains deployment of the whole issue.

Identifying and reaching women-led and youth-led enterprises also carries origination cost, since these are segments that mainstream credit distribution reaches less efficiently by definition.

Costs are contained by running both themes under a single sustainable finance and product framework, by aligning with existing International Capital Market Association principles rather than creating bespoke criteria, and by using one assurance engagement across both themes. The allocation split itself can be reset for other markets, which is what makes the structure reusable rather than specific to this transaction.

Impact Beyond Sustainability And Business

Co-benefits

Pairing the two themes means environmental capability reaches the social customer group. Women-led and youth-led enterprises financed under the social allocation gain access to carbon footprint measurement and sustainability performance monitoring through the company's digital platform for small businesses, which they would be unlikely to procure independently.

The structure accelerates a wider market shift from single-theme instruments towards multi-dimensional impact instruments, which changes what investors expect from labelled issuance.

The proportional split is adaptable, so the same structure can be reweighted to match different national or sector priorities, and replication is foreseen in emerging markets across the Middle East, Central Asia and Europe in the 2026 to 2027 period.

Potential side-effects

Combining themes creates a dependency between them. If eligible green projects or eligible women-led and youth-led borrowers are scarce, the fixed 65 and 35 per cent split slows deployment of the entire issue rather than only of the affected component.

A combined instrument is also harder to assess than a single-theme one. Investors and assurance providers must evaluate two sets of eligibility criteria and two reporting streams, and the credibility of the whole instrument depends on both holding.

Defining a target group by gender or age rather than by activity requires careful verification to avoid nominal rather than substantive qualification, so allocation controls have to test who actually leads and benefits from the business.

Typical Business Profile

The model suits commercial banks with both a corporate lending book capable of originating renewable energy, efficiency and green building assets, and a small business franchise able to reach underserved entrepreneurs, because the instrument requires eligible volume in both categories at once.

It is most relevant in emerging economies where access to sustainable finance is limited and where climate investment and financial inclusion are policy priorities at the same time, so that one instrument can serve both agendas.

Delivery engages structured funding, sustainability management, credit risk, small business banking and corporate banking functions, working with a multilateral development bank that sets the alignment requirements and invests in the issue.

Approach

1. Establish the case for combining themes: Identify where environmental investment need and structural exclusion from finance overlap in the same customer base, and confirm that a single instrument can serve both rather than requiring two separate issues.

2. Build a single sustainable finance and product framework: Develop one framework aligned with the green bond principles and social bond principles of the International Capital Market Association, so that both themes are governed by one document and one reporting cycle.

3. Secure a development bank as partner and investor: Negotiate with an institution that brings alignment requirements, development expertise and an investor network, and use the design negotiation to settle green and social eligibility criteria and reporting standards together.

4. Meet the partner's Paris alignment requirements before issue: Develop a climate transition plan in line with the development bank's alignment matrix for financial institutions and publish it, so that the instrument rests on a disclosed pathway rather than on transaction-level commitments alone.

5. Fix the allocation split and the eligible categories: Commit a defined share of proceeds to each theme, in this case 65 per cent to renewable energy, energy efficiency, green buildings and low-carbon production, and 35 per cent to enterprises led by women and by young entrepreneurs, giving six eligible categories under one framework.

6. Define the target group by the barrier, not the sector: Direct the social allocation at entrepreneurs facing structural difficulty in accessing finance, and put verification in place so that qualification reflects genuine leadership of the business.

7. Add capability alongside the capital: Give financed small businesses access to a digital platform offering carbon footprint measurement and sustainability performance monitoring, so that social financing carries environmental capability into the same customer group.

8. Report both themes annually and assure them together: Take the issue date as the baseline, run use-of-proceeds reporting and project-level monitoring for both allocations, publish annually across the life of the bond, and engage independent external assurance to verify framework alignment and data reliability in one engagement.

Stakeholders Involved

• Project leads: The transaction was executed under the leadership of the chief executive with the approval and strategic direction of the board of directors, which keeps social development and climate action on the permanent senior management agenda. It is presented as an expression of the company's 2050 net zero commitment and its inclusive growth strategy rather than as a product launch.

• Company functions: The structured funding and sustainability management team holds the central role in structuring, monitoring and reporting. It works in coordination with credit risk, small and medium-sized enterprise banking and corporate banking so that environmental, social and governance principles are integrated across business lines and sustainability performance sits inside risk management and credit assessment.

• Main providers: A European multilateral development bank acted as both strategic partner and investor, contributing its Paris alignment matrix, international development expertise and investor network. Extensive negotiation with it during design determined the green and social eligibility criteria, the climate transition plan requirements and the reporting standards. Independent external assurance providers verify framework alignment and the reliability of the impact data.

• Other: Small and medium-sized enterprises, particularly those led by women and by young entrepreneurs, are the principal beneficiaries and sit at the centre of the process. They are also served through the company's digital platform for small businesses. Feedback runs through use-of-proceeds reporting and annual public disclosure.

Key Parameters To Consider

The instrument is USD 100 million with a five-year tenor, issued in December 2025, with proceeds fixed at 65 per cent green and 35 per cent social.

The allocation split is the parameter most likely to change on replication. Its flexibility is deliberate, so that proportions can be reshaped according to different country and sector priorities, and application of comparable structures in emerging markets across the Middle East, Central Asia and Europe is foreseen for the 2026 to 2027 period.

Continuity is secured through three mechanisms: the sustainable finance and product framework aligned with the International Capital Market Association, the first climate transition plan developed under the development bank's Paris alignment matrix and published in January 2026, and independent external assurance arrangements.

Impact measurement is anchored to the issue date as baseline, with annual public reporting across the term, integrated with the company's sustainability reporting rather than run as a separate disclosure.

Implementation And Operations Tips

Settle both sets of eligibility criteria before issue. A dual-theme instrument fails on the weaker theme, so the social criteria need the same rigour and the same verification design as the green ones.

Expect the alignment requirement to reshape the institution, not just the transaction. Developing and publishing a climate transition plan to satisfy a development bank's matrix produces disclosure obligations and internal capability that outlast the bond.

Check origination capacity in both categories before fixing the split. A ratio that cannot be filled on one side slows deployment of the whole issue, so the proportions should reflect realistic pipeline rather than presentational balance.

Pair the social allocation with a capability offer. Giving financed enterprises carbon footprint measurement and sustainability performance monitoring is what prevents the social share from being ordinary lending with a label attached.

Assure both themes in one engagement. Running a single external assurance process across framework alignment and impact data keeps the combined instrument cheaper to verify than two separate issues would be.

External Links

• Integrated annual report and sustainability disclosure

Source List

(1) Integrated annual report and sustainability disclosure