Embed climate and impact tests in every credit decision

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

The company is a development and investment bank in the financial institutions sector, employing between 251 and 1,000 people.

A development bank's environmental footprint is dominated not by its buildings but by what it lends against. The problem the model addresses is that conventional credit assessment measures financial risk well and environmental, social and development effects poorly, so capital can be allocated to activities that undermine the bank's own stated objectives without any process flagging it.

The distinction runs through the whole case and should be stated plainly. The impacts described below are those of the activities the bank finances and enables, not the emissions, water use or employment of the bank's own premises and operations. The bank's own operational footprint is small by comparison; the portfolio is where the leverage sits.

The model strengthened from 2019, when the bank's development and investment banking mission was restructured, and it is now integrated into every credit process rather than applied to a designated green product line.

The need it answers has three parts: accelerating the country's transition to a low-carbon economy, supporting the green transformation of the private sector, and making the development effect of financing measurable rather than asserted.

The base year for impact measurement is 2022.

Location of the initiative: Türkiye, with funding raised from international development finance institutions

The model brings six functions that are usually separate into a single management framework: raising sustainable funding, environmental and social risk assessment, impact measurement, alignment with the sustainable development goals, climate risk management and sustainability reporting.

Screening is applied without exception. Every financing request is analysed through an environmental and social risk assessment tool, managed against national legislation, the IFC Performance Standards, the environmental and social requirements of international financial institutions, and the bank's own policies and procedures. A list of activities the bank will not finance sits alongside the assessment.

Social dimensions are assessed in the same process rather than added afterwards. Projects are subject to gender equality assessment, OECD Development Assistance Committee scoring and analysis of their contribution to the sustainable development goals, so social effects enter the credit decision rather than the annual report.

Measurement follows the money. Environmental effects are calculated under the GHG Protocol and the PCAF methodology, so financed and avoided greenhouse gas emissions are computed to international standards. Social effects are tracked through employment, inclusion, gender equality and development goal contribution indicators.

The bank also acts on the borrower side of the relationship. It positions itself as a solution partner rather than only a funder, advising clients on environmental and social risk management, climate action, resource efficiency and sustainability reporting. Because the assessment process pushes borrowers towards international standards, the effect reaches into their supply chains rather than stopping at the financed asset.

Results are published through the integrated annual report, a sustainability report aligned with the national sustainability reporting standards, an impact report, CDP disclosures and reporting to international financial institutions, and are supported by independent third-party assurance.

Figure 1: Environmental and social risk management process, from client proposal through screening and validation to implementation and monitoring.

Figure 2: Direct and indirect contribution to 15 of the 17 Sustainable Development Goals.

Sustainability impact

Climate

The climate effect measured here is that of the financed portfolio, not of the bank's own operations. Financed and avoided greenhouse gas emissions are calculated under the GHG Protocol and the PCAF methodology, which places them in the bank's value chain rather than in its Scope 1 or Scope 2 inventory. They are reported under Scope 3 Category 15, investments, an indicator covered by the bank's independent assurance.

Against the 2022 base year, the sustainability-themed share of the loan portfolio rose from 79 per cent to 93 per cent in 2023 and reached 96 per cent by 2024 and 2025. Over the same period, climate-linked lending reached 56 per cent of the portfolio.

By the end of 2025, renewable energy projects financed by the bank had contributed to the delivery of approximately 7 per cent of the country's total renewable energy capacity.

Financed investments supported the reduction of approximately 3.9 million tonnes of CO2 emissions.

Climate targets are managed on a scientific basis: the bank's targets were validated under the SBTi FINZ methodology, and it was the first financial institution in the world to obtain that validation. It is also the first public bank to join PCAF, which is what makes the financed emissions calculation methodologically comparable with those of other institutions.

Nature

Nature-related risk is treated as a distinct category rather than folded into environmental risk generally. The bank was the first Turkish bank to take TNFD Adopter status, committing it to disclose nature-related dependencies and impacts.

The list of activities the bank will not finance is the operative instrument here, since it removes categories of nature-damaging activity from the lending universe before any assessment is required.

Environmental assessment under the IFC Performance Standards brings biodiversity, pollution prevention and resource efficiency requirements into project appraisal for financed investments.

Social

Social effects are measured on the financed portfolio through employment, inclusion, gender equality and development goal contribution indicators.

In 2025, financing of USD 2.7 billion linked to the sustainable development goals was provided, contributing directly or indirectly to 15 of the 17 United Nations Sustainable Development Goals, across renewable energy, industry, infrastructure, health, education and inclusive development investments.

Gender equality assessment is applied to projects, and the bank is a signatory of the Women's Empowerment Principles.

A grievance mechanism handles applications from parties affected by financed project activities, so stakeholder feedback has a defined route into the bank rather than depending on informal contact.

The bank was the first Turkish financial institution to sign the Operating Principles for Impact Management, and it applies OECD Development Assistance Committee scoring across all its projects.

Business impact

Benefits

The commercial return is access to funding. A portfolio screened to international environmental and social standards is what allows the bank to raise sustainable funding from international development finance institutions, and those relationships are the source of the long-tenor resources it on-lends.

Instrument innovation follows from the same position: the bank issued the country's first social sukuk and a low-carbon economy bond, widening the funding base beyond conventional lines.

Risk quality improves. Screening every request through an environmental and social risk assessment tool, and applying an excluded activities list, removes exposures that would otherwise appear later as regulatory, reputational or transition risk.

Client relationships deepen because the bank advises on environmental and social risk management, climate action, resource efficiency and sustainability reporting, which positions it as a solution partner rather than only a source of funds.

The first-mover positions, in PCAF membership among public banks, TNFD Adopter status, the Operating Principles for Impact Management and SBTi FINZ validation, translate into standing with the international institutions that provide the bank's funding.

Costs

The cost is process capacity. Running an environmental and social risk assessment on every credit request, plus gender assessment, OECD Development Assistance Committee scoring and development goal contribution analysis, requires specialist staff, tooling and time added to each credit cycle.

Impact measurement carries its own cost. Calculating financed and avoided emissions under the GHG Protocol and PCAF requires client-level data that must be collected, checked and maintained, and the resulting disclosures are subject to independent third-party assurance.

The excluded activities list narrows the addressable market by design. Declining otherwise creditworthy business is a real commercial cost, and it is the price of the portfolio quality claimed.

Technical assistance and capacity building programmes for clients consume resource without generating direct fee income, and are justified by the improvement in the financed portfolio rather than by their own return.

Reporting is duplicated across audiences: the integrated annual report, the sustainability report, the impact report, CDP disclosures and reporting to international financial institutions each have their own requirements.

Costs are contained by using one assessment framework for all credit processes rather than a separate green product process, and by aligning internal criteria with the standards the funding institutions already require.

Impact beyond sustainability and business

Co-benefits

Because environmental and social assessment encourages borrowers to comply with international standards, the effect extends into their supply chains, so transformation is encouraged across the sector rather than confined to the financed project.

Long-term cooperation with the World Bank Group, AIIB, EIB, CEB, AFD, KfW, JBIC, ADB, CDB, BSTDB, the OPEC Fund, ITFC and IsDB brings technical assistance and methodology into the domestic market alongside capital.

Membership of UNEP FI Principles for Responsible Banking as a founding signatory, the UN Global Compact, the Women's Empowerment Principles, NZBA, PCAF, TNFD, the Operating Principles for Impact Management, GIIN and the Social Value International Türkiye Network transfers international practice into the national finance sector.

Potential side-effects

A portfolio that is 96 per cent sustainability themed leaves little headroom for the indicator to show further progress, so continued improvement has to be demonstrated through the depth of assessment rather than through the share.

Financed emissions accounting depends on client-reported data, and its accuracy is bounded by the quality of that data rather than by the bank's own methodology.

Applying an excluded activities list and international standards can restrict access to finance for smaller borrowers that lack the capacity to meet the documentation requirements, which is why technical assistance and capacity building sit alongside the screening rather than after it.

Attribution needs care. Contribution to approximately 7 per cent of national renewable capacity and to 3.9 million tonnes of avoided CO2 is a supported outcome shared with sponsors, contractors and other lenders, not an effect produced by the bank alone.

Typical business profile

The model applies to development banks, public banks and commercial lenders that want environmental, social and development effects to influence credit allocation rather than to be reported after the fact.

It is applicable across sectors, geographies and institution sizes, because the mechanism is a screening and measurement process attached to the credit cycle rather than a specialised product.

Delivery engages credit, risk management, investment banking, financial reporting, human resources, strategy and dedicated sustainability and impact management teams, coordinated through the board and its committees.

Approach

1. Put the mandate change first: Restructure the institution's mission so sustainability is part of the banking strategy, as was done here from 2019, because a screening process bolted onto an unchanged mandate is overridden whenever it becomes inconvenient.

2. Screen every request, not a designated product line: Analyse all financing requests through an environmental and social risk assessment tool, so the discipline applies to the whole portfolio rather than to a green sub-portfolio.

3. Publish what will not be financed: Maintain an excluded activities list so certain exposures are removed before assessment begins, which saves credit capacity and makes the boundary auditable.

4. Adopt external standards rather than internal ones: Manage assessment against national legislation, the IFC Performance Standards, the requirements of international financial institutions and the institution's own policies, so criteria are recognised by the funders whose money is being on-lent.

5. Bring social assessment into the credit decision: Apply gender equality assessment, OECD Development Assistance Committee scoring and development goal contribution analysis at appraisal, so social effects influence allocation instead of being described afterwards.

6. Measure financed and avoided emissions to a common method: Calculate under the GHG Protocol and the PCAF methodology so the portfolio's climate effect is comparable with that of other institutions and can be validated against science-based targets.

7. Advise the borrower as well as funding it: Provide guidance on environmental and social risk management, climate action, resource efficiency and sustainability reporting, so the standard is met by improvement in the client rather than only by exclusion.

8. Report on a fixed set of indicators and have them assured: Track the sustainability-themed portfolio share, the climate-linked lending share, avoided CO2, development-goal-linked financing volume and financed renewable capacity, publish them across the integrated, sustainability and impact reports and CDP, and place them under independent third-party assurance.

Stakeholders involved

• Project leads: Sustainability is owned at board and senior management level as an inseparable part of the development banking mission and corporate strategy. The governance structure rests on coordination between the Board of Directors, the relevant committees, senior management and the sustainability and impact management teams. Climate risks, environmental and social risks, sustainable financing targets and impact performance are monitored regularly and the results are fed back into decision-making.

• Company functions: The model is integrated into strategic planning, risk management, credit allocation, investment decisions and performance monitoring. Sustainability is not the responsibility of a single unit: it is embedded in human resources, credit, risk management, investment banking, financial reporting and strategy processes as an institutional culture. Environmental and social risk assessment, OECD Development Assistance Committee scoring and development goal contribution analysis are applied systematically within credit processes.

• Main providers: Independent third-party assurance providers verify the reported environmental and social performance, and specialist advisers support methodology work on financed emissions and nature-related disclosure.

• Other: The bank works closely with the World Bank Group, AIIB, EIB, CEB, AFD, KfW, JBIC, ADB, CDB, BSTDB, the OPEC Fund, ITFC and IsDB, and with international commercial banks, and discloses through CDP. It is a founding signatory of the UNEP FI Principles for Responsible Banking, a UN Global Compact participant, a Women's Empowerment Principles signatory and a member of NZBA, PCAF, TNFD, the Operating Principles for Impact Management, GIIN and the Social Value International Türkiye Network. Clients, investors, employees, public institutions, regulators, civil society organisations and local stakeholders affected by project activities are engaged continuously, and stakeholder views feed the sustainability strategy, material topic selection, environmental and social risk management and impact measurement. A grievance mechanism manages applications from affected parties.

Key parameters to consider

The base year for impact measurement is 2022 and impact data is monitored annually.

Performance is tracked through five indicators: the sustainability-themed loan portfolio share, the climate-linked lending share, the volume of avoided CO2 emissions, the value of development-goal-linked financing and the financed renewable energy capacity.

Reported results are a portfolio share rising from 79 per cent in 2022 to 93 per cent in 2023 and 96 per cent in 2024 and 2025, a climate-linked lending share of 56 per cent, USD 2.7 billion of development-goal-linked financing in 2025 contributing to 15 of the 17 goals, a contribution to approximately 7 per cent of national renewable energy capacity by the end of 2025, and support for the reduction of approximately 3.9 million tonnes of CO2.

Scaling depends on cooperation with international development finance institutions, sustainable financing instruments, technical assistance programmes and capacity building.

Disclosure runs through the integrated annual report, the sustainability report aligned with national sustainability reporting standards, the impact report, CDP disclosures and reporting to international financial institutions, supported by independent third-party assurance.

Implementation and operations tips

Applying the assessment to every credit request rather than to a green product line is the decision that produces a portfolio-level result. A ring-fenced sustainable product simply relocates the rest of the balance sheet out of view.

Aligning internal criteria with the standards the funding institutions already apply removes duplicated assessment and makes the funding relationship cheaper to maintain.

Publishing an excluded activities list converts an internal preference into a commitment that can be audited, and it saves credit assessment capacity.

Pairing screening with client advisory work matters, because a standard that can only be met by exclusion shrinks the portfolio, while one that clients can be helped to meet transforms it.

Separate what the institution did from what it supported. Contribution figures for national renewable capacity and avoided emissions are shared outcomes and should be presented as such.

External links

• Sustainability reports

• SBTi validated targets

• CDP disclosure

• ISSB and TCFD aligned reporting

• Independent third-party external assurance