USD 300 Billion
During COP29, it was pledged that developing countries undergoing climate change adaptation would receive up to
USD 300 billion in annual financial support until 2035.
Combating Climate Change
According to the World Meteorological Organization’s report for 2024, the risk of a dangerous acceleration in global temperature rise continues to persist. The average surface air temperature has risen 1.54°C above pre-industrial levels, making 2024 the hottest year on record.
Global climate change now constitutes a distinct risk category, which places it at the forefront of sustainability-related assessments. In combating climate change, the banking sector’s critical tasks include identifying risks in carbon-intensive sectors with low adaptation capacity, promoting efforts to increase adaptation capacity, and assessing sectoral sensitivity to potential changes, as this sector directs financing sources to the real economy.
Over 200 countries participated in the latest Conference of the Parties (COP29) of the United Nations Framework Convention on Climate Change (UNFCCC), held in November in Baku, Azerbaijan.
The COP29 agenda focused on key issues such as climate finance, carbon markets, reducing fossil fuels, and addressing the needs of developing countries.
During COP29, it was pledged that developing countries undergoing climate change adaptation would receive up to USD 300 billion in annual financial support until 2035. These measures for adaptation to climate change are expected to enhance the resilience of the global ecosystem.
In Türkiye, developments in 2024 regarding climate change monitoring included preparing a guide by the Türkiye Banks Association on “Creating Heat Map Methodologies.” This guide marks an important step in tracking climate change data on a sectoral basis and making plans related to risk management.
Green Transition and CBAM
In alignment with the UN’s Paris Agreement on climate change, countries have pledged to achieve net-zero carbon emissions within
30 years. Achieving this goal necessitates global collaboration between the public and private sectors and economic transformation.
The European Green Deal, developed by the European Union, sets environmental targets to reduce climate change, adapt to and transition to a circular economy, prevent pollution, and protect biodiversity and ecosystems. The Carbon Border Adjustment Mechanism (CBAM), which complements the Green Deal Action Plan, foresees various measures for EU member states and countries engaged in foreign trade.
The CBAM aims to protect European Union companies investing in green technologies and seeks to prevent companies from relocating their production to countries with insufficient environmental regulations, thereby addressing carbon leakage. The mechanism is also seen as a development that could impact the foreign trade balances of countries like Türkiye, which have energy-intensive economies and high carbon emissions, while encouraging compliance with climate goals.
Under the CBAM framework, obligations related to verification and pricing are expected to come into effect on January 1, 2026. From this date, the CBAM is set to introduce a carbon cost on exports from sectors such as cement, electricity, aluminum, iron, steel, fertilizers, and hydrogen, based on the carbon content of the products that exceed the established limits.
Emissions Trading System
The Emissions Trading System (ETS), along with the Carbon Border Adjustment Mechanism (CBAM), forms a crucial part of the sustainability ecosystem. As part of Türkiye’s plan to achieve net-zero emissions by 2053, the system will support the country’s Nationally Determined Contribution (NDC). It effectively tackles climate-related risks by setting a cap on greenhouse gas emissions from facilities covered by the system. One of its key advantages is that it offers policymakers precise data on the expected emission levels over a specified period. Ziraat Katılım is analyzing the implementation of the system in Türkiye and planning related activities, while also examining ETS’s relationship with current energy and climate policies.
In the past two years, Türkiye has made significant progress in transitioning to ETS. The launch of the pilot ETS application in October 2024 is one of the most notable steps. The Ministry of Environment, Urbanization, and Climate Change has accelerated its efforts to establish a legal framework for ETS in Türkiye, working on a Climate Law. The draft bill, which will set the country’s climate adaptation policies, has been presented to the Grand National Assembly of Türkiye (TBMM). In line with its 2053 carbon-neutral target, Türkiye is shaping the strategic aspects of ETS within the framework of the 12th Development Plan and the Medium-Term Program. The Memorandum of Understanding signed between the Energy Markets Operating Corporation (EPİAŞ) and the European Energy Exchange AG in 2024 has further accelerated official efforts to establish the ETS in Türkiye. With the enactment of the Climate Law, the legal and institutional framework of the ETS will be further strengthened, and it is expected to become an even more significant element for the Turkish banking sector in the coming years.
According to data from the Banking Regulation and Supervision Agency (BRSA), 18 banks in Türkiye have subjected a total of TL 564 billion in loans to ESRA processes.
Environmental and Social Risk Management
Another key development in the context of sustainability and climate is the management of banks’ risks associated with environmental and social factors. Environmental and Social Risk Management (ESRM) practices involve evaluating the potential environmental and social impacts of projects or investments considered for financing. If deemed risky, measures such as withholding financing, planning improvement, and corrective actions, as well as follow-up and regular reporting, are taken through Environmental and Social Risk Assessment (ESRA) processes. These practices are significant for the banking sector and its stakeholders.
According to data from the Banking Regulation and Supervision Agency (BRSA), 18 banks in Türkiye have subjected a total of TL 564 billion in loans to ESRA processes. These loans account for approximately 7.4% of their total loan portfolios. In terms of risk categories, loans with medium and high risk levels constitute 43% and 40%, respectively. Among non-performing loans, the largest share—65%—consists of loans categorized as high-risk. This indicates that, in Türkiye, loans with high environmental and social risks are more likely to carry repayment risk from a banking perspective.
Aiming to minimize potential negative impacts arising from environmental and social risks, Ziraat Katılım subjects corporate financing transactions exceeding the threshold value set by the Ziraat Katılım Sustainability Committee to a comprehensive evaluation within the scope of its Policy on the Management of Environmental and Social Risks in Financing Activities.
Turkish Sustainability Reporting Standards (TSRS)
The Türkiye Sustainability Reporting Standards (TSRS), published by the Public Oversight, Accounting, and Auditing Standards Authority (POA) in 2023, came into effect on January 1, 2024. Developed based on the global standards issued by the International Sustainability Standards Board (ISSB) and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), the TSRS framework consists of two core standards and supplementary sector-specific volumes.
TSRS 1, General Requirements for Disclosure of Sustainability-related Financial Information, mandates that companies meeting certain size and revenue thresholds disclose material sustainability-related risks and opportunities. The standard is critical from a financing perspective, as this information will be used in financial reporting that supports capital allocation decisions. TSRS 2 focuses on Climate-related Disclosures. It requires companies to disclose information on climate-related risks and opportunities that will support informed financial decision-making.
Digitalization, Artificial Intelligence, and Cyber Security
The post-pandemic era has accelerated digital transformation, accompanied by the rapid growth of an ecosystem where sustainability and artificial intelligence (AI) are increasingly integrated. As one of the most prominent investment areas in 2024, AI technologies have become an essential component of data analytics and process automation across industries.
In the banking sector, digitalization has not only reshaped customer experiences, but also significantly enhanced operational efficiency. According to 2024 digital banking data compiled by Deloitte, more than 30% of banks’ total revenues are now generated through digital channels. Demand for banking services delivered via digital platforms has witnessed a notable increase. In Türkiye, the number of digital banking users exceeded 117 million as of September 2024.
Focusing on the development of innovative financial products and services, Ziraat Katılım continues to fully digitalize its offerings, thereby enriching the customer experience while driving operational efficiency.
As the financial sector becomes more digitized, ensuring cyber security and protecting digital assets has become increasingly vital. According to the IMF’s 2024 Global Financial Stability Report, the number of cyber attacks has doubled since the global pandemic began in 2020. 20% of these attacks target the financial sector. Proactive threat assessment, data integrity, encryption protocol robustness, and the adoption of zero-trust architecture are the most critical measures for ensuring cyber security.
Integrated Annual Report of Ziraat Katılım Bank covers the period from January 1, 2024 to December 31, 2024.
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