Communiqué on Banks’ Calculation of Green Asset Ratio

Green Asset Ratio, Eligible and Compliant Assets

Article 4 of the Communiqué establishes the Green Asset Ratio as the primary key performance indicator for assessing banks’ contributions to environmental sustainability. This ratio is calculated by dividing the value of eligible green assets on a bank’s unconsolidated balance sheet by the total assets included within the scope of the green asset ratio. The total assets within the scope of the green asset ratio consist of the sum of the gross amount of on-balance sheet financial assets measured at amortized cost after deducting receivables from public administrations under the central government, central banks, and supranational organizations, and assets held in the trading accounts. 

Eligible assets are calculated as the sum of the gross amount of on-balance sheet financial assets that are related to all economic activities listed in the technical screening criteria, regardless of whether they meet the criteria.

The concept of “compliant assets” plays a crucial role in calculating the green asset ratio. Compliant assets are defined as the eligible assets that meet all of the following conditions:

1. Significantly contribute to one or more environmental objectives,
2. Do no significant harm to other environmental objectives,
3. Comply with minimum social safeguard standards.

The calculation is done by adding up the gross amounts of these financial assets, measured at amortized cost, within the balance sheet that are related to economic activities and satisfy all the requirements listed above. 

Environmental objectives specified in Article 5 include: a) climate change mitigation, b) adaptation to climate change, c) transition to a circular economy, ç) sustainable use and protection of water and marine resources, d) pollution prevention and control, and e) protection and restoration of biodiversity and ecosystems.

According to Article 6, to qualify as a compliant asset, assets must fulfill the relevant technical screening criteria demonstrating significant contribution to at least one environmental objective. Banks must document compliance with these criteria through emission reports, feasibility studies, energy efficiency audit reports, nationally or internationally recognized certificates, green technology selection tools, or investment expenditure documents, all verified by independent parties and available for inspection. The BRSA is authorized to determine the technical screening criteria to be used for identifying aligned assets and calculating their respective amounts.

In identifying aligned assets, the environmental objective "climate change mitigation" is primarily considered, although the Board has the authority to include other environmental objectives.

Do No Significant Harm and Minimum Social Safeguard Standards

According to Article 7, aligned assets must meet the "do no significant harm" condition. Evaluations of compliance with this condition consider the environmental impacts throughout the entire lifecycle of economic activities, including the products and services generated, and their post-usage environmental impacts. The Board can enforce criteria established by competent public institutions regarding this principle.

Article 8 stipulates that aligned assets must also comply with minimum social safeguard standards. Banks are required to maintain documentation evidencing compliance with these standards, ready for inspection.

Loans with Unidentified Use

Special provisions are made for loans with unidentified usage purposes. Under Article 9, working capital loans and similar financial instruments provided to businesses generating at least 90% of their turnover from aligned assets and earning no revenue from non-renewable energy sources within the past year are considered aligned assets. Thus, the effectiveness and contribution of banks to green financing are evaluated comprehensively.

Reporting

The Regulation clearly sets out the reporting obligations of banks. Banks must establish comprehensive documentation, classification, monitoring, and control processes related to their green asset ratios, develop corresponding policies, arrange necessary database adjustments, and establish reporting systems. Reporting obligations can vary based on banks' size and type of activity as determined by the Board. Banks must begin reporting to the BRSA by June 30, 2025.

Secondary Key Performance Indicators

Article 12 identifies secondary key performance indicators for banks' contributions to environmental sustainability as ratios of aligned assets to eligible assets and eligible assets to total assets covered by the green asset ratio. The Board is authorized to introduce additional key performance indicators based on different financial data such as cash flow, income-expenditure accounts, off-balance sheet assets, and assets tracked in trading accounts, in alignment with national taxonomy standards.

Conclusion

The Green Asset Ratio regulation introduced by BRSA enhances the systematic, transparent, and auditable nature of banks' sustainable finance activities. These measures enable effective monitoring and reporting of banks' environmental sustainability efforts, strengthening Türkiye's alignment with international sustainability goals and accelerating the banking sector's green transformation. Additionally, these regulations ensure the transparency and comparability of banks' sustainability performance for investors, customers, and other stakeholders.