The First Sustainable Sukuk Issuance In Turkey And The World

Sustainability, the importance of which has been better understood at the global level in recent years, is at the forefront of the agenda of the financial world, as it is in many other sectors. Until recently, the concept of sustainability was limited to the energy field and was used to refer to renewable energy. With the effect of the COVID-19 pandemic, sustainability is discussed intensively in almost every field, from economic growth to social welfare, from agriculture and tourism to working conditions.

As Kuveyt Türk, we consider keeping the environmental impact of our operations to a minimum as one of the main components of our sustainability approach. In this context, we carry out studies in many different areas from environmental and social credit evaluation system to green products and services, from waste management to savings plans, from integrated corporate social responsibility projects to governance priorities, and we take important steps in this field in cooperation with environmental and social institutions.

We are gradually increasing our financing support for sustainable projects in the field of renewable energy. By benefiting from the power of digital technologies, we make significant progress in reducing paper waste and ensuring the sustainability of our institution's business and our customers under all circumstances. We consider sustainability with an approach that adds value to the society and transforms what it gains on these lands into benefits for these lands. In this context, we consider the diversification of financial products and services, especially sukuk, with the vision of sustainability essential for developing the sustainable finance ecosystem in our country. With our sustainability strategy, we, as Kuveyt Türk, participate in the common voice of humanity, which reveals the need for a more humane approach to the problems of environmental and social values and the conservation of these values.

As Turkey's leading participation finance institution, we have been introducing many innovations to our country over the years and breaking new ground in sustainability. In this context, we introduced Turkey to interest-free capital markets by making the first sukuk transaction in Turkey and Continental Europe in 2010.

Recently, we broke new ground once again in the field of sukuk. This time, we conducted the "Sustainable Tier 2 Sub-Equity Sukuk Issuance" for the first time in Turkey and the world. Bank ABC, Citibank, Dubai Islamic Bank, Emirates NBD Capital, KFH Capital and HSBC were authorised as joint coordinators. Our sustainable sukuk issuance was worth $350 million with a 10-year maturity and an early redemption option at the end of the fifth year. The demand exceeded $4.3 billion from more than 150 investors with a wide geographical distribution, including Continental Europe, the United Kingdom, the United States, Asia and the Gulf. With the intense enthusiasm of the investors, the amount of orders exceeded 12 times the sukuk issuance and brought Kuveyt Türk the best Tier 2 pricing that has been issued from Turkey since 2017, with 6.125%. Reaching a broad audience and providing investor diversity, the issue was distributed to nearly 100 investors. 20% of the distribution was made entirely to green/social fund investors.

The issuance includes many firsts; it is Turkey's and the world's first sustainable Tier 2 sukuk issuance, the lowest-priced Tier 2 issued from Turkey since 2017, the highest demand-consistent transaction ever collected by Kuveyt Türk and a financial institution in Turkey and the issuance with the second-highest demand coefficient among financial institutions in Turkey. The main point that distinguishes this issuance from other sukuk issuances of Kuveyt Türk and the market is its ESG (Environmental-Social- Governance) structure. The resource obtained from the sukuk (lease certificates) will be selected and transferred to Kuveyt Türk's green and social projects throughout the term of the sukuk, in line with the participation finance principles, as well as Kuveyt Türk's Sustainable Finance

We consider sustainability with an approach that adds value to the society and transforms what it gains on these lands into benefits for these lands

Scope Document and the second-party opinion received from the global environmental consultancy firm. The impact reporting of these projects, which comply with all 8 of the United Nations 2030 Sustainable Development Goals (SDG), will also be made by the independent audit  firm and transparently posted on our bank's website. Our sustainable sukuk issuance with an ESG structure reveals both the green and social funding support of Kuveyt Türk, which has a strong SME portfolio and is also one of the sector leaders in renewable energy funding. In addition, our already strong consolidated solid capital adequacy ratio increased by 389 basis points with the sukuk transaction issued in subordinated format. In this area, where we have taken a concrete and new step, we will continue to increase our sustainability-themed resource diversity and funding.

We will continue to increase our sustainability-themed resource diversity and funding

Executive Vice President at Kuveyt Türk International Banking & Treasury, Dr. R. Ahmet Albayrak