Leading Turkish bank Akbank aligns FX trading with ESG targets

Looking to also align its foreign exchange (FX) trading with its ESG targets, Akbank, a long-standing customer of NatWest, turned to NatWest’s FX team to discuss the most suitable way forward.

In close collaboration, the teams identified a range of underlying key performance indicators (KPIs) for an ESG FX agreement, and confirmed the following three:

1. balanced gender distribution across Akbank’s employees,
2. electricity sourced from renewable resources for the bank’s operations
3. no new lending to greenfield coal-power plants.

If these KPIs are met during the specified test periods, Akbank will qualify for a sustainability-linked rebate, correlated to the volume of FX trades booked with NatWest between now and the end of this financial year. At the same time, the agreement effectively allows Akbank to continue to book FX transactions with NatWest with no change to their daily process.

The cornerstone of a sustainability-linked product is that the product’s financial and/or structural characteristics can vary depending on whether or not the selected KPIs reach the predefined Sustainability Performance Targets.

By linking the achievement of sustainability targets to a financial incentive or punitive measure, such as an added fee, the users of sustainability-linked financial products are committing explicitly to future improvements in sustainability outcomes within a predefined timeline.

Fabio Madar, Head of Currencies at NatWest, commented on the FX agreement: “We are delighted to have been able to partner with Akbank on aligning their FX trading with ESG KPIs and adopting the concept of ‘sustainability-linked’ to FX. For NatWest, this ESG FX agreement represents the first we have signed with a bank and the first we have signed in Turkey, and is another great example of NatWest’s purpose in action, helping our customers to achieve their ESG goals.”

Sinem Koc Celebi, FX Sales, NatWest, said: “We are thrilled for our customer, Akbank, to achieve another milestone in their strategy to link their ESG ambitions with their business activities. Akbank’s commitment to sustainability mirrors our own ambition to be a sustainable, purpose-led bank that champions the communities we serve and helps them to thrive.”

Caroline Haas, Head of Climate and ESG Capital Markets, NatWest, said: “Financial institutions play a crucial role in the transition to sustainable economies, not only by providing sustainable finance but also by leading the way in embedding sustainability across their entire organisation. We’re proud to partner with financial institutions, such as Akbank, as they undertake their sustainability journey, and incorporate products such as ESG-linked FX agreements to encourage behavioural change and contribute towards a more just and sustainable economy.”

Şebnem Muratoğlu, EVP, Treasury, Akbank, stated:, “We continue to lead the Turkish banking sector in the fields of environment, social and governance factors with our initiatives. This treasury agreement, following the first ESG-linked repo agreement in the Central and Eastern Europe, Middle East and Africa regions signed by our bank in October, once again positions sustainability at the center of our banking approach. We reiterate our commitment not to lend to new coal (thermal) power plant projects, we promise to ensure a balanced gender distribution in our bank's employees, and we state that we will meet our electricity needs from renewable resources. Our bank's innovative ESG strategy continues to be shown as an example, not only in the banking sector, but also in the entire private sector.”

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