Client stories

Leading Turkish bank Akbank aligns FX trading with ESG targets

Building the future of banking

Akbank is one of the leading banks in Turkey. Its core business is banking, consisting of corporate and investment banking, SME and commercial banking, retail and private banking, payment systems, treasury transactions and international banking services.

Committed to proactively supporting Turkey’s transition to a sustainable economy, Akbank presented its ESG strategy in January this year, outlining how it plans to mitigate the environmental footprint of the bank’s operations while increasing the positive impact of its activities. Amongst other targets, Akbank has committed to provide TL 200 billion of sustainable loan financing by 2030 and has already exceeded its 2021 objective to increase the share of its sustainable finance-based borrowing transactions to 30%. The bank, which aims to be carbon neutral by 2025, has also pledged for its sustainable investment funds to reach TL 15 billion by 2030.

In 2020, Akbank issued its first Green Bond and this year celebrated another milestone when it became the first Turkish deposit bank to issue sustainable subordinated debt. Aiming to link its ESG ambitions to a wide range of its products, Akbank signed the first ESG-linked repo agreement in the Central and Eastern Europe, Middle East and Africa regions earlier this year and two ESG-linked term loan facilities in September.

Achievement of KPIs deliver positive impact and reduce currency costs

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.

Briefly explained: The concept of ‘sustainability linked’

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.

Advancing the Turkish banking sector

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.”

This article has been prepared for information purposes only, does not constitute an analysis of all potentially material issues and is subject to change at any time without prior notice. NatWest Markets does not undertake to update you of such changes.  It is indicative only and is not binding. Other than as indicated, this article has been prepared on the basis of publicly available information believed to be reliable but no representation, warranty, undertaking or assurance of any kind, express or implied, is made as to the adequacy, accuracy, completeness or reasonableness of the information contained in this article, nor does NatWest Markets accept any obligation to any recipient to update or correct any information contained herein. Views expressed herein are not intended to be and should not be viewed as advice or as a personal recommendation. The views expressed herein may not be objective or independent of the interests of the authors or other NatWest Markets trading desks, who may be active participants in the markets, investments or strategies referred to in this article. NatWest Markets will not act and has not acted as your legal, tax, regulatory, accounting or investment adviser; nor does NatWest Markets owe any fiduciary duties to you in connection with this, and/or any related transaction and no reliance may be placed on NatWest Markets for investment advice or recommendations of any sort. You should make your own independent evaluation of the relevance and adequacy of the information contained in this article and any issues that are of concern to you.

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