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Carbon Pricing:
Gaining a Competitive Edge in a Climate-Constrained World
Derya Özet Yalgı, Sustainability Manager
Ceren Solak Yılmaz, Sustainability Supervisor 25 April 2018
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About Garanti
Sustainability at Garanti
Climate Finance
Climate Change Action Plan
Internal Carbon Pricing
Climate Change Disclosure
Agenda
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About Garanti
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About Garanti
ROAE
16.6%BASEL III CAR
16.8%
15.4 MILLIONCUSTOMERS
2nd LARGEST PRIVATE BANK
by assets of
US $94 billion
#1in NIM &
Net F&C base*
Note: Figures are based on BRSA consolidated financials as of December 31, 2017
Mcap, number of branches, ATM and customer numbers are as of February 6, 2018
Broad Geographical Coverage &
Omni-Channel Distribution Network
• ~940 branches
• Leading internet and mobile banking
• Largest financial call center
• More than 5,000 ATMs
• Targeted investments to digital platforms
Shareholding Structure
• ~50% free float
• Majority shareholder is
BBVA
• The most traded stock of
Borsa Istanbul
• Shareholders from around
35 countries
• ~60% of the institutional
investors are UN PRI
signatories
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Sustainability at Garanti
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Our Value Creation Model
Sustainability Index
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Sustainability Governance7
Board of Directors
Responsible Banking Committee
Sustainability Committee
ESG Risk Management
Sustainable Finance
Climate Finance
Sustainability Reporting
Stakeholder Engagement
Policy Development
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Climate Finance
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3.
Green Office Standards
2.
Reducing Deforestation
4.
Adaptation to Climate Change:
Mitigation of Water risks
1.
Prioritizing Low Carbon Investments
Climate Change Action Plan
4 Pillar Approach
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Carbon Pricing Combined Sensitivity Analysis Decrease the dark/spark spread through
increasing the cost of NG & coal in
the mid-long term
Implement shadow carbon price
Positive pricing on RE
Outcome
min. 70% renewable share by 2020 in PF transactions*
Project Finance Transactions
The amount of cumulative financing** provided
to renewable energy investments over US$ 4.9
billion.
30% share** in Turkey’s operating
installed wind power capacity
*for greenfield power plant installations
**as of 2H 2017
Pledge for
2020
Prioritizing Low Carbon
Investments ( I / III )
Detailed evaluation of non-financial
risks of carbon-intensive projects
E&S Risk Mgmt System
100% renewable energy financing in
all new PF greenfield loans since
2014
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Green Finance Initiatives – Key developments over the past 10 years
Environmentally-Friendly
Bonus Credit Card
2006
The first wind power plant
financed, still the market leader
Small Scale Solar PP
Product launched
2014
2007 2012
US$ 60 mio disbursed
to SMEs for EE
Agricultural Irrigation
Systems Loan
launched
2015
Residential mortgage covered
bond to support green
mortgages
2017
Prioritizing Low Carbon
Investments ( II / III )
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2018
New Products & Risk
Management Systems
under development
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Green Mortgage
Energy Efficiency
Renewable Energy
> Agreement Date: 2017
> 75 mio €
> Eligible Projects
> Green Mortgage Loans
> Mortgage Loans
> Agreement Date: 2017
> 150 mio US$
> Eligible Projects
> Green Mortgage Loans
> Agreement Date: 2016
> 100 mio €
> Eligible Projects
> Renewable Energy
> Energy Efficient Production
> Green Mortgage Loans
> Other projects with prior
consent of Proparco
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3
Prioritizing Low Carbon
Investments ( III / III )
Green Credit Lines
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Reducing Deforestation
> Our exclusion list includes unsustainable forestry activities
> Additionally, for projects that are subject to our Environmental and Social Impact Assessment Model;
> We make sure that the borrowers make every effort to mitigate deforestation effects
> Above a certain monetary limit and E&S risk rating, we ask our customers to implement voluntary
forestation projects.
Garanti Bank customers pledged to implement forestation projects amounting to
~40 million trees by 2025
A photo of a forestation project implemented by Garanti Bank’s customer as per the Environmental and Social Impact Assessment Model
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Internal Carbon Pricing
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Carbon Pricing in Turkey
• Turkey signed the Paris Agreement on April 22nd, 2016
• Ratification is on hold
• Negotiations regarding the status change continue
• An active member of PMR Project led by the World Bank
• Turkish GHG Emissions MRV Regulation came into force in 2014
• First mandatory reporting cycle was in 2017
• Pilot MRV implementation for energy, cement and refinery sectors in 2016
• Pilot ETS scheme to be implemented
• The Energy Exchange Istanbul (EXIST) announced to work on an ETS
design in 2019
• A draft regulation to establish Renewable Energy Certificate Trading
Scheme (RETS) is being developed
Possibility of a carbon tax & other market mechanisms
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Carbon Pricing at Garanti
First Pilot
implementationClimate Change
Action PlanSector Norms
2011 2015 2018
Pricing Scope: PF greenfield commitments
Pricing Range:
2011-2020: 5-10 US$/tCO2e
Envisaged after 2020:
• 22 US$/tCO2e 2020
• 48 US$/tCO2e 2025
• 74 US$/tCO2e 2030
# of Projects: 7
Average Impact on EBITDA: 35%
in new PF greenfield commitments
17%
2013 2014 2015 2016 2017
100%100%100% 100%
Share of Renewables in Energy Portfolio
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Positive pricing on RE: < 5 US$
Internal Pricing
Research
2017
Carbon pricing report release
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CIB Policies & Sector Norms
• Exploration, drilling, transport
and refining of oil and gas
• Renewable energy projects:
wind, solar, hydropower,
biomass and biofuel
• Thermal power stations
(combined & coal power plants)
• Nuclear power plants
• Electric power transmission and
distribution
• Development and/or expansion
of existing projects
• Planning and development of
mines
• Operations, onsite processing
of extracted minerals
• Closing and restoration of
mines
• Transport: Highways, ports, terminals,
airports, subway, tramway and railway
• Environmental: Waste and water
management (treatment, management
and distribution)
• Social: Education and health related
• Telecommunication: Cables and
communication networks
Energy Sector Norms Mining Sector NormsInfrastructure Sector Norms
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Challenges to Overcome
• Lack of clarity in green
definitions
• Communicating carbon pricing
• GHG MRV Regulation recently
came into force
• No common carbon pricing
implementation in the Turkish
financial sector
• Lack of analytical capability
• Lack of awareness
• National & regional practices
• The true cost of carbon
• How to implement in corporate
loans
Signed by 7 Turkish banks
representing 50% of the total asset size of
Turkish banking sector
Sustainable Finance Declaration
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Internal & External Capacity Building
•A full-day workshop organized in collaboration with:
•CDP
•EBRD
•Climate Wedge
•Climate Focus
•GAIA Carbon Finance
Internal Carbon Pricing Workshop
•CPLC Steering Committee Member
•UNGC Business Leadership Criteria on Carbon Pricing Signatory
•UNEP FI Banking Principles Core Group Member
•TCFD Supporter
Advocacy
•UN Global Compact Turkey Network
•Business Council for Sustainable Development Turkey
•Turkish Banking Association
•Turkish Industry & Business Association
Sustainable Finance Platforms
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Climate Change Disclosure
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Thematic Area Recommendations What we have
GovernanceDescribe the board's oversight of climate-related risks and opportunities
Describe management's role assessing and managing climate-related
risks and opportunities
StrategyDescribe the climate-related risks and opportunities the organization has
identified over the short, medium, and long term
Describe the impact of climate-related risks and opportunities on the
organization's business, strategy and financial planning
Describe the resilience of the organization's strategy, taking into
consideration different scenarios, including a 2°C or lower scenario
Risk
Management
Describe the organization's processes for identifying and assessing
climate-related risks
Describe the organization's processes for managing climate-related risks
Describe how processes for identifying, assessing, and managing these
risks are integrated into the organization's overall risk management
Metrics and
Targets
Disclose the metrics used to assess climate-related risks and
opportunities in line with its strategy and risk management process
Disclose Scope 1, Scope 2, and if appropriate Scope 3 greenhouse gas
(GHG) emissions
Describe the targets used by the organization to manage climate-related
risks and opportunities and performance against targets
Disclosure on Climate Change
> One of the first supporters
> Developing internal capacity
To be developed
> 2017 Water A List
> 2015 & 2016 Climate Change A List
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For Questions:
For more information:
www.garantiinvestorrelations.com
Thank You