Despite the widespread belief that this challenging test, which tests the resilience and sustainability of economic actors from global to local levels, is nearing its conclusion, it's clear that the upcoming years will necessitate cautious management.
Q
Durability and sustainability are two concepts that have gained great importance recently. Could you please provide your insights on today's market trends on these two topics?
A
The COVID-19 pandemic has triggered an unexpected transformation in all aspects of our lives. This phenomenon, initially recognized as a worldwide health emergency, has evolved into a driving force that has significantly impacted and transformed several aspects of the economy, production, supply chain, digitization, and daily routines over a period of time.
Over almost the past five years, governments have prioritized addressing the pandemic's adverse impacts as their initial objective. They have introduced extensive assistance and funding programs on an unprecedented scale to ensure the continuity of the economic cycle. However, due to the nature of the markets, the adoption of expansionary policies has led to inflation in most regions of the world over time. In this new scenario, the majority of the authorities of the countries have shifted their approach and resorted to tightening policies to counterbalance the irregularities observed in pricing levels.
Despite the widespread belief that this challenging test, which tests the resilience and sustainability of economic actors from global to local levels, is nearing its conclusion, it's clear that the upcoming years will necessitate cautious management.
In this particular context, it is critical to highlight the urgent significance of the climate crisis we are currently experiencing. The devastating impacts of global warming and the climate crisis, which have been scientifically proven to be the result of human activities, are being experienced with increasing intensity in almost every part of our planet compared to previous periods.
It's time to take quick and pragmatic measures. The efforts of all actors who will provide pragmatic and tangible contributions to addressing the climate crisis have become incredibly significant. In this regard, it is crucial to align the efforts in this direction.
Q
The COP28 meetings, which took place in the UAE in 2023, marked a significant milestone since the official final declaration of the COP included the phase-out of "fossil fuels" for the first time since the inception of the UN climate discussions 30 years ago. May we inquire about your perspectives on the latest developments in this regard?
A
To begin with, it would be accurate to state that the scientific data shared at COP28 indicated that the required measures have not yet been implemented to the desired extent since the Paris Agreement was signed. To address the challenges we encounter, it is necessary to take multi-dimensional, holistic, and synchronized action. Since it is not possible for an institution to solve economic, environmental, and social problems alone, close and synergistic collaborations are needed, as suggested by the 17th SDG.
Today, it is imperative that we devise enduring solutions through long-term, strategic, and planned studies. In this regard, the significance of civil society is progressively growing. It is a fact that in our era, organizations representing civil society will gain more prominence, and individuals and institutions involved in this field are going to assume greater responsibility.
This development you mentioned about COP28 is of utmost significance. It is crucial that we bring an end to the fossil fuel era or, at least, significantly decrease its proportional usage. Recent measurements indicate a significant 1.4°C increase in the planet's average temperature compared to the pre-industrialization era.
During the COP28 negotiations, significant progress was made in the exploration of developing a dedicated fund to address the escalating losses and damages experienced by vulnerable countries as a result of climate impacts. We also consider this a significant accomplishment.
Another notable accomplishment of COP28 was the implementation of the Global Stocktake, which serves as a mechanism to assess progress and accelerate stronger climate action on a five-year basis. These studies are intended to provide guidance for the next nationally determined contributions (NDCs) to be put forward in 2025.
During the meetings, new commitments were made and progress was achieved in areas including the mitigation of methane emissions, the establishment of more sustainable food systems, and the preservation of forests. These achievements hold great significance to us, extending beyond the scope of official negotiations.
Ziraat Participation is committed to generating value in accordance with its principle of responsible income generation for both its shareholders and stakeholders and contributing further to Türkiye's sustainable future through implementation of the ESRA framework.
Q
As the CEO of a participation finance institution that has left behind its 9th year by achieving a rapid and robust growth performance, what would you like to say about the significance of resilience and sustainability for your institution?
A
Our institution is the pioneer in the publicly owned participation finance sector in Türkiye.
We are a subsidiary of Ziraat Bank, which is the most established and powerful brand in our geography and has celebrated its 160th anniversary in 2023.
In alignment with our mission, we are aware of the principles of participation finance, ethical values, and social responsibility. With this awareness, we strive to operate with sustainable profitability and efficiency at global standards, as well as to become a participation finance institution that pursues customer satisfaction and ultimately facilitates financial access. In this context, our goal is to become a universal, highly regarded, and leading participation finance institution that promotes participation finance principles in Türkiye as well as in neighboring regions, consistently generates value, and provides enhanced benefits to its customers at every stage of sharing.
Our primary strategies include Focused Growth, Sustainable Profitability, Competency Transformation, Participation Finance Principles, and Agricultural Banking. We attribute the productivity and success of these strategies to our competent employees, who possess the ability to make choices and implement decisions that align with our corporate business goals. At the other end of this cycle, we have a satisfied customer base that can easily access products, services, and solutions that fully adhere to the principles of participation finance in easily accessible and practically consumable contemporary service formats.
As a participation finance institution, we are aware of the significant responsibility we have in shaping our customers' financial future, and we are committed to implementing initiatives that will contribute to a better future. We are confident in our ability to remain resilient and strong in order to sustain this.
In this big picture, sustainability, which has been on our agenda since the day we were founded, is steadily ascending to the top. As a financial service provider, we are aware that the outputs we produce in terms of sustainability are embodied across the rings of our value chain rather than our operational activities. The most important ring of this value chain is our resource transfer operations, and we focus on managing this area by deploying the most contemporary methods.
Q
Over the past two years, your Bank has made significant strides in internalizing sustainability, streamlining processes, and providing products and services aligned with the Sustainable Development Goals. What insights or information would you like to share with us in this particular context?
A
Over the past two years at Ziraat Participation, we have successfully implemented various projects to internalize sustainability, seamlessly integrate relevant processes into our financial cycle, and, above all, enhance the capacity of our employees in sustainability and ESG matters. Throughout this process, where we received support from skilled consultants as needed, we were guided and inspired by the sustainability policies and strategies adopted by the Ziraat Finance Group, of which we are a part, as well as the best practices of international participation finance principles.
Within this framework, we have strived to ensure that sustainability finds a place in our entire organization from the top to the bottom, under the auspices of our Board of Directors. We have successfully established our Sustainability Committee, along with the relevant positions, job descriptions, and plans.
The design of our SDG-related products, which will serve as a testament to the beneficial effects of our sustainability initiatives, as well as their introduction to our customers, were the most critical components of this process. We have expanded Ziraat Participation's product and service offerings by 8 SDG-related products during the reporting period as a result of these studies, which are elaborated upon in various sections of our report.
Green Home Housing Financing, Green Vehicle Financing, Individual Energy Efficiency and Energy Efficiency Management Financing for our private customers, and SPP, renewable energy, energy efficiency, and wastewater management financing packages for our corporate customers have become a significant milestone in Ziraat Participation's sustainability journey.
Q
The significance of banks' responsibilities in relation to the sustainability risks of the initiatives for which they provide resources has recently increased. The success banks achieve in this area affects their ranking in sustainability indices and the cost of green financing they will provide. Would you please provide us with your perspective on this matter?
A
You have pointed out an important aspect. To achieve success in combating the climate crisis, it is crucial for all economic actors to contribute their efforts.
Our institution, a leading player among participation finance institutions, has developed a thorough ESRA (Environmental and Social Risk Assessment) methodology that fully adheres to participation finance principles. This methodology aims to identify, plan, and manage environmental and social risks associated with resource transfer operations in 2023 in collaboration with project owners. We will conduct a thorough risk assessment for all our corporate finance transactions (including project finance, corporate finance, commercial finance, and entrepreneurial segment finance) that surpass the specified threshold value. We will make our decisions to minimize any adverse social and environmental impacts.
Ziraat Participation is committed to generating value in accordance with its principle of responsible income generation for both its shareholders and stakeholders and contributing further to Türkiye's sustainable future through implementation of the ESRA framework.
As a member of the Ziraat Finance Group, our institution is committed to effectively managing the risks and opportunities arising from external conditions and to generate shareable value under all circumstances.
Q
Could you please provide information about Ziraat Participation's future plans regarding sustainability and ESG?
A
Participation finance principles are a business conduct philosophy that envisages generating and sharing value for all stakeholders. The foundations and tenets provided by these principles significantly overlap with ESG principles that promote responsible business conduct. Participation finance principles, which forbid speculative market transactions, enhance the resilience of institutions during periods of crisis and volatility.
In this respect, it is a system that fosters resilience, sustainability, and long-term development.
We consider the Sustainability Sukuk Framework, which we issued in 2024, to be a significant milestone that will facilitate our progress in the area of ESG-related participation finance in the medium term and help us achieve our growth targets.
As we move our presence and confidence in the Islamic finance market, which is rapidly developing and growing globally, to a new position, the Sustainability Sukuk Framework we have introduced will provide us with valuable leverage in increasing our SDG-related business volumes and enhancing our positive impact with its structure that prioritizes the international standards that form its basis and align with the Paris Agreement, the European Green Deal, and the Türkiye Green Deal Action Plan.
Q
As we wrap up our interview regarding your initial sustainability report, we would greatly appreciate it if you could provide us with your closing message to your stakeholders.
A
We have full confidence that we will attain further achievements in the fight against the climate crisis, as long as we strongly translate our ESG commitments into tangible action. We are resolute in our commitment to collaborate with our stakeholders and embracing the principle of “Achieving More by Sharing”.
The length of the road to be traveled in the fight against the climate crisis and the potential challenges we will encounter should never discourage us.
As a member of the Ziraat Finance Group, our institution is committed to effectively managing the risks and opportunities arising from external conditions and to generate shareable value under all circumstances.
We look forward to meeting in upcoming reports where we will discuss our sustainability performance. I would like to express my sincere appreciation to all of our stakeholders who have provided invaluable support to Ziraat Participation for their valuable contributions.
Metin ÖZDEMİR
CEO
