Real Estate Goes Green in Turkey

Real Estate Goes Green in Turkey

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Turkey continues to prioritize the adoption and consistent implementation of sustainability principles throughout its economy. Indeed, the Turkish Capital Markets Board recently set a voluntary threshold for companies subject to its supervision, and many are finding the use of green buildings valuable in reaching them. In addition to their economic benefits, green buildings – which are socially and environmentally compatible with their environment – are gaining importance in determining a company’s level of sustainability credibility and sustainable investment commitment.

Turkey’s Sustainability Progress

Turkey’s efforts to maintain concrete corporate sustainability policies increased significantly in 2020. The Turkish Capital Markets Board amended the Corporate Governance Communiqué. Accordingly, companies included in the Communique’s scope are now bound to the Framework for Compliance with Sustainability Principles, and, as of 2020, must report whether they have been operating in compliance with sustainability principles. If not, they must explain why, and list the social and environmental risks and impacts arising from the non-compliance.

The Framework sets out various sustainability principles under “General Principles,” “Environmental Principles,” “Social Principles,” and “Corporate Governance.” According to the Environmental Principles, companies must, among other things, comply with environmental legislation and international standards such as ISO 14001, identify the incentives for environmental management, disclose measures and strategies to address the climate crisis, provide data on renewable energy use.  Unsurprisingly, then, green buildings show great potential for companies that must comply with the Framework.

Green Buildings and Green Certification in Turkey

Under the Regulation on Green Certificates for Buildings and Settlements, the “Green Certificate Commission,” which was established within the Ministry of Environment and Urbanization, is responsible for the supervision of the green building and green settlement system and for specifying the procedures and principles of related matters. So-called “assessment foundations” are authorized by the Ministry to assess the environmental, social, and economic performance of buildings and settlements according to the assessment guides and can certify buildings and settlements in certain conditions.

As per the regulation’s provisions, the owners of buildings and settlements must apply to the assessment foundations authorized by the Green Certificate Commission to obtain green certificates. Subsequently, the assessment foundation that receives the application will carry out an assessment based on the assessment guides and then register the related data in the National Green Building Information System. Since the software infrastructure of this system has not yet been completed, it is not currently functional or being enforced. However, the goal is to finish the infrastructure of the system this year. Currently, Turkey’s assessment foundations provide consultancy services to building and settlement owners regarding local and foreign green building certificates.

Apart from the National Green Building Information System, the Turkish Green Building Council also provides a national green building certificate in line with applicable legislation, following an evaluation process to ascertain factors such as water and energy efficiency.

Additionally, Turkey currently has 495 certified green buildings – one of the highest numbers in the world. Indeed, on December 31, 2018, Turkey had the sixth most LEED-certified buildings per gross square meter in the world according to the U.S. Green Building Council.

Green Leases

Green leases – lease agreements that contain provisions requiring the parties to reinforce the environmental-friendly and sustainable nature of the leased estate, or special provisions that transform a regular lease agreement into a green lease agreement – are not regulated under Turkish Law and are not yet common in Turkey. The number of green leases is expected to rise after the established ambition to sustainability principles by Turkish entities. Additionally, as Turkey is eager to follow and adapt European Union directives, we expect the country to follow the European Union’s path pertaining to green lease regulation.

Green Financing for Green Buildings

Since 2018, green financing has been on the agenda in Turkey, with financiers becoming more familiar with green financing options, especially regarding green buildings. Financing through green mortgages, green leasing, and green project finance are currently on offer.

By Done Yalcin, Managing Partner, and Arcan Kemahli, Senior Associate, CMS Turkey

This Article was originally published in Issue 8.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.