Launch Partners

Tuesday, January 31, 2023

Launch Partners

Case study: Emlak Katilim’s second green Sukuk

Turkiye Emlak Katilim Bankasi has issued its second green Sukuk worth TRY500 million (US$26.82 million) on the 14th November 2022. The 430-day issuance, underpinned by buildings under construction that plan to obtain a Leadership in Energy and Environmental Design (LEED) Gold certification, will exclusively finance eligible green buildings.

“We will continue to issue thematic Sukuk in order to find resources for our bank’s sustainable activities, under the program approval of TRY2 billion (US$107.28 million), which we received from the Capital Markets Board of Turkiye. We aim to execute the sustainable/green Sukuk issuances of some institutions that we are currently working on to the market in the coming months,” Esma Karabulut, the head of investment banking and investor relations at Emlak Participation Bank, told ISFI.

With a profit rate of 20% per annum, the issuance follows the participation bank’s maiden green Sukuk offering which was issued almost exactly a year prior on the 10th November 2022. The second green Sukuk issuance represents a significant upsize from its TRY51.8 million (US$2.78 million) debut issuance and it was fully subscribed by corporate investors, rather than a mix of institutional and individual investors.

The bank’s second green Sukuk issuance differs from its previous issuance in terms of the specific green projects it finances. The proceeds from the first Sukuk were earmarked for long-term green projects while the second issuance focuses on financing green building projects.

The projects financed through the issuance are expected to contribute approximately 2,000 tons to the annual net carbon emission reduction. LEED-certified green buildings contribute to SDG 6 of clean water and sanitation, SDG 7 of affordable and clean energy, SDG 11 of sustainable cities and communities and SDG 13 of climate action.

The buildings to be constructed also meet the eligibility criteria for energy efficiency and renewable energy, pollution prevention and control, clean transportation, environmentally sustainable management of land use and green buildings from the International Capital Market Association’s Green Bond Principles.

The recent issuance also differs from the first issuance in its structure. The first Sukuk issuance was based on a Mudarabah structure while the most recent issuance is based on a Wakalah model.

The Turkish sustainable Sukuk market has gained considerable momentum in recent years. According to Esma, since last year, many Turkish institutions from sectors including energy, agriculture and recycling have started to show interest in the Sukuk market to increase the diversity of resources, access cheaper funding and to continue their sustainability activities in Islamic capital markets.

Esma expects all Sukuk and debt instruments issued not only in Turkiye but also all over the world to be thematic within the next five years. She expects non-thematic Sukuk issuances to be more expensive than thematic issuances with the carbon border taxes to be implemented in the upcoming years.

Emlak Katalim’s second green Sukuk

TRY500 million (US$26.82 million)


14th November 2022
Summary of terms and conditions
Issuer
Emlak Katilim Varlik Kiralama
Obligor
Turkiye Emlak Katilim Bankasi
Size of issue
TRY500 million (US$26.82 million)
Mode of issue
Qualified investors
Purpose
To finance eligible green buildings under construction
Tenor
430 days
Issuance price
100%
Profit rate
20% (per annum)
Payment
With the principal at maturity date
Currency
Turkish lira
Issue date
14th November 2022
Maturity date
18th January 2024
Lead manager, principal advisor and bookrunner
Turkiye Emlak Katilim Bankasi
Governing law
Turkish law
Legal advisor(s)/council
Mutlu Avukatlik Partnership
Islamic structure
Wakalah
Listing
Borsa Istanbul Stock Exchange
Underlying asset
Buildings under the construction seeking a Leadership in Energy and Environmental Design Gold certification
Rating
‘B’ by Fitch Ratings (obligor’s local currency issuer default rating)
Shariah advisor(s)
Emlak Katilim’s Shariah committee
Tradability
Yes
Face value/minimum investment
TRY10,000 (US$536.44)
Investor breakdown
100% corporate investors

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