Our Decarbonization Targets

As developments take place in the regulatory framework and good practices in the world and in Türkiye, Garanti BBVA monitors these developments on the one hand, and acts with the aim of setting a role model for the sector on the other.

The Bank’s decarbonization targets set for carbon-intensive industries such as energy, automotive, iron & steel, and cement by 2030 have been prepared using the internationally recognized PACTA (Paris Agreement Capital Transition Assessment) methodology and were publicly disclosed in 2023. In keeping with the ever-improving data quality, Garanti BBVA reviews and takes steps to update these targets.

What does Garanti BBVA aim with sectoral decarbonization targets?

• Measure customers’ progress in decarbonization processes and extend the financial support they need for their investments in new technology and production methods in this pathway

• Mitigate the transition risks in the credit portfolio by increasing the weight of exposure with clients achieving their decarbonization targets

• Fulfill the transparency commitment in environmental and social performance disclosures that have lately become highly important for the financial sector.

Emissions reduction targets for carbon-intensive sectors

Sector Emission Scope Metric Scenario Garanti BBVA Baseline (2022) Garanti BBVA Progress (2023) Difference Reduction Target by 2030
Energy 1+2 kgCO2e/MWh IEA Net Zero 2050 388 339 -13% -72%
Automotive 3 gCO2e/Km IEA Net Zero 2050 182 179 -1% -40%
Iron & Steel 1+2 kgCO2kgCO2e/Tiron&steel IEA Net Zero 2050 1.096 1.320 20% -10%
Cement 1+2 kgCO2e/Tcement IEA Net Zero 2050 726 726 0% -20%
Coal - TLmn Phase-out of the sector by 2040

Note: It is important to emphasize that the baseline of these metrics may change, since the sources of information used and the methodology are constantly changing

In line with its Net Zero Banking Alliance (NZBA) and Science Based Targets Initiative (SBTi) commitments, Garanti BBVA aims to align its credit portfolio with net zero by 2050 scenarios. In this framework, the Bank started calculating the financed GHG emissions under six asset classes, namely the Bank’s working capital loans, project finance, commercial property, mortgage, auto loans and public equity and corporate bonds, employing the PCAF (Partnership for Carbon Accounting Financials) methodology in 2023.

The Pillar-III ESG reporting, which was included in legal disclosures by the European Banking Authority (EBA) in 2022, allows the evaluation of banks' ESG risks and finance strategies by all financial sector stakeholders, including customers and investors. In 2023, Garanti BBVA continued to analyze the resilience of the banking portfolio against transition risks and physical risks arising from climate change.

Physical climate risks are highly important due to the negative effect on the production capacities of the Bank’s customers and declined revenues, direct loss of assets due to climate-related disasters, increased insurance costs, human resource impacted by climate-driven migrations, loss of assets or collaterals due to scarce water supply, elevated operational costs and their effect on repayment capabilities. Hence, since 2022, Garanti BBVA has been addressing climate-related physical risks under two headings: acute and chronic. The Bank monitors these risks using a model developed based on the heat map revealing sectoral vulnerabilities and the standing of physical climate risks in customers’ locations as defined by internationally accepted data sources.

Garanti BBVA also monitors actions plans for climate scenario analyses conducted in 2022 for the head office building and branches. The Bank measured the physical risks in the face of:

• Drought, extreme precipitation and extreme temperatures under RCP 2.6 and RCP 8.5 climate scenarios,

• Drought, extreme precipitation, extreme temperatures, changes in average temperature, and changes in precipitation amounts under RCP 8.5 climate scenario for its renewables portfolio.

As part of climate risk monitoring, Garanti BBVA makes use of various methodologies to measure and manage the transition risks that its portfolio is exposed to.

• The Bank’s Risk Department follows up the risk limits in high-transition risk sectors as defined by the BBVA Group such as mining, electrical energy generation, natural gas etc. by way of monthly High Transition Risk reporting.

• Since 2023 year-end, emission intensity based on current unit production of customers engaged in seven carbonintensive industries (energy, automotive, iron and steel, cement, oil and gas, aviation, coal mining) are being measured according to PACTA database.

• With the tools developed within the bank, the current situation of customers, especially those operating in carbon-intensive sectors, regarding climate change and their preparations for the transition to a lower-carbon business model is analyzed.

• Energy efficiency certificates and greenhouse gas emissions data of the real estates under the bank's guarantee are obtained and their energy efficiency performances are monitored.