Between Earthquakes and Energy: Turkey’s ESG Reckoning in a Fragile Geopolitical Landscape

1. Introduction: The Anatolian ESG Puzzle

Turkey is a country of paradoxes and pivots. A member of the G20 and NATO, a bridge between Europe and Asia, and a country with geostrategic clout across the Middle East, Central Asia, and Eastern Europe, Turkey has long pursued economic modernization alongside political centralization. But in 2024, Turkey finds itself at a crossroads—economically, politically, and climatically.

Though the country has made notable ESG policy commitments in recent years—ratifying the Paris Agreement in 2021, launching its Green Development Revolution agenda, and expanding its renewable energy portfolio—Turkey faces serious domestic and international headwinds that challenge the credibility and coherence of its ESG transition.

This report examines the current state of Turkey’s ESG framework, its progress and pitfalls, the macro and political constraints it faces, and policy pathways that could help Turkey align sustainability with economic stability in a turbulent region.

2. Environmental Policy: Ambition Meets Climate Vulnerability

2.1 Climate Risks and Natural Disasters

Turkey is one of the most climate-vulnerable countries in the OECD. The devastating earthquakes of February 2023, which claimed over 50,000 lives and caused more than $100 billion in damages, underscored not only the fragility of infrastructure, but also the urgency of resilient urban planning and sustainable construction.

In parallel, Turkey faces:

• Increasing droughts in Anatolia and the southeast, threatening food and water security.

• Forest fires along the Aegean and Mediterranean coasts, exacerbated by rising temperatures.

• Sea-level rise in Istanbul and coastal cities, endangering real estate, ports, and tourism.

  
  

2.2 Environmental ESG Commitments

In response, Turkey has launched several initiatives:

✅ Net-Zero by 2053

In 2021, President Erdoğan announced Turkey’s goal to reach net-zero emissions by 2053, a symbolic year marking the 600th anniversary of the Ottoman conquest of Constantinople.

✅ National Climate Law (Expected 2024–25)

The Ministry of Environment, Urbanization and Climate Change is finalizing the country’s first comprehensive climate law, which will legislate emission caps, carbon markets, and green reporting.

✅ Renewable Energy Push

Renewables now account for over 52% of installed electricity capacity, mostly from hydropower, solar, and wind. The government aims to add 20 GW in solar and wind by 2030.

✅ Zero Waste Initiative

Championed by First Lady Emine Erdoğan and backed by the UN, this campaign has become a national ESG symbol, focusing on circular economy, plastic reduction, and recycling.

Despite these efforts, coal subsidies, weak enforcement, and urban pollution remain persistent problems. According to the Climate Action Tracker, Turkey’s policies are currently rated as "insufficient" to meet its stated targets.

3. Social Equity: Earthquake Recovery, Labor, and Gender Gaps

3.1 Earthquake Recovery as Social ESG Test

The 2023 earthquakes revealed deep social inequalities in housing, infrastructure, and public service delivery. Recovery efforts have been swift but uneven, with many displaced communities in Hatay, Adıyaman, and Gaziantep still lacking permanent housing and healthcare.

The reconstruction drive offers an opportunity to embed ESG into urban planning—through green building codes, climate-resilient infrastructure, and inclusive design. However, transparency, funding, and coordination issues persist.

3.2 Labor Rights and Informal Employment

Turkey’s labor market suffers from:

• A high informal employment rate (around 30%), especially in agriculture and construction.

• Low union participation and limited collective bargaining rights.

• Migrant labor exploitation, particularly among Syrians and Afghans.

  
  

ESG frameworks must address these structural issues through inclusive labor policies, skills development, and formalization incentives.

3.3 Gender Equality Gaps

Turkey ranks 124th out of 146 in the World Economic Forum’s Global Gender Gap Index (2023). Key issues include:

• Low female labor force participation (~34%).

• Gender-based violence and femicide.

• Underrepresentation of women in corporate and political leadership.

  
  

Recent ESG guidelines by the Capital Markets Board of Turkey now require listed companies to disclose gender diversity metrics, but enforcement remains limited.

4. Governance: Institutions, Transparency, and Regulatory Credibility

4.1 Institutional Challenges in ESG Governance

Governance is the most politically sensitive dimension of ESG in Turkey. Key concerns include:

• Centralization of regulatory authority, limiting independent oversight.

• Weak environmental impact assessments (EIAs) for major infrastructure projects.

• Limited civil society space and restrictions on NGOs, especially those working on environmental and human rights issues.

  
  

The rule of law and judicial independence are also flagged by the EU, OECD, and World Bank as obstacles to long-term ESG investment.

4.2 Green Finance and Corporate Disclosure

Turkey’s financial regulators have taken steps to align with ESG norms:

• The Banking Regulation and Supervision Agency (BDDK) and Capital Markets Board (SPK) have issued ESG disclosure guidelines aligned with TCFD and IFRS standards.

• The Istanbul Stock Exchange (Borsa Istanbul) launched the Sustainability Index, listing companies with strong ESG performance.

• The Turkish Sovereign Wealth Fund has announced plans to issue green and sustainability-linked bonds.

  
  

However, gaps remain in:

• Standardization of ESG metrics across sectors.

• Third-party ESG auditing and verification.

• Integration of ESG into public procurement and SOE governance.

  
  

5. Energy, Industry, and the Carbon Transition

5.1 Fossil Fuel Dependence and Energy Security

Despite progress in renewables, Turkey remains heavily dependent on natural gas (mostly imported from Russia, Iran, and Azerbaijan) and domestic coal. The country lacks a carbon pricing mechanism, and fossil fuel subsidies persist—despite climate pledges.

The European Carbon Border Adjustment Mechanism (CBAM) poses a major threat to Turkish industrial exports, especially:

• Steel and aluminum

• Cement and ceramics

• Fertilizers and chemicals

  
  

Unless Turkey introduces carbon pricing or equivalent measures, it risks losing access to EU markets, which account for 41% of its exports.

5.2 Energy Transition and Industrial Decarbonization

To offset this risk, Turkey is exploring:

• Carbon markets, with pilot programs underway.

• Green hydrogen development, especially in the Aegean region.

• Battery storage and EV incentives, to reduce oil import dependence.

  
  

The Green Deal Action Plan (2021) provides a roadmap for aligning with EU environmental trade standards, but implementation has been slow due to institutional and fiscal constraints.

6. Geopolitics, Trade, and ESG Diplomacy

6.1 A Balancing Act Between East and West

Turkey's geopolitical positioning creates ESG policy dilemmas:

• It is a candidate country for EU accession, yet increasingly aligned with Russia and China in energy and trade.

• It is a NATO member, yet maintains strategic autonomy in foreign policy.

• It seeks foreign direct investment (FDI) from ESG-sensitive Western funds, while relying on Gulf and Asian capital with fewer governance conditions.

  
  

This duality complicates ESG alignment with EU Green Deal, OECD ESG taxonomies, and UN sustainable finance principles.

6.2 ESG and Trade Diversification

Turkey is leveraging its location to become a “green trade corridor” between Europe and Asia. Projects include:

• Sustainable logistics hubs, such as the Marmara Logistics Center.

• Rail electrification under the Middle Corridor Initiative.

• Digital customs and ESG-traceable exports, especially in textiles and food products.

  
  

If leveraged correctly, ESG could become a competitive advantage—but only if policy coherence and regulatory trustworthiness are restored.

7. Currency Volatility and ESG Investment Constraints

7.1 Monetary Instability and Institutional Risk

The Turkish lira has depreciated by over 80% against the dollar since 2018. Inflation remains above 50%, and real interest rates are negative. This creates several ESG-linked risks:

• Green project financing becomes more expensive and volatile.

• Foreign ESG investors demand higher risk premiums or avoid Turkish assets altogether.

• Sustainability-linked loans, often denominated in USD or EUR, become harder to service.

  
  

The Central Bank of Turkey’s recent pivot to orthodox monetary policy under new leadership (post-2023 elections) may restore some investor confidence, but macroeconomic volatility remains a core ESG risk.

8. Recommendations: A Path Toward ESG Credibility

8.1 Launch a National ESG Strategy

Turkey should consolidate its fragmented policy landscape into a single, integrated ESG strategy, aligned with:

• UN SDGs

• OECD Guidelines for Multinational Enterprises

• EU Green Deal and CBAM compliance

• IFRS/ISSB sustainability reporting frameworks

8.2 Institutional Reform and Stakeholder Engagement

• Establish an independent ESG Supervisory Council, with representation from ministries, civil society, academia, and the private sector.

• Improve transparency of EIAs, public procurement, and ESG-related budget allocations.

• Expand civil space for environmental activists, journalists, and unions.

  
  

8.3 Green Investment Incentives and De-risking Tools

• Offer sovereign green guarantees to lower the risk of private ESG investment.

• Develop ESG-aligned PPP frameworks for infrastructure and urban development.

• Expand blended finance and green bond issuance to fund sustainable recovery.

  
  

9. Conclusion: The Anatolian ESG Moment

Turkey has the potential to become a regional ESG leader—a country that leverages its geographical, industrial, and human capital to build a resilient, inclusive, and green economy. But to do so, it must align political will with institutional capacity, and short-term economic stabilization with long-term ESG commitments.

The road ahead is not easy—marked by currency fragility, policy inconsistency, and geopolitical balancing acts. Yet, the case for ESG in Turkey is not just moral or environmental—it is economic, strategic, and urgent.

In a post-pandemic, climate-disrupted world, sustainability is no longer a luxury for Turkey—it is the foundation of its future prosperity.