To support Türkiye’s resilient recovery and climate transition through financing for green and inclusive post-earthquake housing, educational and healthcare facilities, as well as climate-aligned small and medium enterprise investments, delivered via a sovereign-backed facility implemented by VakifBank.
A sovereign-backed, multi-sector on-lending facility of up to USD300 million to VakifBank, structured in two components.
Component A: Post-Earthquake Reconstruction (USD200 million). An up to seven-year loan (including an up to 2.5-year grace period) to support post-earthquake reconstruction in 11 affected regions through financing of affordable housing and social infrastructure (schools, healthcare). Housing will target the affordable housing segment, including low-income families, and comply with Toplu Konut İdaresi Başkanlığı (TOKI)’s earthquake resilience standards and national energy efficiency certifications.
Component B: SME Climate Finance (USD100 million): an up to 10-year loan (including an up to 2.5-year grace period) to finance climate mitigation investments by SMEs, including renewable energy, battery storage, energy efficiency upgrades, and circular economy solutions. A minority portion may support climate-adaptive investments and water efficiency.
Established in 1954, VakifBank is Türkiye’s second-largest bank by assets (TRY5 trillion or USD120 billion). It offers a full suite of banking services and operates internationally. VakifBank is majority-owned by the state.
Applicable Policy and Categorization: AIIB’s Environmental and Social framework (ESF), including the Environmental and Social Exclusion List (ESEL) and Environmental and Social Standards (ESSs), applies to this Project. The Project is placed in Category FI, as the financing structure involves the provision of funds to VakifBank pursuant to which AIIB delegates the decision-making related to the use of the AIIB’s funds insofar as the subprojects meet the conditions of the Project Operations Manual (POM). This will include the selection, appraisal, approval, and monitoring of subprojects in accordance with AIIB’s ESF requirements. Category A, as well as Higher Risk activities, are excluded from the proposed subproject.
Environmental and Social Instruments: VakifBank’s Environmental and Social Management System (ESMS) is materially aligned with AIIB’s ESF and will be used as the project’s Environmental and Social (E&S) instrument together with the POM. VakifBank has significantly enhanced its ESMS through the launch of a dedicated ES Risk Management System in December 2022. VakifBank’s ESMS mandates to (i) screen the subproject proposals against its ESEL, (ii) assign an E&S categorization, (iii) conduct E&S risk assessment, (iv) monitor E&S risks and impacts, (v) report to its management accordingly, (vi) disclose E&S information, and (vii) conduct meaningful consultation with stakeholders. Specifications for implementing AIIB E&S requirements will be defined in the POM, including the adoption of the AIIB’s ESEL.
Environmental and Social Aspects: The Project will deliver positive E&S impacts by supporting climate-aligned investments, particularly in post-earthquake reconstruction and SME climate finance. Component A may involve risks such as waste generation, air and noise pollution, occupational and community health and safety, land use impacts, and potential involuntary resettlement due to reconstruction activities. Component B risks include energy and water consumption, emissions, waste management, and labor-related issues. AIIB will retain the right to review selected subprojects and will routinely assess VakifBank’s risk categorization to ensure consistency with ESF requirements. Activities listed in the ESEL will not be eligible for financing. Component A of the Project is not expected to cause any involuntary resettlement or land acquisition, as all activities will be implemented exclusively on government-owned vacant land. VakıfBank will verify the land acquisition process to ensure compliance with applicable requirements and confirm that no displacement of people, livelihoods, or income-generating activities occurs. In addition, VakifBank has institutionalized a strong commitment to gender equality through a comprehensive Gender Equality Policy that promotes inclusive practices across its operations and subprojects. Under the Project, VakifBank will require subprojects to adopt gender-responsive measures, including Codes of Conduct to mitigate risks related to Gender-Based Violence (GBV) and Sexual Exploitation, Abuse, and Harassment (SEAH), and will report gender-disaggregated data to ensure transparency and accountability.
Occupational Health and Safety, Labor and Working Conditions. AIIB has assessed VakifBank’s ESMS with respect to labor conditions and worker protection. The subproject contractors and suppliers must comply with ESMS requirements, including labor and working conditions and health and safety matters. These obligations will be embedded into sub-loan agreements and procurement documents. Measures include managing occupational health and safety risks and upholding fair labor practices. The subprojects will also apply VakifBank’s ESMS to its suppliers and contractors. Representations and warranties on labor and working conditions to be provided by suppliers and contractors to the subprojects will be incorporated into sub-loan agreements and contracts.
Stakeholder Engagement, Consultation, and Information Disclosure. VakifBank publishes its ESMS and discloses E&S documentation in both Turkish and English. Higher-risk subprojects will have E&S documents disclosed at the facility level. Corporate-level transparency is maintained through VakifBank’s integrated sustainability reports, aligned with GRI, PRB, and TCFD requirements.
Project Grievance Redress Mechanism (GRM). The Project includes a multi-tiered grievance mechanism. VakifBank operates an External Communications Mechanism (ECM), as the Project GRM at the corporate level, to receive and address E&S concerns, including issues raised by project-affected people (PAPs) and the project contracted workers. Sub-borrowers will be required to establish subproject-level GRMs and inform local stakeholders of their availability timely in an appropriate manner, including AIIB’s Project-affected People’s Mechanism (PPM).
Monitoring and Reporting Arrangements. VakifBank will be responsible for the implementation of the Project through the selection, analysis, and monitoring of all subprojects, as regulated in the POM, based on data collected directly from subprojects. It will maintain a centralized E&S database and provide semi-annual reports to AIIB based on an agreed format. AIIB will conduct annual site visits during implementation to ensure that E&S risks are appropriately managed and mitigated.
Türkiye Vakıflar Bankası T.A.O. (VakifBank)
Ali Tahan
Senior Vice President
International Banking & Investor Relations Department
