Oct 07, 2024
When Türkiye submitted its investment plan to the Climate Investment Funds (CIF) under the Clean Technology Fund (CTF), in late 2008, power sector emissions were projected to rise by 8 percent per year. The economy was growing very fast – it would double, in real terms, within a decade – and most of its electricity came from fossil fuels. As energy demand rose, Türkiye also grew more dependent on the price volatility of energy imports. [Story image courtesy of EBRD]
The CTF plan laid out a vision for expanding renewable energy capacity while investing in energy efficiency to slow demand growth. The Turkish economy is dominated by small and mid-size enterprises (SMEs), so the plan prioritized support for SMEs to adopt clean and efficient technologies. SMEs had traditionally struggled to access bank loans, which constrained their growth. With renewables and energy efficiency in particular, lack of awareness among SMEs and banks alike, a perception that such investments were difficult and risky, and lack of resources for small projects posed major barriers.
Watch: Understanding Türkiye’s energy journey in this video produced by the EBRD
The European Bank for Reconstruction and Development (EBRD) launched the Turkey Sustainable Energy Finance Facility (TurSEFF) in 2010 with a US$42.4 million CTF investment. But the EBRD had just started operating in Türkiye in 2009. So how could a bank that most businesses had never heard of connect with SMEs across the country and make a real, transformational impact?
Ksenia Brockmann, who now heads Green Financial Systems for EBRD in the region, was a consultant at the time, helping EBRD build relationships with Turkish commercial banks and running workshops with specific sectors to identify investment opportunities along the entire supply chain. It was clear that the banks knew their customers well, Brockmann said, and they had branches nationwide with established sales channels.
Unlocking the market
TurSEFF made the most of those connections. Instead of trying to reach SMEs directly, the project partnered with five commercial banks to promote clean technologies with financing that would bring them within SMEs’ reach. With support from CTF and the European Union, EBRD helped the banks learn more about clean technologies, create financing tools such as on-bill financing and leasing, and do outreach to SMEs to build awareness of the benefits of making such investments.
“They were effectively our key to the market,” Brockmann said. “They know their clients best and know their needs and struggles, including about clean technologies.”
SMEs span a wide range of sectors, but the key barrier to adopting clean technologies was typically the high upfront cost, Brockmann said. Businesses looked at what others in their field were using, and they were reluctant to pay a premium for a greener alternative. Market studies helped to show how investments would pay off, and the concessional finance made the loans more affordable.
“That gave the push to the market, and then SMEs saw their peers and neighbors had this new piece of equipment,” Brockmann said. “That helped the banks to sell more green loans to deploy better technologies – and that is how we unlocked the market for many innovative solutions for SMEs.”
A cascade of positive impacts
The CTF funds unlocked nearly $220 million in blended finance for SMEs. TurSEFF-supported loans financed everything from solar arrays, to precision metal cutting tools, to landfill gas projects.
National policies have also been updated to ensure a resilient future for such investments. Less discussed, but also significant, Brockmann said, is that rising demand for clean technologies spurred the growth of a whole ecosystem of businesses that supply and support those technologies.
Manufacturers seized the opportunity to improve their processes and equipment, saving energy and reducing emissions. Food and beverage companies upgraded coolers and freezers.
Watch: Tamar Tatar, CEO of a small manufacturing business, shares his story of how he reaped tangible benefits while saving energy and contributing to lowering emissions. This video was produced by the EBRD.
The model pioneered by the project was so successful that EBRD and the CIF provided additional finance in 2012 to support more loans, bringing the total financing in the first phase of TurSEFF to US$260 million. The project also catalyzed two more phases of TurSEFF, in 2013 and in 2016; the latter is still ongoing, slated to conclude this year.
Altogether, as of July 2024, the TurSEFF programs had mobilized €890 million for 3,106 sub-projects that added about 809 MW of renewable energy capacity, saved as much electricity as 1.2 million households use each year, and avoided as many emissions as taking 1.4 million cars off the road.
In addition, with funds from EBRD, the World Bank, and the International Finance Corporation (IFC), the CTF supported the establishment of additional credit lines, for larger businesses and for residential projects. Total CTF financing for Türkiye was $239.9 million, with nearly $1.4 billion in co-financing. This includes support for the Green Economy Financing Facility Türkiye (GEFF Türkiye), launched in 2022, which continues the successful on-lending model pioneered by TurSEFF.
Changing perceptions, transforming markets and
Some of the transformational impacts of TurSEFF have been well documented – especially the ways in which it changed perceptions of renewables and energy efficiency among Turkish banks, and brought financing for clean technologies within reach for thousands of small and mid-size businesses.
National policies have also been updated to ensure a resilient future for such investments. Less discussed, but also significant, Brockmann said, is that rising demand for clean technologies spurred the growth of a whole ecosystem of businesses that supply and support those technologies.
“This is definitely a success story, and the CTF’s contribution was essential in achieving these impacts,” said Beata Paroczai, principal for climate strategy and delivery at EBRD.
