Overview Of The Draft Regulation On The Türki̇ye Green Taxonomy

The Concept of Taxonomy and the General Framework

Taxonomy refers to the classification of facts, assets or activities within a systematic structure based on specific criteria. In an environmental perspective, this approach enables the assessment and classification of economic activities according to their impacts on the environment and climate.

Within the framework of taxonomy efforts implemented globally to define and support sustainable economic activities, the Draft Regulation on the Türkiye Green Taxonomy (the "Draft Regulation"), has been prepared and submitted for consultation. It is designed to be compatible with the European Union taxonomy while considering Türkiye's unique needs.

Legal Basis and Purpose of the Regulation

Pursuant to the Climate Law No. 7552 (published in the Official Gazette dated 9 July 2025 and numbered 32951) (the "Climate Law") and Article 792/D of Presidential Decree No. 4 (published in the Official Gazette dated 15 July 2018 and numbered 30479), the Draft Regulation was published by the Climate Change Presidency (the "Presidency") under the Ministry of Environment, Urbanization and Climate Change of the Republic of Türkiye, aiming to support economic activities compatible with sustainable development, to promote the flow of finance towards sustainable investments, and to prevent the risk of greenwashing in the market. In this respect, the Draft Regulation constitutes a framework legislation setting out the procedures and principles of the Türkiye Green Taxonomy, with a purpose to direct green investments within a transparent and measurable framework by classifying economic activities based on their contributions to environmental objectives. In line with the principles of transparency, sustainability and environmental integrity, this approach constitutes a critical threshold for establishing a systematic legal basis and, at the same time, provides support for Türkiye's objective of achieving net zero emissions by 2053.

Scope and Institutional Structure

The Draft Regulation envisages a broad regulatory framework covering all institutions, organizations and enterprises, as well as their economic activities. It regulates the conditions of application, technical screening criteria, reporting and verification mechanisms, and administrative and technical procedures and principles. The Online Taxonomy Management System ("e-Taxonomy") has also been included within this scope. The bodies responsible for the taxonomy are designated as the Presidency, the Türkiye Green Taxonomy Committee and the taxonomy technical expert group, with the stipulation that the members of these bodies must possess sufficient technical knowledge and experience.

Conditions for Classification as Green

Under the Draft Regulation, in order for an economic activity to be considered a "taxonomy-aligned economic activity" and classified as green, it must make a significant contribution to at least one of the following 6 environmental objectives: (i) climate change mitigation (deduction of greenhouse gas emissions), (ii) climate change adaptation, (iii) the sustainable use and protection of water and marine resources, (iv) the transition to a circular economy, (v) pollution prevention and control, and (vi) the protection and restoration of biodiversity and ecosystems, while at the same time not causing significant harm to any of the other environmental objectives. Compliance with the applicable technical screening criteria determined for these purposes is also mandatory. In addition, the requirement to comply with minimum social safeguards must be satisfied.

For an activity to be qualified as "making a significant contribution", it must meet the significant contribution criteria determined with respect to the relevant environmental objective. Likewise, in order to be assessed as an activity that "does not significantly harm environmental objectives", it must comply with the do-no-significant-harm criteria in relation to the environmental objectives other than the one to which it makes a significant contribution.

Minimum social safeguards refer to the procedures implemented by all institutions, organizations and enterprises to ensure compliance with social protection regulations, including the principles indicated in the 10 fundamental conventions identified in the International Labour Organization's (ILO) Declaration on Fundamental Principles and Rights at Work, the rights set out in the Universal Declaration of Human Rights, the Organization for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises, the United Nations Guiding Principles on Business and Human Rights, as well as national labour and social security legislation.

Technical Screening Criteria

The Draft Regulation also provides a detailed framework for the determination of technical screening criteria, which are defined as the significant contribution and do-no-significant harm criteria. Accordingly, technical screening criteria are based on identifying the most appropriate potential contributions to environmental objectives and the minimum requirements to prevent significant harm to other environmental objectives, taking into account the short-term and long-term impacts of the relevant economic activity. The criteria are envisaged to be quantitative wherever possible, and qualitative where quantitative criteria are not feasible; to take into account applicable legislation and standards for assessing carbon footprints; and to be based on conclusive scientific evidence and fundamental principles. In addition, the environmental impacts of the economic activity and the products produced and services provided thereunder throughout their life cycle, as well as the potential economic and financial impacts of the transition to a sustainable economy and its effects on competition should be taken into consideration. It is explicitly stated that electricity generation activities using solid fossil fuels shall not be considered environmentally sustainable economic activities. The technical screening criteria will be regularly reviewed by the Presidency, updates will be published on the Presidency's official website, and the updated criteria will apply as of the following year.

Reporting and Entry into Force

Following the collection and evaluation of opinions, the Draft Regulation is planned to enter into force on the date of its publication, with a voluntary transition period envisaged until 31 December 2026. Investment firms, collective investment undertakings, portfolio management companies, entities subject to the Communiqué on the Calculation of the Green Asset Ratio of Banks (published in the Official

Gazette dated 11 April 2025 and numbered 32867), and insurance, reinsurance and pension companies operating under Insurance Law No. 5684 (published in the Official Gazette dated 14 June 2007 and numbered 26552) and Private Pension Savings and Investment System Law No. 4632 (published in the Official Gazette dated 7 April 2001 and numbered 24366) will be required to perform taxonomy reporting as of 1 January 2027 using data from the previous financial year. As of this date, the reporting obligation will become mandatory, companies will be required to submit notifications through the e-Taxonomy system by the end of the 6th month following the completion of the relevant year's financial statements, and the reports will be subject to independent verification processes. Such reporting will be carried out in line with the key performance indicators (KPIs) envisaged for measuring progress towards environmental objectives. Activities falling below certain thresholds may be excluded from the scope of reporting.

Reports uploaded to the e-Taxonomy system shall be publicly accessible. In order to ensure that sustainability disclosures are accountable, verifiable and traceable, the information included in the reports is envisaged to be subject to independent verification processes. Information and documents shared within the scope of the taxonomy that do not constitute trade secrets may be shared, where necessary, with the consent of the relevant company. Administrative fines will be imposed, in accordance with the relevant provisions of the Climate Law, on those who fail to fulfil their obligations to submit the required notifications, information and documents.

Conclusion

With the finalization of the Draft Regulation, the timely and effective management of compliance processes will become increasingly important for institutions and organizations subject to reporting obligations. In this context, secondary legislation and updates regarding the implementation of such obligations should be closely monitored.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.