Turkish economy continued to accelerate its growth in 2021 as well. In the first three quarters of the year, GDP grew year-on-year by 11.7%.

Esteemed Stakeholders,

The pandemic is still at the top of the agenda in the world as well as in Türkiye. Although the adverse consequences continue to affect our lives, we are at a much better position than in 2020 thanks to the increased rate of vaccination, the adoption of new behaviors according to the new normals such as masks and social distance, and, of course, the support of decision makers to the economy.

Raised awareness on sustainability in all areas

This year, we are faced with a great truth that we have known for a long time, yet postponed to see: the adverse consequences of climate change. We all started to feel the adverse effects of climate change in our daily lives in 2021, including devastating forest fires and floods in our country, as well as global droughts and extreme weather events. In my opinion, as of this year, societies will understand the importance of sustainability, Environmental Social and Governance (ESG) approach and Sustainable Development Goals (SDGs) much better and deal with these issues with much greater awareness.

Last year witnessed a global recovery in terms of economy. With the increased vaccination rate, the sharp economic contraction of the previous year was replaced with recovery and growth. However, the increase in commodity prices was felt in every country due to the hitches in the supply chains, supply shortages in many commodities, problems in the production and supply of China-based mineral products, and restrictions caused by climate change in agricultural production. Thus, inflationary expectations rose. With the increase in the energy prices, these expectations became permanent.

Our economy continued to accelerate its growth in 2021

I believe that all adverse circumstances and uncertainties in our lives will disappear and be replaced by positive expectations in 2022. Consequently, we can say that we expect the world economy to grow significantly in 2022 as well.

Turkish economy continued to accelerate its growth in 2021 as well. In the first three quarters of 2020, GDP grew year-on-year by 11.7%. Current data indicate that financial activities preserved its capacity in the last quarter of the year.

The slowdown in domestic demand remained limited, while the inflation increased throughout the year due to global costs. Especially since the second half, the volatility in exchange rates, the capacity constraints caused by the normalization process and the rapid increases in food prices caused an increase in inflation. Annual inflation, which was 14.6% at the end of 2020, reached 36.1% by the end of 2021. As our exports increased at a record level and domestic demand recovered year-on-year, the Turkish economy closed 2021 with a strong growth. We expect Türkiye to continue to grow in 2022, since a recovery in current account balances is expected as a result of strong foreign demand and ongoing improvement in tourism followed by subsequent growth.

We will continue to provide financing for environmental investments with renewable energy, energy and resource efficiency in order to support our country's transition to a low carbon economy.

We are proud to support green transformation

In 2021, we all experienced the adverse consequences of climate change in our lives, and we will continue to experience them unless any action is taken. However, based on the belief that great opportunities lie in every crisis, I think that the past year would also be a milestone for the world societies. Societies are now more aware than ever of this problem and what awaits us.

At the UN Glasgow Climate Change Conference (COP26), the countries made a promising decision to break up with fossil fuels. At this conference, we observed with great excitement that the Paris Agreement, which is an important step towards the fight against climate change, is still alive and has not fallen off the global agenda. I think it is very important that the Paris Agreement, signed in 2016, was accepted by the Grand National Assembly of Türkiye and entered into force after a six-year hiatus, which demonstrates that political awareness on climate change has been raised in Türkiye.

Established for the development of Türkiye, support for investments in economic enterprises and improvement of the capital market, TSKB has a significant experience in sustainable banking. Escarus, our subsidiary that has been serving in sustainability consultancy for 10 years, is an important partner in our contribution to the green transformation of the business world. In addition to consultancy, we are proud to support the green and sustainability transformation in our country with our loan facilities.

We published the first Climate Risk Report in our industry

The sustainability related funding from international development finance institutions and debt capital markets have exceeded 80% of our total funding. As a result of our improvements and strong ESG performance throughout the year, our Bank ranks first among Turkish banks evaluated by Sustainalytics, and ranks sixth among global banks in its category. We make a measurable and traceable contribution to the UN Sustainable Development Goals through our financing activities. Recently, we have started to deal with our working capital loans in this context. In May, we published the first Climate Risk Report in the Turkish banking industry, taking into account the recommendations of the Task Force on Climate- related Financial Disclosures (TCFD). With the roadmap we announced and the science based targets we set, we promised to continue our support for Türkiye's transition to a low carbon economy at full speed.

Mitigation of risks caused by climate change and investments in adaptation to climate change will remain among TSKB's focus areas. We will continue to provide financing for environmental investments with renewable energy, energy and resource efficiency in order to support our country's transition to a low carbon economy.

You can prove the existence of institutions, companies, banks and financial institutions only on paper. Plazas, buildings, offices and meeting rooms consist of chairs, tables, glass and concrete. It is people who both give meaning and purpose to institutions and companies, and add life to buildings and offices. We understood and experienced it better during the pandemic.

The only thing that creates and enables, and will enable, TSKB to exist is human beings. I believe that behind our successful work and your hope for the future lie behind the strong bonds we have established with our colleagues, customers and stakeholders.

I would like to thank all our stakeholders both personally and on behalf of Board of Directors. I hope that 2022 will go down in history as a year in which the pandemic and all its adverse consequences come to an end, and concrete steps are taken for a livable world.

ADNAN BALİ
Chairperson of the Board of Directors

We are among the first banks in our category, both in Türkiye and globally, with the ESG risk rating given to our Bank by Sustainalytics.

Dear Stakeholders,

It has become an existential necessity for us to reconstruct all our production, consumption, living and working practices with a "green" perspective during the transition from a linear economy to a circular economy. If we are to have a future on this beautiful planet with limited resources, we cannot afford to waste time to take these steps.

Our country has to carry out a comprehensive transformation in all sectors, from industry to agriculture and transportation to energy, in line with the SDGs in the upcoming period. The finance industry will be one of the most important actors of this transformation. I believe that development banking, which deals with not only the economic aspect of growth, but also with other aspects such as ecology, biodiversity, natural resources and social welfare with a long term perspective all over the world, will guide and inspire the finance industry in the new period.

Sustainable impact on green and inclusive transformation

As we stated in our report "Green Transformation of the Turkish Industrialists" published in 2021, our country needs approximately 11 billion Euros of smart financing to realize its green transformation within the framework of the Paris Agreement and the European Green Deal. We have been providing uninterrupted support to the transformation of our country in this field with our lending, investment banking and advisory services for many years.

We are the first in Türkiye and among the top five institutions globally with the ESG risk rating given to our Bank by Sustainalytics.This makes us proud, while increasing our responsibility for sustainable development. We build all our activities on the SDGs. 90% of our loan portfolio consists of SDG-linked investments. We mainly contribute to seven SDGs, though we touch all SDGs with our financial support for environmental and social investments such as renewable energy, energy and resource efficiency, environment, women's employment, developing regions, and occupational health and safety.

Combating the climate change, supporting the transition to a low carbon economy and ensuring an inclusive social development will continue to be our strategic priorities in the upcoming period as well. Accordingly, we will further expand our product and service range with innovative environmental, social and governance products. By 2025, we aim to have a 90% share of SDG-linked loans and a 60% share of climate and environment-focused SDG-linked loans in the total portfolio. From 2021 to 2030, we aim to provide USD 8 billion of SDG-linked financing to our economy.

We completed our third sustainable bond issuance in 2021, when innovative products and collaborations gained importance in the field of sustainable finance.

Sustainable impact with renewable energy investments

For 20 years, we have been providing support to renewable energy investments, which are extremely important in our country's transition to a low-carbon economy. As of the end of 2021, we have a 15% share in Türkiye's installed power in this field. This year, we mainly financed investments and hybrid projects with wind, geothermal, solar and biogas/biomass resources

Sustainable impact on the economy

In 2021, we maintained our steady growth in line with our medium and long term targets. As of the end of the year, our total asset size was TL 84.1 billion, while our total loan portfolio was TL 63.9 billion, indicating our direct contribution to the real economy. In the same period, we extended approximately USD 1 billion of new long term loans. We can say that renewable energy, inclusiveness and capacity increase investments stand out in these loans. Moreover, our strong profitability our asset quality, we increased our equity by 13.7% to TL 6.9 billion and our net profit to TL 1.1 billion.

ESG-linked funding reaching 80%

In 2021, when innovative products and collaborations gained importance in sustainable finance, we signed a USD 25 million trade finance-based sustainable funding agreement with Citi and also completed our third sustainable bond issuance. Moreover, 14 international banks, four of which are new, joined our sustainability-linked syndication loan, which amounted to USD 192 million with a roll-over rate of 130%. We will finance the geothermal investments of private sector companies throughout Türkiye with the "Geothermal Development Project” loan amounting to USD 150 million, which we obtained from the World Bank in December with the guarantee of the Ministry of Treasury and Finance. As of the end of 2021, the ratio of ESG linked funding in our total liabilities reached 80%.

Digital Impact for green transformation

The pandemic has accelerated technological developments, digitalization and innovation all over the world. From a development bank perspective, we consider these developments as opportunities for the sustainability of our planet and inclusive economic growth. We are accelerating our investments in application modernization, data analytics, business continuity and artificial intelligence in order to increase efficiency throughout our bank, while closely following international digital transformation developments. We both improve ourselves and try to raiseawareness among our stakeholders in order to achieve the green technological transformation as well as the green economic transformation.

Social responsibility projects

We expand the impact we created with our banking activities with long-term social responsibility projects we carry out in different fields. We handle these projects according to our bank's strategic priorities, and focus on issues such as climate change, environment, women's employment, and equal opportunity in education and arts. In all these efforts, we increase our impact through close collaborations with NGOs to access more people and institutions. In its 4th year, the #EqualSteps platform, which we launched with SKD Türkiye, has become an important digital guide in the women-friendly transformation of the business world. Empowerment-through-Education Scholarship Fund, which we established under TEV and supported female university students, has reached its 5th year. The Women Stars of Tomorrow-Education Support Fund, , which we conduct together with IKSV, supports our talented young female musicians in their international career journeys and brings them one step closer to their dreams.

It is our common goal to ensure the green and inclusive growth of our country in line with the SDGs. TSKB will continue to move forward with the motivation to create a positive and lasting impact on its common future with effective collaborations and concrete steps. I would like to thank our shareholders, customers, business partners, board of directors and colleagues for their valuable contributions on this journey.

Kind regards,

ECE BÖRÜ
CEO, Board Member