As the Central Bank of the Republic of Turkey (CBRT) steered its direction towards price stability, it encountered an annual food inflation above 20% in front of it. While the pandemic has already reduced the income and negatively affected purchasing power of millions of Turkish people, the problem of access to food emerged due to the sharp rise in food prices which was the least desired situation.

The supply problems brought by the pandemic, increased export quotas pushed the  Global Food Price Index to the highest in the last 3 years in 2020.[i] But the main source of stress in the global food system is climate change, which still needs to be tackled aggressively. Drought reached a serious level in 2020, which was one of the hottest years on record. Thus, the effect of climate change on inflation has reached a point that cannot be ignored. More importantly, the damage caused by climate change constitutes a risk factor for the entire financial system. The devastation that occurs in the climate disaster region can threaten the solvency of households, businesses, governments, and ultimately financial institutions.[ii]

Therefore, many central banks have acknowledged the risks created by climate change on the financial system,  expanding their mission to combat climate change. The number of central banks, which enrolled in the Network for Greening the Financial System (NGFS), which was established with 8 central banks in 2017 and made serious efforts to transition to a climate-resistant financial system, reached 83 in 2020.[iii]

This organization guides countries to implement broad transition scenarios to successfully complete their transition to a carbon-neutral economy, so that central banks can conduct climate stress tests by analyzing the risks that may arise on the financial system in situations where the sudden transition to a carbon neutral economy, gradual transition, and no transition. And eventually countries can shape their own roadmap to increase financial resilience to climate risks, based on their internal dynamics.

For example, although the sudden transition to a carbon neutral economy seems essential to limit global warming to 1.5 ° C as soon as possible, the rapid abandonment of carbon-intensive sectors in the country where it is realized can trigger financial distress.  NGFS could support countries to draft precautionary measures for these kind of scenarios in a planned way.

In addition, the Network for Greening the Financial System (NGFS) guides central banks by conducting studies on how to integrate Sustainable and Responsible Investment (SRI) practices into portfolio management. Member central banks are also taking steps to further adopt SRI practices in portfolio management. In particular, Green Bonds[iv] will be one of the most important sources of financing in this area.

Although many central banks around the world are taking a joint effort to increase their financial resilience to climate risks, the CBRT is unfortunately not part of this  effort. The new Central Bank administration does not even put climate-related concerns on its agenda while trying to enhance its weak credibility with the priority of price stability, and cleaning the  debris it took over from the old administration. But when the impending climate catastrophe threatens the entire financial system, the struggle for price stability today will also lose its meaning and there will be no opportunity to adapt to the increasing climate risk in footsteps.

Even if the CBRT management wakes up one morning with a deep awareness of this issue and wants to become a member of the Network for Greening the Financial System (NGFS) to take the necessary actions, it is not possible to do so. Because this network is an extension of the Paris Climate Agreement. But Turkey is the only G-20 country which signed but hasn’t ratified in their parliament. As a country, this absence reflects our attitude towards combating climate change and global solidarity very well. In other words, climate change is not an issue that the Central Bank can solve alone, even if it wishes. The government has to have the same motivation and work to make the necessary changes in a coordinated manner. How likely this is, I leave it to your guess.

Unfortunately, climate concerns are in the bottom row of Turkey’s agenda. We have an unhealthy posture which views  this problem and potential disasters as the “problem of others / the rest of the world”. Since we have a perspective which evaluates global problems as “problem of rest of the world”, about a year we believed that pandemic will deeply shake China only and hence production/supply chains will be shifted from there  to Turkey. Then, have experienced how quickly these kind of problems can affect all countries in the globalized world, as our production machine began to stutter due to lockdowns and infected workers.

At the end,  if we do not ignore the lessons to be learned about this, the Pandemic offers promising opportunities to move away from the unsustainable growth path.

Climate-friendly / green projects should be prioritized in recovery packages, subsidies for fossil fuels should be reduced, and energy policies should be redesigned taking environmental impacts into consideration. Developed countries are aware that green rescue packages will be the key to getting out of the unsustainable growth path and have started to take necessary actions. Once again, we must not miss this train and do what needs to be done in time.



Firuze Ergin




[iv] Green bonds are designed to support climate-friendly projects, and their returns are instruments used in green projects.

Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and and has contributed to the financial daily Referans and the liberal daily Radikal.