Some of Turkey's largest banks are reluctant to finance Canal Istanbul due to environmental concerns and investment risks associated with the massive construction project, Reuters reported, citing four senior bankers.

Two sources said the global sustainability pact signed by six of Turkey's top banks has become an obstacle to financing Kanal Istanbul, which Erdogan called a crazy project.

The government plans in June to begin the construction of a 45 km long canal that will connect the Black Sea in the north with the Sea of ​​Marmara in the south. Erdogan says the canal will protect the Bosphorus, which runs through the heart of Istanbul.

However, the mayor of Istanbul, engineers, and, according to one poll, a majority of citizens oppose the project for environmental reasons, claiming that it will destroy the marine ecosystem and resources that provide nearly a third of the city's freshwater.

Six Turkish banks, including Garanti Bank, Is Bank, and Yapi Kredi, have signed the UN-backed Principles for Responsible Banking, which call on signatories to avoid harming people and the planet.

In 2019, the channel's price was estimated at 75 billion lire - or $ 13 billion.

The reluctance of some Turkish lenders to finance the project increases the likelihood that government and foreign funding should play a larger role in making Erdogan's dream a reality.

Asked if Turkish banks would participate in the financing, Erdogan's spokesman and advisor Ibrahim Kalin told Reuters that the project would certainly attract investors and lenders.

But for most Turkish banks, especially lenders with European sponsors and those involved in syndicated loans, the risks are likely to be too high, the sources say. They said that the adoption of such a large project could limit their ability to carry out further syndicated loans, and there is a risk of torpedoing the project at a later stage.