The Central Bank launched the Roadmap for Sustainable Finance in Sri Lanka and hosted a high-level seminar for senior officers of financial institutions and stakeholders in Colombo last week.
This was the national launch of the Roadmap for Sustainable Finance which was unveiled globally on April 10, 2019 at the Sustainable Banking Network Global Meeting of the International Finance Corporation (IFC) in Washington, DC, USA.
“The Road Map will facilitate the aim of achieving greener and more sustainable financial sector in Sri Lanka with its forthcoming and forward looking approach adopted. The financial system in the country has done well so far, and it is a momentous step to introduce a Roadmap,” Governor Central Bank Dr. Indrajit Coomaraswamy said.
The main thrust of this initiative is to ensure sustainability is embedded in the country’s financial sector. This is a timely move to bring key stakeholders by integrating environment and society on its way forward. It is necessary to do speeding up and scaling up financial facilities to mitigate adverse effects of climate change. However, public funds are not sufficient to meet investment requirement. Therefore, the financial system needs to chip in to fill this gap to achieve concerted and effective action, he said.
“We need to mitigate extreme negative impact of climate change as Sri Lanka is one of 40 countries vulnerable to climate change,” the Governor said.
One of the highlights of the Roadmap was that Sri Lanka needs to invest Rs. 30 billion over the next five years to achieve national biodiversity targets and to avoid future expenses related to biodiversity restoration and management.
“Globally, business leaders are realising their responsibility towards preserving the scare resources to ensure a sustainable future. Governments and development institutions are emphasising the need to address the most pressing development challenges. We can not expect the business as usual will take us forward. A new norm has unfolded. Understanding the risks and adapting to it is the key,” Country Officer International Finance Corporation (IFC) of the World Bank, Victor Anthonypillai said.
The environment and social sustainability will define how smart businesses are. The Roadmap is a key milestone in a long journey transforming the businesses. Climate change takes the centre stage, but climate smart approach is not the option any more, he said.
Sri Lanka’s economy has taken a beating due to floods and prolonged droughts. It is estimated that Sri Lanka stands to lose 1.2 percent of annual GDP by 2050 unless such issues are addressed. Globally from an investment angle evidence for the new norm is even more compelling. Sustainable investment assets which include environmental, social, governance (ESG) and those which have a positive impact on investment have surged worldwide by more than a third since 2016.
“We help the stakeholders understand and manage ESG risks associated with projects they finance and help increase assistance to businesses that are greener, climate friendly and socially inclusive,” he said.
The roadmap was developed in consultation with stakeholders’ including the Sri Lanka Bankers’ Association (Guarantee) Ltd, Finance Houses Association of Sri Lanka, Insurance Regulatory Commission of Sri Lanka and Securities and Exchange Commission of Sri Lanka.
The IFC served as the secretariat and technical advisor and the United Nations Development Program (UNDP) provided financial support through its Biodiversity Finance Initiative to the Central Bank in designing the Sustainable Finance Roadmap.
The Roadmap provides a broad direction to financial regulators and financial institutions to effectively manage environmental, social and governance (ESG) risks associated with projects they finance and promotes assistance to businesses that are greener, climate-friendly and socially inclusive.
It attempts to scale up the contribution of the financial sector – including banking and finance, capital markets and insurance industry – and help build a more resilient, sustainable green economy.
The Roadmap articulates a series of strategic activities to implement sustainable finance in Sri Lanka, while detailing an action plan to be implemented over short, medium and long term by stakeholders.
The Central Bank of Sri Lanka has appointed a Steering Committee on Implementation of the Roadmap for Sustainable Finance in Sri Lanka to facilitate effective implementation of the strategic activities encompassed in the Roadmap. The committee envisages monitoring and reviewing the progress while incentivising stakeholders in practising sustainable finance in their ordinary course of businesses.
Having identified the need for capacity development in the sphere of sustainable finance in Sri Lanka, the Central Bank through its training arm, Centre for Banking Studies (CBS) has designed a series of training programs for stakeholders of sustainable finance. First of such capacity building initiatives was held last week at CBS, in collaboration with IFC and UNDP.