Sri Lanka Sustainable Finance Roadmap FINAL 08.04.19

Roadmap
for Sustainable Finance in Sri Lanka
Roadmap for Sustainable Finance
in Sri Lanka

Central Bank of Sri Lanka (CBSL)
April 2019

Roadmap for Sustainable Finance in Sri Lanka
Acknowledgement
United Nations Development Programme (UNDP) provided funding

support to the development of the Roadmap through the
Biodiversity Finance Initiative (BIOFIN).
The CBSL would also like to thank the International Finance

Corporation (IFC) for technical support and thank stakeholders for
contributions to consultation process. These stakeholders include
(in alphabetical order): The Finance Houses Association of Sri
Lanka (FHA), The Insurance Regulatory Commission of Sri Lanka
(IRCSL), Securities and Exchange Commission of Sri Lanka (SEC)
and Sri Lanka Banks’ Association (Guarantee) Ltd. (SLBA).

Table of Contents
Part 1 Background ......................................................................................................................... 1
1.1 Global Context ............................................................................................................ 1
1.2 National Context ......................................................................................................... 2
1.3 Existing Market and Policy Actions in the Financial Sector .................................. 3
Part 2 Objectives ........................................................................................................................... 5
Part 3 Core Pillars ......................................................................................................................... 6
3.1 Financing VISION 2030 ............................................................................................. 6
3.2 ESG Integration into Financial Market ................................................................... 10
3.3 Financial Inclusion .................................................................................................... 13
3.4 Capacity Building ...................................................................................................... 14
3.5 International Cooperation ........................................................................................ 17
3.6 Measurement and Reporting .................................................................................. 17
Part 4 Proposed Action Plan ...................................................................................................... 20
References ................................................................................................................................... 25

Abbreviations and Acronyms

ABS Asset Backed Securities
BIOFIN The Biodiversity Finance Initiative
CBI Climate Bonds Initiative
CBSL Central Bank of Sri Lanka
CSE Colombo Stock Exchange
ESG Environmental Social and Governance
FHA The Finance Houses Association of Sri Lanka
FI Financial Institution
GDP Gross Domestic Product
GRI Global Reporting Initiative
ICMA International Capital Market Association
IFC International Finance Corporation
IPCC The Intergovernmental Panel on Climate Change
IRCSL The Insurance Regulatory Commission of Sri Lanka
KPI Key Performance Indicator
MSME Micro, Small and Medium Enterprises
NBFI Non-Bank Financial Institution
PAED Publicly Available Environmental Data
PE Private Equity
PRB Principles for Responsible Banking
PRI Principles for Responsible Investment
PSI Principles for Sustainable Insurance
FC4S International Network of Financial Centers for Sustainability
SBI Sustainable Banking Initiative
SBN Sustainable Banking Network
SDGs Sustainable Development Goals
SEC Securities and Exchange Commission of Sri Lanka
SLBA The Sri Lanka Banks’ Association (Guarantee) Ltd.
SSE Sustainable Stock Exchange
TCFD Task Force on Climate-related Financial Disclosures
UN United Nations
UNDP United Nations Development Programme
VC Venture Capital

Part 1 Background
1.1 Global Context
As consequences of unsustainable economic and population growth, the world is
facing challenges including those related to environmental degradation, climate
change, poverty and inequality. In 2015, the United Nations (UN) introduced the
Sustainable Development Goals (SDGs) to address these challenges and to call
for action by all countries to promote prosperity while protecting the planet. The
recently released Special Report of the Intergovernmental Panel on Climate
Change (IPCC)1 further highlighted the urgency of meeting the goals set by the
Paris Agreement and limiting global warming to 1.5 degrees Celsius.
Implementing the SDGs and the Paris Agreement on climate change requires a
substantial mobilization of public and private finance towards sustainability.
International initiatives, principles and standards such as the Sustainable
Banking Network (SBN), the Equator Principles, International Finance
Corporation (IFC) Environmental and Social Performance Standards and World
Bank Environmental, Health and Safety Guidelines have been launched to
support sustainable finance transition. Countries also have developed national
sustainable finance policies and principles tailored to local context. Among SBN
member countries, 17 have launched national policies, guidelines, principles or
roadmaps by far.
As illustrated in the UN Environment and World Bank Group’s Roadmap for a
Sustainable Financial System (Figure 1), sustainable finance takes a broad
approach concerning environmental, social economic and other SDGs aspects,
supporting investment across a broad set of sectors required to build an inclusive,
economically, socially, and environmentally sustainable world.

1
IPCC, 2018. Global Warming of 1.5 ºC.
1
Figure 1 Elements of Sustainable Finance
Source: UN Environment & World Bank Group, 2017. Roadmap for A Sustainable Financial System. Adapted from UN
Environment Inquiry, 2016. Definitions and Concepts: Background Note.
1.2 National Context
Sri Lanka is facing increasing environmental and climate challenges. Frequent
natural disasters, deforestation and forest degradation, degradation of coastal
and marine ecosystems, climate change and extreme weather, air and water
pollution and loss of biodiversity hinder its sustainable economic growth. Sri
Lanka may face a 1.2 percent loss of annual GDP by 2050 if measures are not
taken to address climate change. 2 Sri Lanka is also one of the biodiversity
hotspots in the world and it is estimated that additional investment of Sri Lankan
Rupees 30 billion within next five years is needed to achieve national biodiversity
targets and to avoid future expenses related to biodiversity restoration and
management.3
Sri Lanka is the first country to appoint a Parliamentary Select Committee on
Sustainable Development. It established the Sustainable Development Council to
ensure that the country’s growth is sustainable. The Sustainable Development

2
Ahmed, M., and S. Suphachalasai. 2014. Assessing the Costs of Climate Change and Adaptation in South Asia.
Asian Development Bank. http://hdl.handle.net/11540/46. License: CC BY 3.0 IGO.
3
Assessment conducted by UNDP Biodiversity Financial Initiative (BIOFIN).
2
Act No. 19 of 2017 enacted by the Parliament provides the legal framework and
the national policy for implementing the SDGs. Additionally, the Sustainable Sri
Lanka Vision and Strategic Path 2030 identifies the need of a balanced, inclusive
and green growth path to facilitate a transition from “Conventional Sri Lanka 2018”
to “Sustainable Sri Lanka 2030”.
During the Sustainable Finance Workshop held by the Central Bank of Sri Lanka
(CBSL) and IFC/SBN in 2017, His Excellency President Maithripala Sirisena
stressed the important role that the financial sector can play to help Sri Lanka
tackle the most urgent development challenges—from environmental
conservation to poverty—and to help finance the SDGs. His presence
demonstrated a strong political will to advance sustainable finance as a long-term
priority for the country. Following the workshop, the CBSL initiated the process of
developing a Roadmap for Sustainable Finance in Sri Lanka to facilitate and
promote sustainable finance practices in consultation with relevant government
agencies, the industry and a wide range of financial sector stakeholders.
The IFC provided technical support, while the UNDP BIOFIN provided the
financial support to the development of this Roadmap.
1.3 Existing Market and Policy Actions in the Financial Sector
In Sri Lanka, voluntary, industry-led initiatives have been implemented to
promote sustainable finance. Early in 2015, the Sri Lanka Banks’ Association
(SLBA) launched the Sri Lanka Sustainable Banking Initiative (SL-SBI) with the
aim to jointly agree upon minimal standards or principles for integrating
environmental and social considerations into operations and to implement these
standards among the signatory banks. Under the Initiative, SLBA issued
voluntary Sustainable Banking Principles, setting a general framework on how
the Sri Lankan banking sector can conduct business to facilitate more sustainable
economic growth locally. Eighteen banks have signed up, committing to
mainstream environmental and social consideration into operation.
In the same year, the Colombo Stock Exchange (CSE) joined the UN Sustainable
Stock Exchanges (SSE) Initiative. In 2018, the CSE provided guidance to its
3
market on sustainability reporting by launching a publication titled
“Communicating Sustainability”.
In parallel, financial regulators started to take the lead through policy-based
initiatives for sustainable finance. In 2016, the CBSL joined the IFC-supported
SBN, which consists of central banks, banking regulators and banking
associations from 36 member countries, representing 85 percent of banking
assets in emerging markets. As an SBN member, the CBSL announced in the
“Roadmap 2017-Monetary and Financial Sector Policies for 2017 and Beyond”
that it would focus on sustainable finance practices to help financial institutions
effectively manage environmental and social risks in the project they finance and
support businesses that are greener, climate friendly and socially inclusive,
promoting sustainable finance in Sri Lanka. The CBSL has appointed a steering
committee to facilitate developing the Sustainable Finance Roadmap for the
financial sector in Sri Lanka through an inclusive and multi-stakeholder process.
4
Part 2 Objectives
This Roadmap sets out plans to develop sustainable finance in Sri Lanka, aiming
to provide guidance and support to financial institutions to effectively managing
environmental, social and governance (ESG) risks associated with projects they
finance and increase support to businesses that are greener, climate-friendly and
socially inclusive.
The specific objectives of the Roadmap are to:
(1) Bring policy cohesiveness across ministries, the Central Bank, other
financial regulators, and financial sector participants and address specific
ESG issues.
(2) Enhance resilience of financial institutions and enable them to grow and
develop in a sustainable manner through effective ESG risk management.
(3) Facilitate green/climate finance products and services innovation to mobilize
predominantly private capital for sustainable investment, making available
the financial resources required for Sri Lanka to achieve the SDGs.
While focusing on banks and non-bank financial institutions (NBFIs) regulated by
the CBSL, the Roadmap reflects commitment and aspirations of the entire
financial market toward sustainability, including banking, capital market and
insurance industry. Other financial institutions can refer to this Roadmap and
develop strategic activities that fit their businesses.
The Roadmap shall be reviewed and adjusted in due course to be in line with
market developments.
5
Part 3 Core Pillars
The Roadmap proposes a series of strategic activities to implement sustainable
finance in Sri Lanka. These activities revolve around six focus areas:
 Financing VISION 2030
 ESG Integration into Financial Market
 Financial Inclusion
 Capacity Building
 International Cooperation
 Measurement and Reporting
3.1 Financing VISION 2030
The Sustainable Sri Lanka Vision and Strategies 2030 sets out short-, medium-
and long-term economic, social and environmental goals. Achieving these goals
to transit towards a green, inclusive and balanced economy in Sri Lanka requires
large investments from the financial sector. The Sustainable Sri Lanka Vision and
Strategies 2030 identifies the investment needs in eight sectors: agriculture and
food, education, energy, health, marine resources, transport, urban development
and physical planning, and water. There is a need to facilitate financial institutions
in developing innovative sustainable finance products and services to implement
the country’s sustainable development agenda, which at the same time reveals
new business opportunities for financial institutions and creates business drivers
for sustainable finance.
3.1.1 Sustainable/green loan
The banking sector plays a critical role in Sri Lanka’s financial system and is
regarded with high capacity to mobilize financial resources to support sustainable
development. Activities that could further the greening of the banking sector
include:
6
For regulators:
 Develop specific sustainable loan guidelines or standards that
guide sustainable loans.
 Encourage banks to develop specific sustainable loan products and
sustainable saving products dedicated to financing
sustainable/green projects.
 Introduce incentive mechanism to promote sustainable loan and
saving, such as differentiated reserve requirements, differentiated
risk weighting, interest subsidies, tax preferences, etc.
For banks：
 Innovate loan/saving products for energy efficiency, green building,
green urban infrastructure, water saving and efficiency, and
climate-smart agriculture through project loans, corporate loans,
green mortgage loans, etc.
 Develop sustainable saving products to mobilize small savings for
sustainable activities and at the same time raise the public’s
awareness on sustainable finance.
3.1.2 Sustainable/green leasing
Leasing is an effective way to enable sustainable businesses by reducing upfront
costs and to some extent encourages the design and production of sustainable
products. Sustainable leasing could focus on funding sustainable projects and
funding in a sustainable way.
For regulators:
 Encourage companies engaged in leasing business to develop
sustainable/green leasing framework, guidance and operational
tools that guide sustainable leasing. Such guidance could cover
funding on residential, industrial and transportation energy
efficiency, supporting the development of green building and the
application of energy-efficient facilities and vehicles.
7
For Financial Institutions engaged in leasing business:
 Support green and socially inclusive projects through leasing
business.
 Explore a sustainable model of leasing that could extend the
lifecycle of equipment, machinery and appliances to promote a
circular economy and sustainability.
3.1.3 Sustainable/green bond
The global green bond market has grown rapidly in the past years and provides
investors a new way to meet green investment goals.
For regulators and stock exchange:
 Adopt international standards on sustainable bonds and develop
necessary domestic guidance and operational tools to enable
sustainable bond issuance, including taxonomy, methods to
quantify the sustainable impacts of bonds and guidance on
reporting. Such guidance and tools could cover sustainable
financial bonds, sustainable corporate bonds, sustainable Asset
Backed Securities (ABS) and other financial products. Such
guidance and tools should take into account both local sustainable
development needs and international standards and principles
such as those by Climate Bonds Initiative (CBI) and International
Capital Market Association (ICMA).
 Encourage the adoption of external verification, which could benefit
green bond issuance by increasing investor confidence in the
environmental credentials of the market.
 Explore potential incentive schemes to encourage the issuance of
sustainable bonds. Potential sustainable bond issuers would face
the additional expense and administrative burden brought by
external verification, managing and monitoring the proceeds, and
meeting reporting requirements. Incentives could help lower initial
8
hurdles for new issuers and absorb additional costs of an
environmentally robust issuance.
For financial institutions:
 Develop sustainable bond products.
 Support the issuance of sustainable bonds by acting as
underwriters.
 Consider allocating a portion of savings or funding to invest in
sustainable bonds.
3.1.4 Sustainable/green public equity
For regulators and stock exchange:
 Encourage managed funds to direct savings and funding towards
environmentally friendly and socially inclusive companies.
 Support the development of sustainability-related indices and the
establishment of sustainable public equity funds to attract both
public and private capital to green industries and to raise investors’
awareness on sustainability.
3.1.5 Other sustainable/green products
For regulators:
 Support and encourage industry players towards innovation on
climate and disaster insurance products, specially focusing on the
sectors vulnerable to such risks, through developing regulatory
guidance and tools where feasible.
 Encourage the establishment of green funds leveraging private
capital and forming public-private partnerships towards
sustainability. These funds could be sustainable private equity (PE)
funds and sustainable venture capital (VC) funds which are
uniquely suited to financing sustainable projects that are risky,
9
innovative, relatively small and at the early stage of the project
cycle.
 Explore specialized investment instruments to mobilize
savings/assets and catalyze them towards sustainable
investments.
For insurance companies:
 Explore insurance solutions for environmental risks and social
inclusion. These could include climate and disaster insurance, crop
insurance and home insurance to protect farmers and homeowners
especially against the loss of crops and damage to property due to
natural disasters. Pollution liability insurance could also be
developed to better manage environmental risks and reduce losses
from environmental pollution.
3.2 ESG Integration into Financial Market
Financial institutions face technical barriers when implementing sustainable
finance. It is critical to provide operational tools to strengthen ESG disclosure and
mainstream ESG issues throughout financial institutions’ risk management and
decision-making processes.
3.2.1 ESG disclosure
ESG data act as a fundamental of sustainable finance. Information asymmetry is
one of the main obstacles to develop and implement a sustainable financial
system. Limited disclosure from companies and regulators in a comparable
format makes it difficult for financial institutions to assess the materiality of ESG
risks involved in their investment and product design.
10
For regulators:
 Improve availability and accessibility of publicly available

4
environmental data (PAED) from non-corporate entities, such as
government agencies, international organizations and
non-governmental organizations. Information technologies such as
online database and fintech can be applied to help improve
availability and accessibility of such data.
 Cooperate with other government departments to improve

corporate-level ESG disclosure by introducing ESG disclosure
guidelines. A list of key indicators that need to be disclosed can be
developed. Mandatory and/or voluntary reporting requirements can
be identified.
 Require financial institutions to disclose their sustainable finance

strategies and ESG data at corporate level or asset level on regular
basis, which could in turn encourage their clients to improve ESG
management and disclosure quality.
 Disclose both positive and negative environmental and social
impacts generated through investment; disclose sustainability
policies and programs implemented within the organization.
Internationally recognized reporting frameworks, such as Global
Reporting Initiative (GRI) and CDP reporting frameworks and Task
Force on Climate-related Financial Disclosures (TCFD)
recommendations could be references.
 Actively engage with clients on ESG disclosure and management
issues.

4 According to the background paper Improving the Availability and Usefulness of Publicly Available Environmental Data for
Financial Analysis, prepared for the G20 Green Finance Study Group in 2017, PEAD are defined as environmental data that are
reported by non-‐corporate entities and that are useful for financial analysis. Examples of useful PEAD are: costs of air pollution,
costs of land contamination, facility level emission data and corporate level environmental violation data, etc.
11
3.2.2 ESG risk management
ESG risk management is a system that helps financial institutions identify, assess
and manage ESG related risks through financial institutions’ entire
decision-making processes to enhance ESG integration. It includes governance
for environmental and social risks, risk management practices as well as an
enforcement mechanism.
For regulators:
 Develop specific guidance and operational tools that are in line with
relevant national standards, regulations and international good
practices for financial institutions to identify, assess and manage
ESG risks in their portfolios as well as new business. Global
standards and guidelines such as IFC Performance Standards can
serve as a reference to assess ESG risk at the project level.
Sector-specific ESG checklists can be developed in collaboration
with other government departments, such as the Central
Environmental Authority. Environmental stress testing, through
which financial institutions can quantify and assess the potential
impact of environmental issues on the performance of their
businesses, can be applied at the asset level in the insurance and
banking sectors.
 Encourage financial institutions to develop their own ESG risk
management strategies and methods tailored to their specific
needs within the overall risk management framework.
 Conduct country-level climate and disaster risk assessments for
financial institutions.
 Incorporate ESG risk management to entire decision-making
processes, including environmental and social policies, risk
assessment, environmental and social covenant (in loan
12
agreements or other financial legal documents), project supervision
and portfolio review, training, external communication and reporting.
Risk assessment should consider full lifecycle and value chain of
projects.
 Incorporate ESG to corporate governance especially by defining
roles and responsibilities of the board and senior management with
regard to ESG issue.
3.3 Financial Inclusion
Sri Lanka has identified financial inclusion as one of the priorities to achieve
sustainable economic development. The country has made considerable
progress in financial inclusion as there is high level of physical access to financial
institutions with more branches opening up in rural areas. However, there remain
challenges in increasing the financial literacy and financial awareness to enable
clients to use financial services effectively and in improving payments and
settlement systems. Limited or no access to the formal financial sector is still
faced by micro, small and medium enterprises (MSMEs), low-income households,
youth and women.
This pillar can be combined with Sri Lanka’s National Financial Inclusion Strategy,
which is under development and aims to further enhance financial inclusion.
For regulators:
 Develop and implement the National Financial Inclusion Strategy
coordinating efforts with major stakeholders from the government,
financial industry and civil society.
 Introduce grants and risk-sharing facilities to support sustainable
start-ups.
 Coordinate with government departments to provide technical
assistance for green project development and investor pitches.
 Support fintech companies and the development of digital tools,
13
providing them with a regulatory sandbox to test fintech solutions
towards financial inclusion.
For banks and finance companies:
 Develop more accessible, affordable and efficient financial
products and services tailored for individual and communities that
traditionally have had limited or no access to financial services.
Explore the application of fintech and digital tools.
 Improve access to essential financial products and services.
 Develop accessible, affordable and effective insurance products
tailored to low-income households and MSMEs to offer protection
against climate change and natural disasters.
3.4 Capacity Building
Adequate expertise and capacity is needed by all, including the regulator, to
ensure the implementation of sustainable finance. On the one hand, there is a
need to facilitate technical training and capacity building among key stakeholders
on ESG risk management and opportunities. On the other hand, new green
products and technologies evolve quickly and expertise is needed to assess their
viability.
3.4.1 Capacity building for regulators
For regulators:
 Internal capacity development to strengthen regulators’ ability to
develop relevant sustainable finance standards and to track and
measure progress on sustainable finance.
14
3.4.2 Capacity building for financial institutions
For regulators:
 Support capacity-building activities for financial institutions to
understand, identify, assess and manage ESG risks and
opportunities.
 Support capacity-building activities for financial institutions to
develop internal sustainable finance-related policies, manuals and
procedures.
 Support knowledge-sharing activities among financial institutions to
provide opportunities to exchange sustainable finance-related
experience and learn from each other.
 Support capacity-building activities for financial institutions to take
measures for the internal management in a more sustainable way,
such as the introduction of green procurement and green buildings.
 Develop or support financial institutions to develop a pool of
specialists that have expertise on environmental or social issues.
 Develop internal training programs to enhance capacity of
identifying and quantifying the credit and market risks that may
arise from environmental and social exposure.
 Hire professionals that have sustainable finance-related work
experiences to help them gain a better understanding of ESG risks,
develop tools that fit their existing procedures and processes to
better-mitigate and -manage risks and to better-grasp green
investment opportunities.
 Develop a pool of in-house or external specialists that have
expertise on environmental or social issues.
15
3.4.3 Development of service providers
Professional service providers are important forces to facilitate the
implementation of the Sustainable Finance Roadmap. They are more familiar
with green technologies and environmental impact assessment, which usually
hinder financial institutions from effectively implementing sustainable
finance-related policies and/or guidelines.
For regulators:
 Encourage the development of domestic service providers in the

field of sustainable finance.
 Encourage the collaboration with international and domestic

sustainable finance service providers.
 Support training programs for service providers-related to

sustainable finance. Such training programs could cover topics
from sustainable project and/or sustainable finance product
verification, ESG risk management to green technologies.
3.4.4 Development of professionals
For regulators:
 Introduce sustainable finance-related courses into university
education and financial professional certificate programs. Equip the
professionals with knowledge and skills on sustainable finance.
3.4.5 Public awareness-raising
For regulators:
 Develop and execute national awareness-raising programs to

increase public understanding of environmentally friendly and
socially inclusive finance so as to increase demand for sustainable
finance products.
 Encourage media coverage on sustainable finance issues and

facilitate professional sustainable finance media development.
16
 Support the implementation of sustainable finance

awareness-raising programs at local level.
3.5 International Cooperation
Leveraging international partnerships could help accelerate collective progress of

sustainable finance in Sri Lanka, in line with international practices and Sri
Lanka’s development needs.
3.5.1 Cooperation on knowledge and capacity
For regulators and financial institutions:
 Participate in and learn from international collaboration platforms

such as Sustainable Banking Network (SBN), Principles for
Responsible Banking (PRB), Principles for Responsible Investment
(PRI), Principles for Sustainable Insurance (PSI), Sustainable
Stock Exchanges (SSE) Initiative, International Network of
Financial Centers for Sustainability (FC4S), etc.
 Expand and deepen the international cooperation and coordination

on knowledge sharing and capacity building, such as through joint
training, research projects and tools development.
3.5.2 Cooperation on funding and resources
For regulators and financial institutions:
 Mobilize international, regional and local resources and funding to
accelerate the implementation of the Roadmap in a coordinated
and efficient manner.
3.6 Measurement and Reporting
Tools and mechanism to tag sustainable assets could help track the total public
and private sustainable finance flows in the country, monitor and evaluate
effectiveness of measures that have been introduced, and identify areas for
market and regulatory improvement.
17
3.6.1 Taxonomy and statistics
Lack of clear definition of green and social project makes it difficult for banks,
institutional investors and other key stakeholders to identify eligible sustainable
projects and then allocate capital towards sustainable, and to measure
sustainable stocks, flows and performance.
For regulators:
 Establish a clear and detailed taxonomy for sustainable activities to
create a common language for all actors in the financial sector.
Such taxonomy could be in the form of sector guidelines, catalogue
and/or standard criteria for sustainable activities/projects,
checklists and/or exclusion lists to guide green and social finance
flows. Such taxonomy could refer to international examples and
address the local sustainable development needs and priorities of
the country.
 Introduce a statistics system to track sustainable finance flows and
impacts.
3.6.2 For regulators to measure progress and impacts
A statistics system could help measure progress of the Sustainable Finance
Roadmap and calculate environmental and social impacts to evaluate policy
effectiveness, adjust and/or improve policies and achieve sustainability goals.
For regulators:
 Develop key performance indicators (KPIs) to capture both
qualitative and quantitative data to measure the effectiveness of the
implementation of the Roadmap.
 Require financial institutions to annually report the progress made
on sustainable finance related activities along with an action plan
for the next financial year.
18
3.6.3 For financial institutions to measure progress and impacts
 Encourage the establishment of monitoring and evaluation
mechanism of sustainable finance progress and impacts within
financial institutions.
 Encourage financial institutions to include ESG factors in their
internal rating system and to publicly disclose their environmental
and social performances and both positive and negative impacts.
19
Part 4 Proposed Action Plan
Timeline
Sector Key Actions Short-term Mid-term Long-term
(2019-2020) (2021-2025) (2026-2030)
Pillar 1: Financing VISION 2030
Banking For regulators:
 Develop specific sustainable loan √
guidelines or standards
 Introduce incentive mechanism to √ √
promote sustainable loan and saving
For banks:
 Innovate sustainable loan products √ √
 Develop sustainable saving products √
Leasing For regulators:
 Encourage companies engaged in √ √
leasing business to develop
sustainable leasing (and non-bank
finance) framework, guidance and
operational tools
For FIs engaged in leasing business:
 Support green and socially inclusive √
projects through leasing (and non-bank
finance) business
 Explore sustainable model of leasing √
(and non-bank finance)
Insurance For regulators:
 Support development and provision of √
climate and disaster insurance
products
 Explore insurance solutions for √ √
20
environmental risks and social
inclusion
Capital For regulators:
Market  Adopt international standards on √
sustainable bond and develop
necessary domestic guidance and
operational tools
 Encourage the adoption of external √
verification
 Explore potential incentive schemes √ √
sustainable bond issuance
 Support the development of √ √
sustainability related indices
 Support the establishment of √
sustainable funds
For FIs:
 Develop sustainable bond product √
 Support issuance of sustainable bonds √
by acting as underwriters
 Allocate a portion of savings or funding √
to investment of sustainable bonds
Pillar 2: ESG Integration into Financial Market
Cross For regulators:
sectoral  Improve availability and accessibility of √
publicly available environmental data
from non-corporate entities
 Introduce ESG disclosure guidelines √ √
 Develop specific ESG risk √ √
management guidance and operational
tools
 Require FIs to disclose their √ √
sustainable finance strategies and ESG
21
data at corporate level or asset level on
regular basis
 Conduct country-level climate and √ √
disaster risk assessment for FIs
For FIs:
 Develop internal ESG risk √ √
management strategies and methods
 Disclose both positive and negative √ √
environmental and social impacts
generated through investment
 Disclose sustainable finance policies √ √
and programs
Pillar 3: Financial Inclusion
sectoral  Develop and implement the National √ √
Financial Inclusion Strategy
 Introduce grants and risk sharing √
facilities to support sustainable
start-ups
 Provide technical assistance for green √ √
project development and investor
pitches
 Support fintech companies and the √ √
development of digital tools
For FIs:
 Develop more accessible, affordable √ √
and efficient financial products and
services
Banking For banks and finance companies:

 Improve access to essential financial √ √
products and services
 Explore the application of fintech and √ √
digital tools
22
Pillar 4: Capacity Building
sectoral  Internal capacity development for √ √
regulators
 Support capacity building activities for √ √
FIs
 Encourage the development of √ √
domestic green finance service
providers
 Encourage international collaboration √ √
 Support training programs for service √ √
providers
 Introduce sustainable finance related √ √
courses into university and professional
education
 Develop and execute national level √ √
campaign programs
 Encourage media coverage on √ √ √
sustainable finance issues and
facilitate professional sustainable
finance media development
For FIs:
 Develop internal ESG risk √ √
management training programs
 Hire sustainable finance professionals √ √
 Support the implementation of √ √
sustainable finance campaign
programs at local level
Pillar 5: International Cooperation
Cross For regulators & FIs:
sectoral  Participate in and learn from √ √
international collaboration platforms
23
 Expand and deepen the international √ √
cooperation and coordination on
knowledge sharing and capacity
building
 Mobilize international resources and √ √
funding
Pillar 6: Measurement and Reporting
sectoral  Establish a clear and detailed √
taxonomy for sustainable activities
 Introduce a statistics system to track √ √
sustainable finance flows and impacts
 Develop KPIs to measure the √ √
effectiveness of the implementation of
the Roadmap
 Require FIs to annually report the √
progress made on sustainable finance
related activities along with an action
plan for the next year
For FIs:
 Establish monitoring and evaluation

√ √
mechanism
 Include ESG factors in internal rating

√
system and publicly disclose ESG
performance and impact
24
References
Asian Development bank, 2014. Assessing Cost of Climate Change and Adaptation in South
Asia.
CBSL, 2017. Roadmap 2017 – Monetary and Financial Sector Policies for 2017 and Beyond.
CBSL, 2017. Proposed Principles Promoting and Developing Sustainable Finance in Sri
Lanka.
Colombo Stock Exchange, 2018. Communicating Sustainability: Six Recommendations for
Listed Companies.
G20 Green Finance Study Group, 2017. Improving the Availability and Usefulness of Publicly
Available Environmental Data for Financial Analysis.
IFC, 2018. Sustainable Banking Network Global Progress Report.
International Monetary Fund (IMF), 2018. IMF Country Report No. 18/175: Sri Lanka.
IPCC, 2018. Global Warming of 1.5 ºC.
Presidential Expert Committee (PEC), 2017. Sustainable Sri Lanka Vision and Strategic Path
2030.
SLBA, 2015. Sri Lanka Sustainable Banking Principles.
SLBA, 2018. SLBA Sustainable Banking Initiative (SBI) – Kick off Meeting 15.08.2017 –
Speech by Director of Bank Supervision.
Sri Lanka Sustainable Development Act No. 19 of 2017.
UN Environment & World Bank Group, 2017. Roadmap for A Sustainable Financial System.
UN website. Sustainable Development Goals. Accessed in December 2018.
UNDP BIOFIN, 2018. The Biodiversity Financial Needs Assessment in Sri Lanka.
25

Sri Lanka Sustainable Finance Roadmap FINAL 08.04.19

Uploaded by

Copyright:

Available Formats

Sri Lanka Sustainable Finance Roadmap FINAL 08.04.19

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Sri Lanka Sustainable Finance Roadmap FINAL 08.04.19

Uploaded by

Copyright:

Available Formats

Roadmap

for Sustainable Finance in Sri Lanka

Roadmap for Sustainable Finance

Central Bank of Sri Lanka (CBSL)

United Nations Development Programme (UNDP) provided funding

The CBSL would also like to thank the International Finance

Part 1 Background ......................................................................................................................... 1

1.1 Global Context ............................................................................................................ 1

1.2 National Context ......................................................................................................... 2

Part 2 Objectives ........................................................................................................................... 5

Part 3 Core Pillars ......................................................................................................................... 6

3.1 Financing VISION 2030 ............................................................................................. 6

3.2 ESG Integration into Financial Market ................................................................... 10

3.3 Financial Inclusion .................................................................................................... 13

3.4 Capacity Building ...................................................................................................... 14

3.5 International Cooperation ........................................................................................ 17

3.6 Measurement and Reporting .................................................................................. 17

Part 4 Proposed Action Plan ...................................................................................................... 20

References ................................................................................................................................... 25

Abbreviations and Acronyms

1.1 Global Context

As consequences of unsustainable economic and population growth, the world is

facing challenges including those related to environmental degradation, climate

Sustainable Development Goals (SDGs) to address these challenges and to call

recently released Special Report of the Intergovernmental Panel on Climate

Paris Agreement and limiting global warming to 1.5 degrees Celsius.

substantial mobilization of public and private finance towards sustainability.

International initiatives, principles and standards such as the Sustainable

Banking Network (SBN), the Equator Principles, International Finance

Corporation (IFC) Environmental and Social Performance Standards and World

Bank Environmental, Health and Safety Guidelines have been launched to

support sustainable finance transition. Countries also have developed national

member countries, 17 have launched national policies, guidelines, principles or

As illustrated in the UN Environment and World Bank Group’s Roadmap for a

Sustainable Financial System (Figure 1), sustainable finance takes a broad

approach concerning environmental, social economic and other SDGs aspects,

supporting investment across a broad set of sectors required to build an inclusive,

economically, socially, and environmentally sustainable world.

Figure 1 Elements of Sustainable Finance

Environment Inquiry, 2016. Definitions and Concepts: Background Note.

1.2 National Context

Sri Lanka is facing increasing environmental and climate challenges. Frequent

natural disasters, deforestation and forest degradation, degradation of coastal

targets and to avoid future expenses related to biodiversity restoration and

Sri Lanka is the first country to appoint a Parliamentary Select Committee on

Sustainable Development. It established the Sustainable Development Council to

ensure that the country’s growth is sustainable. The Sustainable Development

Asian Development Bank. http://hdl.handle.net/11540/46. License: CC BY 3.0 IGO.

to “Sustainable Sri Lanka 2030”.

(CBSL) and IFC/SBN in 2017, His Excellency President Maithripala Sirisena

tackle the most urgent development challenges—from environmental

conservation to poverty—and to help finance the SDGs. His presence

demonstrated a strong political will to advance sustainable finance as a long-term

developing a Roadmap for Sustainable Finance in Sri Lanka to facilitate and

promote sustainable finance practices in consultation with relevant government

agencies, the industry and a wide range of financial sector stakeholders.

financial support to the development of this Roadmap.

1.3 Existing Market and Policy Actions in the Financial Sector

In Sri Lanka, voluntary, industry-led initiatives have been implemented to

aim to jointly agree upon minimal standards or principles for integrating

 Financing VISION 2030

 ESG Integration into Financial Market

 Measurement and Reporting

 Develop specific sustainable loan guidelines or standards that

 Encourage banks to develop specific sustainable loan products and

 Introduce incentive mechanism to promote sustainable loan and

 Innovate loan/saving products for energy efficiency, green building,

 Develop sustainable saving products to mobilize small savings for

 Encourage companies engaged in leasing business to develop

 Support green and socially inclusive projects through leasing

 Explore a sustainable model of leasing that could extend the

 Adopt international standards on sustainable bonds and develop