SL makes impressive strides in sustainable finance policy action

Sri Lanka is among eight countries advanced to the implementation stage from the preparation stage having initiated key banking reforms to drive development and fight climate change, according to the second Global Progress Report of the IFC-facilitated Sustainable Banking Network (SBN), released recently.

“Eight countries moved from the preparation stage to the implementation stage, shifting from vision to practice in sustainable finance policy action. Cambodia, Ecuador, Georgia, Nepal, Pakistan, Panama, Paraguay and Sri Lanka have launched sustainable finance policies or principles since the last report and moved into the implementation stage,” the authors of the report stated. 

The Roadmap for Sustainable Finance was officially launched in April, this year, by the Central Bank of Sri Lanka (CBSL) with the support of the International Finance Corporation (IFC) and United Nations Development 
Programme (UNDP).

The Roadmap provides examples of green and sustainable assets while strongly encouraging the development of green bonds and refers to both the International Capital Market Association (ICMA) and Climate Bond Initiative (CBI) standards. 

It also recommends external verification of green bonds in order to increase investor confidence. The Roadmap is not only limited to debt instruments but also highlights the potential for sustainable products in areas such as leasing and insurance.

So far, Sri Lanka has made notable progress in 11indicators out of 19 indicators in 
policy converge. However, moving forward, Sri Lanka is required to adopt several policy measures in areas such as comprehensive taxonomy for green assets, defining main climate risks for local financial sector requirements as well as getting environmental and social risk management (E&S) policies, practices and results 
externally verified. 

The SBN pointed out that its members, including Sri Lanka, could make rapid progress, leapfrogging ahead by learning from the experienced members. 

“Peer-to-peer knowledge sharing is a hallmark of SBN and often results in some countries rapidly applying successful approaches of other countries to their own landscape,” it stated. 
The Central Bank of Sri Lanka has already received such inputs from Indonesia’s Financial Services Authority during the country’s first sustainable finance 
workshop in 2017. 

The report also captured the progress made by 14 countries globally to actively grow their green bond markets. Data shows increasing innovation by financial institutions to green their lending portfolios. Across Asia-Pacific, seven SBN member nations have issued green bonds.

Of the 38 countries that make up the SBN, 16 are in Asia-Pacific, displaying a commitment within the region to sustainable finance and industry innovation. 

Ten Asia-Pacific economies have adopted national sustainable finance policies and voluntary principles while China and Indonesia are the only two nations globally to have progressed their sustainable financial systems to a maturing stage.

Established in 2012, SBN now represents US $ 43 trillion (86 percent) of banking assets in emerging markets. The report is based on an innovative results-measurement approach developed by SBN members as they work to convert sustainable finance.