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SL’s financial sector faces over US $ 10bn climate bill
- Central Bank says estimated US $ 10.85bn is required for implementing NDCs until 2030
- Warns cost of inaction is rising as climate risks intensify
- Stresses launch of Sustainable Finance Roadmap 2.0 is a critical step forward for SL
- Stakeholder committee and working groups to be formed in near future
“Sustainable finance is no longer optional. It is an economic, social and environmental imperative globally and here in Sri Lanka”
- Dr. Nandalal Weerasinghe
Sri Lanka’s financial sector must gear up to mobilise an estimated US $ 10.85 billion by 2030 to meet the country’s climate commitments, the Central Bank said, while warning that the cost of inaction is rising as climate risks intensify.
The caution was delivered by Central Bank Governor Dr. Nandalal Weerasinghe at the launch of the Sustainable Finance Roadmap 2.0 in Colombo yesterday. Dr. Weerasinghe described the initiative as a “critical step forward” in building resilience and long-term sustainability in the country’s financial sector and broader economy.
“In the Sri Lankan context, it is estimated that US $ 10.85 billion is required for implementing the Nationally Determined Contributions (NDCs) until 2030,” Dr. Weerasinghe stated.
The new roadmap integrates both environmental and social sustainability to ensure a more inclusive financial future.
The fresh push towards sustainable finance comes at a time when climate-related shocks pose a growing threat to the macroeconomic and financial stability of countries such as Sri Lanka, already grappling with recovery from a crisis that struck the economy in 2022.
Dr. Weerasinghe cautioned that the extreme weather events the island nation has witnessed are no longer anomalies but are signs of a shifting climate that would increasingly impact the country’s agriculture, energy security, infrastructure and livelihoods. “Sustainable finance is no longer optional. It is an economic, social and environmental imperative globally and here in Sri Lanka.”
The Sustainability Roadmap 2.0 builds on the foundation set in 2019 and aligns with the Central Bank’s updated mandate under its new act, which incorporates inclusiveness as a core responsibility alongside price and financial stability.
Dr. Weerasinghe noted that the Central Bank has “strategised how financial inclusion could be achieved” and that climate-related shocks must now be viewed through both monetary and financial lenses.
“Supply-side disruptions could trigger inflationary pressure, weakening price stability while building up of nonperforming portfolios following a catastrophe, which could take a toll on financial system stability through a credit crisis,” he said.
In parallel to climate resilience, the roadmap also seeks to advance Inclusive Green Financing and integrate vulnerable groups, MSMEs and gender considerations into the financial architecture. The implementation of Phase II of the National Financial Inclusion Strategy will serve as a key driver in achieving this.
As decarbonisation efforts tighten across key export markets like Europe and global disclosure norms such as S1 and S2 come into play, Sri Lanka’s financial sector must not lag behind, Dr. Weerasinghe stressed.
Meanwhile, acknowledging inter-institutional gaps and funding challenges, Dr. Weerasinghe urged the stakeholders to treat sustainability not as a checkbox but as an urgent national priority. According to him, successful implementation of the Roadmap 2.0 will position Sri Lanka at the forefront of the sustainable financing leadership in the region.
“We have challenges to overcome especially with inter-institutional coordination and alignment with a national strategy in climate financing… implementation of the actions laid down in Roadmap 2.0 is very important as it will strengthen the foundation of the financial sector to gain more resilience against climate risks while uplifting financial inclusion among society.”
Addressing the leaders of financial institutions and heads of relevant departments, Dr. Weerasinghe called for full cooperation from all parties, noting that stakeholder committees and working groups will be established soon to push forward with execution.
Central Bank launches Sustainability Roadmap 2.0
- Updated roadmap emphasises actions that will support Sri Lanka to position itself as ‘investment-ready’ after its debt restructuring process
Sri Lanka yesterday saw the launch of the Sustainability Roadmap 2.0, developed by the Central Bank, with technical and financial support from the International Finance Corporation, a member of the World Bank Group, in partnership with the European Union, under the Accelerating Climate-Smart and Inclusive Infrastructure in South Asia programme.
The updated roadmap emphasises actions that will support Sri Lanka to position itself as ‘investment-ready’ after its debt restructuring process, with the key guidelines and protocols in place.
While acknowledging that scaling the contribution of the financial sector to the country’s sustainable development requires a broad multistakeholder and multisectoral approach, the Central Bank said the new roadmap primarily focuses on the actions that are under the mandate of the key financial sector regulators.
Recognising the significance of addressing climate-related risks to achieve its dual goals of price stability and financial system stability, the Central Bank embarked on its sustainable finance initiative in 2016.
The first roadmap was launched in 2019, to address the need for incorporating environmental sustainability into the financial system to mitigate the adverse impacts of climate change by promoting policy cohesiveness across the financial sector regulators. Subsequent to the launch of the first roadmap, initiatives such as Sri Lanka Green Finance Taxonomy and Directions/Guidelines for banking and NBFI sectors, which predominantly covered the green financing activities, were issued by the Central Bank.
However, according to the financial sector regulator, even after five years after the publication of Sri Lanka’s first roadmap for sustainable finance, the contribution of the financial institutions to the country’s sustainability targets remains small.
“There is, therefore, an urgent need to support the financial ecosystem to better align its funding with not only environmental challenges but also social challenges faced by Sri Lanka and to scale up its contribution to the sustainable development objectives of the country,” the Central Bank said in the publication launched yesterday.
The first roadmap highlighted financial inclusion as a core pillar but its actions were limited to developing the National Financial Inclusion Strategy for implementation.
The Sustainable Finance Roadmap 2.0 aims to address the social dimension of sustainability in a comprehensive manner, ensuring social justice for identified vulnerable groups and MSMEs to achieve financial inclusion. The 2.0 Roadmap strengthens the existing framework by taking stock of the trends in sustainable finance and progress made since the publication of the first roadmap in 2019. These include: evolutions in reporting requirements and standards, with an emphasis on those aligned with the International Sustainability Standards Board - ISSB10, improved guidance on environmental risk management for the financial sector and a stronger emphasis on biodiversity and nature finance, following the adoption of the Kunming-Montreal Global Biodiversity Framework in 2022.
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