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CB in green funding push; asks banks to consider raising green bonds

28 June 2022 12:57 am - 1     - {{hitsCtrl.values.hits}}

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In a bid to promote sustainable finance activities, the Central Bank last week issued fresh guidelines to the banks asking them to consider raising funds via green and sustainable bonds and allocate such funds to either invest in or to fund sustainable activities. 


As a first step, the Central Bank in May published the ‘The Sri Lanka Green Finance Taxonomy’, as part of its road map for sustainable finance introduced in 2019. The green taxonomy helps investors and companies to classify and make informed decisions on sustainable economic activities at a time when climate change has become the top most agenda item in both the state and private sector in recent times. 


To this end, the Central Bank issued fresh directions to both the licensed commercial banks and specialised banks to actively consider green funding sources, both locally and internationally when raising capital and also to develop innovative financial solutions to support such sustainable economic activities. 

Further, the Central Bank also identified priority sectors for banks to provide sustainable lending facilities, which include sustainable agriculture, energy-saving machinery, renewable energy, sustainable transport, waste management projects and sustainable tourism, ICT and women empowerment initiatives.  Although still not mandatory, companies are now engaged in delivering and reporting on their environmental, social and governance (ESG) conduct as part of their daily business activities, as global investors push companies for greener, more climate-friendly and socially inclusive business activities or face consequences. 


However, with current global energy prices-driven inflation spiral, which has caused a cost-of-living crisis for billions in the world, no energy transition would happen without delivering on energy affordability and access to conventional energy.   Some one-eyed experts and commentators welcome the market pricing of products, which results in a many-fold increase in prices overnight, depriving millions of their ability to afford these products and thereby make them destitute and impoverished in the absence of a corresponding increase in their incomes. 

Meanwhile, despite the instructions by the regulator to banks to raise green finance to fund green projects, it is highly doubtful if the current market conditions support such an effort. While access to foreign capital by local banks has virtually stopped, the liquidity in the local market has nearly run dry.  On the other hand, the banks have become extremely conservative in their risk taking, as they have virtually stopped their lending activities to prevent a fallout from a massive wave of defaults, as people are reneging on their loan payments.  

 

 


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  Comments - 1

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  • Sam Tuesday, 28 June 2022 01:43 PM

    I would say that by not importing fuel we are one of the greenest nations on Earth.


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