ADB urges Sri Lanka to fast-track sustainable finance to attract global investment

By Nuzla Rizkiya

Sri Lanka must accelerate the adoption of sustainable financing frameworks to attract the global investors and strengthen its long-term economic resilience, the Asian Development Bank (ADB) said yesterday.

With the global investors increasingly seeking socially impactful financing mechanisms such as green and sustainability-linked bonds to strengthen resilience in their investment ventures, the ADB officials noted that Sri Lanka should focus on improving its sustainable finance ecosystem to support these ambitions.

A well-structured sustainable financing system, which is backed by internationally accepted regulations and governance frameworks, would also help the country diversify its financial risks by reducing its dependence on traditional banking channels, according to the regional development partner.

“It can drive economic prosperity and improve quality of life by reducing waste, lowering costs and enhancing the environment. Therefore, it is crucial to promote sustainable finance by strengthening the capacity of institutions and developing innovative financing instruments,” noted ADB South Asia Department Director General Takeo Konishi.
He made these remarks while addressing virtually the Serendipity Knowledge Programme on Sustainable Finance, organised by the ADB in Colombo yesterday.

Addressing the forum, Konishi commended the Securities and Exchange Commission of Sri Lanka and Colombo Stock Exchange for their initiatives in implementing green bond regulations and raising awareness among the issuers and investors. 

He acknowledged that the efforts have already resulted in successful green bond issuances, including DFCC Bank’s first green bond issuance in September 2024, followed by Alliance Finance PLC in February 2025, both of which were fully subscribed, mainly by institutional investors.

“Now the next phase should focus on further developing the sustainable finance ecosystem and leveraging capital markets to introduce instruments that raise funds for sustainable projects,” Konishi said.

Reiterating his sentiments, ADB Country Director for Sri Lanka Takafumi Kadono reaffirmed the ADB’s commitment to support Sri Lanka in developing the regulatory frameworks that would improve its investor confidence.
Concentrating on strengthening the sustainable finance ecosystem, he shared that the ADB’s support would focus on establishing the regulatory frameworks for thematic bonds, improving disclosure and reporting standards and collaborating with the credit and auditing agencies to boost investor trust.  

“Sri Lanka has strong potential in sustainable finance to attract both foreign and local funds, which in turn will benefit the capital market through product diversification and the issuance of innovative instruments,” Kadono said.
The growing importance of sustainable finance was also highlighted by Sustainable Finance Institute Asia Senior Adviser Datuk Zainal Izlan Zainal Abidin, who emphasised the need for the countries to adopt impactful financing frameworks that would address both the global and local challenges.

Abidin pointed to the rapid growth potential of the global sustainable finance market, which was valued at approximately US $ 5.4 trillion as of the third quarter of 2024.

Citing Moody’s report, he noted that sustainable bond issuances are expected to reach US $ 1 trillion in 2025, while the sustainable loan market, along with its increasing demand for ESG-aligned financing solutions, reached nearly US $ 992 billion in 2024.

“It is therefore, timely for Sri Lanka to share knowledge and experience in creating a financial ecosystem that delivers impactful sustainable finance, which is essential in supporting the country’s sustainability aspirations,” Abidin said.

He recommended the countries to invest in sustainable infrastructure, integrate ESG principles into business strategies and take proactive steps to align with the growing expectations of global supply chains.

“These are crucial tools for managing sustainability risks and meeting society’s growing expectations for a more sustainable economy,” Abidin said.