Banks required to strictly comply with sustainable finance framework from next year

 Sri Lanka’s banking sector will be required to strictly comply with the sustainable finance framework issued by the Central Bank (CB) next year onwards. 
The CB in June issued directions to licensed commercial banks and licensed specialised banks on sustainable finance to promote sustainable finance practices in line with its Sustainable Finance Road Map.

“Compliance will be stringent from next year for banks,” CB Deputy Governor Yvette Fernando said during a panel discussion at the Sri Lanka Economic Summit 2022 held in Colombo on Tuesday.

She said it would also become mandatory for non-banking financial institutions (NBFI) to comply with the sustainable finance framework.

The CB last month issued guidelines on sustainable finance activities pertaining to the NBFI sector. 

In addition, earlier this year, the CB launched the Sri Lanka Green Finance Taxonomy, which defines and categorises economic activities that are environmentally-sustainable, and is a key action item outlined in the Roadmap for Sustainable Finance. The Taxonomy has been prepared in line with the international best practices, while harmonising for local context, hence it is expected to enable financial market participants to raise low-cost funding for green activities through both domestic and foreign markets. The CB’s Road Map is intended to provide a broader direction to financial regulators and financial institutions to effectively manage environmental, social and governance (ESG) risks associated with projects they finance and promote assistance to businesses that are greener, climate-friendly, and socially-inclusive.