SL must look at achieving low carbon future amidst prevailing uncertainties: IFC

• IFC says launch of new guidelines an important move for SL
• Points out new taxonomy will be a critical enabler for developing green bond and green lending market

Even as Sri Lanka works to navigate uncertainties in its economic outlook, it must look to achieving a sustainable and low-carbon future, the International Finance Corporation (IFC) said.

As Sri Lanka recently launched the Green Finance Taxonomy, the IFC said the guideline is an important move for the island nation in tackling climate change.

“As one of IFC’s long-standing partners in Sri Lanka, we acknowledge the Central Bank of Sri Lanka (CBSL) for its steadfast support and commitment in shaping an important national policy that will contribute to a strong sustainable economy for future generation,” said IFC Country Manager Sri Lanka and the Maldives Lisa Kaestner.
The IFC played a key role in supporting the CBSL to design the country’s Green Finance Taxonomy.

While the initial focus will be on industries of high priority, including agriculture, construction and manufacturing, Kaester said the taxonomy will also be a critical enabler for developing the green bond and green lending market. The guidelines were launched to help channel financing for sustainable, environmentally friendly products and services while supporting the country’s climate goals. 

The Sri Lanka Green Finance Taxonomy is a critical tool to help investors, companies and green bond issuers navigate transition to a low-carbon, climate-resilient and resource-efficient economy. 

Meanwhile, the CBSL said it is committed towards creating a greener and more sustainable financial system that contributes to a sustainable economy.  “This is particularly important in the context of current economic challenges that we face as a country and during the recovery in the aftermath of the COVID-19 pandemic,” said CBSL Governor Dr. P. Nandalal Weerasinghe.

He added that the CBSL is in the forefront of promoting and developing a holistic strategy towards integrating sustainability into the country’s financial system.

With the launch of the Green Finance Taxonomy, Sri Lanka has reached a key milestone in the journey embarked upon with the launch of the Sustainable Finance Road Map of Sri Lanka in 2019. 

“We envisage that the Green Finance Taxonomy would be a critical tool to guide financial institutions, investors, corporates and green bond issuers to navigate the transition to a low-carbon, climate-resilient and resource-efficient economy,” Dr. Weerasinghe pointed out.  Sri Lanka is among one of the most affected countries by extreme weather events. According to the World Bank, the country is expected to see a 1.2 percent annual gross domestic product (GDP) loss by 2050, due to climate change. In response, the first phase of the new document covers three priority areas—climate mitigation, climate adaptation and ecological conservation and resource efficiency.    As the first national Green Finance Taxonomy to be developed using the International Platform on Sustainable Finance (IPSF) Common Ground Taxonomy on climate change mitigation, it reflects the experience from the European Union and China. The Sri Lanka taxonomy also references the IFC’s Blue Finance Guidelines and Climate Smart Agriculture activities.  

The work was facilitated through the Sustainable Banking and Finance Network (SBFN) and supported by the IFC Green Bond Technical Assistance Programme (GB-TAP). According to the SBFN third Global Progress Report and accompanying 41 Country Progress Reports (including the Sri Lanka Country Progress Report, April 2022), 16 SBFN countries have introduced or are developing green or sustainability-focused taxonomies. Nine countries – Bangladesh, Brazil, China, Colombia, Indonesia, Kazakhstan, Mongolia, South Africa and now Sri Lanka – have already published taxonomies for green and sustainable finance. 

Combating climate change is a strategic priority for the IFC globally. In FY 2021, the IFC committed a record US $ 4 billion for climate-related projects across the world, representing 32 percent of the IFC’s own account commitments.