Banking with purpose: HNB’s blueprint for a sustainable Sri Lanka

By Jonathan Alles

While the devastating impact of last year’s economic crisis continues to reverberate across the nation, a triple planetary crisis – climate change, pollution and biodiversity loss looms larger still over Sri Lanka.

From the establishment of HNB to the present day, the world got 1.1 degrees Celsius warmer. That leaves the world with just 0.4°C left of warming before it hits 1.5°C, beyond which the likelihood of catastrophic climate impacts increases significantly.  

Yet, just as disruptions caused by climate change have started to intensify, scepticism around its impact appears to be on the rise, particularly in developed economies. Indeed today, 32% of Americans still believe that climate change is due to natural causes, while an incredible 9% deny its existence all together.   

Local impacts of a global climate crisis

But for the 60% of humanity that reside in the Asian subcontinent, and especially for equatorial island nations like Sri Lanka which increasingly face record-breaking extreme weather events each year, climate change scepticism seems entirely disconnected from reality.  

Over the past year alone, our people have endured extreme heat waves, as prolonged drought conditions in key agricultural districts’ hampered food production. Consequently, over 250,000 Sri Lankans were deprived of access to clean drinking water. This in the same year that more than 71,000 Sri Lankans were affected by heavy rains and flooding across 13 out of 25 districts. 

According to the United Nations Development Program, unaddressed climatic change could cost Sri Lanka 1.2% of its GDP by 2050. With 25% of the workforce in agriculture and an already contracted economy, the stakes couldn’t be higher. 

But if Sri Lanka can integrate Environmental, Social and Governance (ESG) standards, and transition fully into a circular economic model, there are significant opportunities for sustainable, broad based economic growth for all Sri Lankans. 

To successfully navigate these challenges, it is imperative that we focus public, private and foreign direct investments into climate resilient infrastructure. Renewable energy capacity will need to be aggressively expanded, so that Sri Lanka’s industrial and manufacturing sectors can rapidly cut down on emissions while continuously optimising resource consumption and environmental footprints.   

We also need to radically optimise Sri Lankan agriculture. Crop diversification, modern technology, precision agriculture, weather tracking and real-time notification systems need to be prioritised, so we can give farmers a fighting chance against increasingly erratic climatic conditions. 

Facilitating change: financing a green transition

Such ambitious goals will require a nation-wide transformation. All sectors – public and private – will need to adapt. The banking sector too needs to be effectively mobilised to serve as a catalyst for a new circular national economic model, one which sustainably harnesses Sri Lanka’s wealth of natural resources, talent, and innovative capacity. In this manner, we can collectively build a new national value proposition of environmentally and socially conscious enterprises that set a new global standard of excellence.     

At the level of national policy, we already see many encouraging signs including the launch of a National Action Plan on Climate Change. Together with efforts to update Sri Lanka’s environmental policies, strengthen conservation, and encourage reforestation, Government policy is gradually aligning to this growing threat. 

We see inspiring work from many Sri Lankan corporates who are mainstreaming global best practices on ESG standards, and even taking global leadership in certain niches. However, to amplify these efforts and make them internationally relevant, additional funding and investment are indispensable. 

A landmark initiative in that regard is the Sustainable Banking Initiative introduced by the Sri Lanka Banks Association (SLBA) in 2015 which established voluntarily sustainable financing guidelines for banks. Fast forward to 2022, the Central Bank has refined this focus with the Sri Lanka Green Finance Taxonomy. This is not just a classification system, but an adaptive blueprint, tailored to a local context, and aligned with global best practices. 

From banks to large corporations, local authorities to national government bodies, this taxonomy offers a coherent framework for greening their financial undertakings. It covers a vast array of sectors, from forestry and agriculture to manufacturing, construction, transportation, and eco-tourism, and represents an extremely promising start for true green finance in Sri Lanka. 

HNB aims to serve as the vanguard of this movement to adapt and integrate all viable measures for reducing the environmental footprint. Accordingly, HNB implemented an Environmental and Social Management System (ESMS) creating a comprehensive framework for monitoring, evaluating and mitigating the environmental impact of our direct and indirect impacts across our operations, customers and suppliers.

We have also continued to make progress in our own renewable energy transition. Powered by an investment in excess of Rs. 82 million, we’ve successfully solarized 95 of 254 branches. Meanwhile, our renewable energy financing portfolio, which includes solar, mini hydro, and wind power projects, now exceeds a staggering Rs. 7.3 billion. We also secured ISO 14064 certification from the Sri Lanka Climate Fund for our dedication to quantifying, reporting, and actively reducing greenhouse gas emissions. 

Ultimately, the most important component in our sustainability journey is our people. Accordingly, HNB employees are encouraged to take the ‘HNB Green Pledge’ and serve as ambassadors of the bank’s vision for a more sustainable future, both in their personal and professional lives. 

Diversity and inclusion are also paramount to our success and deeply embedded in HNB’s DNA. As a national heritage brand, we value the strength that comes from embracing the full spectrum of backgrounds, beliefs, and experiences that Sri Lanka has to offer. Every individual, regardless of their origins or circumstances, can bring unique perspectives that enrich our collective wisdom and drive innovation.   

Pathways to sustainable progress

Having a robust corporate governance framework that is designed to ensure the highest standards of ethical and responsible behaviour is paramount. Accordingly, HNB has been working closely with Transparency International Sri Lanka to further enhance its governance framework.  

Equally important is our commitment to customers. Banking isn’t just a business; it’s a service that should be accessible to all, because effective delivery of banking services can have profound positive impacts on individuals and communities, especially for our nation’s youth and the unbanked.

Accordingly, HNB has been an active leader in the inculcation of healthy savings habits for generations, leveraging a comprehensive and popular suite of Minor Savings products under the beloved HNB Singithi brand. We were also among the first to establish Student Savings Units in schools across Sri Lanka with over 140 student savings units across the country.  

Similarly, by reaching out to Sri Lanka’s underserved communities, we aim to empower them, providing tools and resources that offer a foothold in the economic mainstream. 

As Sri Lanka’s first private sector bank to engage with the nation’s SMEs, this ethos has long been central to HNB’s broader mission of combining entrepreneurial spirit with empowered people and leading-edge technology to constantly exceed stakeholder expectations.  

In the decades that followed, this commitment has only grown stronger, and to date, HNB continues to lead Sri Lanka’s private sector banks in MSME development. Accordingly, another cornerstone of our sustainability commitments is HNB Gami Pubuduwa (Village Awakening). 

Through it, we have empowered countless MSMEs and rural entrepreneurs, providing them with capital, training, advisory services, and growing platform for them to showcase their products and reach new customers across Sri Lanka and globally. 

Meanwhile, leveraging platforms like SOLO and MOMO, we’ve bridged the technological divide, offering our SME clientele a chance to venture into e-commerce and other digital banking capabilities. As a result, SOLO transaction volumes have expanded three times in the past year – the best indicator yet that our work to mainstream digital banking is starting to pay off. 

We have also strived to serve as a true partner in progress for all Sri Lankans – in good times, especially during moments of challenges. Accordingly, over the past couple of years, we have sought to further expand support to vulnerable groups, including our own micro finance customers who have been impacted by the crisis and pregnant mothers through initiatives like the HNB ‘Oba Wenuven Api’ initiative. 

It was the collective impact of these interventions which led to HNB being declared Sri Lanka’s Best Corporate Citizen by the Ceylon Chamber of Commerce for 2022, and moving forward, we aim to continue to uphold these high standards. 

The crux of these efforts is ensuring that Sri Lankan businesses – from large conglomerates to MSMEs across the island integrate ESG practices into their operations and place special emphasis on creating environmentally and socially conscious products and business models. 

Products that have a net positive impact on their consumers without adding to – and potentially even helping to reverse – the world’s growing environmental challenges. These commitments can help to signal responsible production to Sri Lanka’s global customers, enabling us to justify charging a premium on our products and services in global markets.  

But they also represent a broader vision where best practices optimise production, creating enterprises that are robust, financially sound, resistant to disruptions and aligned to the greater mission of fostering a Green Sri Lankan economy. 

(The writer is the Managing Director and CEO of HNB)