Sri Lankan banks chart way forward to promote sustainable finance

CEOs and representatives from banks, DEG Senior Vice President Manuela Marques and the consultant’s team, representatives from the Central Environmental Authority pose for a picture to mark the significant signing of the Sri Lankan sustainable banking principles

The Sri Lankan banking industry, through their umbrella body the Sri Lanka Banks Association (SLBA), during a CEO Roundtable meeting held on 4 November at HNB Towers, approved a move forward to create a joint initiative that promotes best practice in sustainable finance. The SLBA Sustainable Finance Initiative (SFI) would explore opportunities for industry alignment while building industry wide capacity in the area of environmental and social risk management.

In line with the country’s long-term development plans as outlined in the Government’s Vision, the SLBA member banks agreed to support efforts towards making the Sri Lankan banking industry more globally competitive. Sustainable economic growth, environmental degradation, climate change and resource scarcity are among the key challenges for Sri Lanka. 

Therefore the proposed Sustainable Finance Initiative coordinated by SLBA on behalf of its member banks would be tasked with developing recommendations, which will include proposals on capacity building and the creation of Sustainable Finance Guiding Principles that are customised for the Sri Lankan context.

During the CEO Roundtable, SLBA Chairman and HNB MD/CEO Jonathan Alles said: “Today, the world is experiencing various forms of natural disasters including earthquakes on a regular basis. Hundreds of people getting affected by extreme weather patterns such as heat waves, floods, tornados, etc are no longer headline news. Above all of these catastrophes, effects of climate change, unsustainable development and deforestation are devastating the earth’s capacity to support life. Further climate change is not only an environmental challenge but has become a fundamental threat to economic development. The longer we wait it will be more costly to arrest these issues. 

“In this light, we feel the importance of managing and re-greening our natural environment more than ever. Sri Lanka being an island nation, rich and diverse in its greenery, I am sure you will all agree that at least some of this heritage should be passed on to our children. In this background the SLBA is proud to organise this historic event today where we as financiers and lenders are getting together to consider non-financial issues that will of course in due course affect all our businesses.”

In a presentation made by Central Environmental Authority of Sri Lanka Environmental Pollution Control Assistant Director Himali Karunaweera, it was highlighted that the requirements discussed in the Sri Lanka Sustainable Finance Principles were within the legal requirements of the country and customers should comply with them to obtain/renew their Environmental Protection License. 

The CEO round table discussion was facilitated by SLBA and co-funded by DEG – Deutsche Investitions- und Entwicklungsgesellschaft (www.deginvest.de), a subsidiary of KfW and one of the largest European development finance institutions for long-term project and company financing.  DEG Senior Vice President Manuela Marques commented on the impressive indicators of development in the country and cautioned on the potential negative effects of unsustainable development and population growth. She further highlighted the benefits of E&S Risk Management for Banks as well as to their customers.

Commitment by the SLBA member banks to set up the Sustainable Finance Initiative is a first step in a process that will make Sri Lanka part of a growing group of emerging countries where banks and governments are creating sustainable-finance frameworks and incentives. Other examples include China’s Green Credit Policy, Nigeria’s Sustainable Banking Principles, and Paraguay’s Roundtable for Sustainable Finance. 

Chief Executive Officers from 17 banks operating in Sri Lanka namely (in alphabetical order) Amana Bank, Cargills Bank, Commercial Bank of Ceylon, DFCC Bank, Habib Bank, Hatton National Bank, MCB Bank, National Development Bank, Nations Trust Bank, Pan Asia Bank, Peoples Bank, Regional Development Bank, Sampath Bank, Sanasa Development Bank, Seylan Bank, Sri Lanka Savings Bank and Union Bank have pledged to adopt the Sustainable Banking Principles for Sri Lanka, designed by a working committee consisting of members from participating banks. 

Held in Colombo at the HNB Towers, the CEO Roundtable was moderated by Innovativkonzept Ltd. (www.innovativkonzept.com), the consultant to the initiative.