Amended Direction on Sustainable Finance for banks
The Central Bank (CB) intends to come up with an amended direction on sustainable finance for Sri Lankan banks after launching the CB Road Map 2.0 which will entail green and social aspects covering women and SME financing.
Dilrukshini Watudura, Assistant Governor CB, a panellist at the ‘Sustainable Finance a Key to Greening the Business Ecosystem’ organised by the ADB and the Ministry of Finance on Wednesday in Colombo, told The Sunday Times Business on the sidelines of the event, that non-bank financial institutions need to change their business models to cater to SMEs for green financing, emphasising that as per sustainability standards, the green deposits mobilised by banks need to be channelled for green projects.
She pointed out that sustainable finance initiatives are moving at a slow phase in Sri Lanka and there should be a collaborative effort by all stakeholders to take this initiative forward. The taxonomy developed by the CB is based on the common ground taxonomy so that the country can tap into the international market, she said. She further said that the economic crisis prevented the country from accessing international markets and the banks also faced a lack of demand for green projects. “The demand at that time was only for solar projects.”
Ms. Watudura noted that for green financing there should be demand and that it is important to motivate corporates, SMEs etc in this area. “Developing project pipelines in this regard has to come not only from the financial entities but also the chambers and other relevant agencies.”
Noting the importance of incentivising, she said that China has come up with an array of fiscal incentives but in Sri Lanka, due to fiscal constraints the country is not equipped to incentivise sustainable products. However, with the new CB Road Map coming up, the
regulator is planning to incentivise banks through regulatory incentives, she added.
She added that the CB has a technical committee and a steering committee for sustainable finance that will come up with regulatory concessions for green products for financial institutions going forward.
ADB Country Head for Sri Lanka, Takafumi Kadono, emphasised the importance of sustainable financing for emerging markets.
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