SBFN Member Since:
2016
Member Organisations
Central Bank of Sri Lanka
Progress Against Pillars and Sub Pillars
This graphic can also be found within this country’s 2019 Country Progress Report.
Framework Documents
| Country | Policies/ Principles/ Guidelines | Year | Issuer |
|---|---|---|---|
| Sri Lanka | 2019 | Presidential Expert Committee (PEC) | |
| Sri Lanka | 2019 | Colombo Securities Exchange | |
| Sri Lanka | 2019 | Central Bank of Sri Lanka (CBSL) | |
| Sri Lanka | 2015 | Sri Lanka Banking Association |
Strategic Development - Alignment with global E&S standards and best market practices
S1.1 – Does the framework make reference to international E&S targets (SDGs, Paris Agreement, Global Compact)?
Yes
(1) 1.1 Background(2) Sri Lankan Sustainable Banking Principles https://www.sustainablebanking.lk/industry-guiding-principles
– In 2015, the United Nations (UN) introduced the Sustainable Development Goals (SDGs) to address these challenges and to call for action by all countries to promote prosperity while protecting the planet. The recently released Special Report of the Intergovernmental Panel on Climate Change (IPCC)1 further highlighted the urgency of meeting the goals set by the Paris Agreement and limiting global warming to 1.5 degrees Celsius.- The Principles are based on leading international sustainable finance standards, and tailored to the Sri Lankan context and development needs
Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019) | Sri Lankan Sustainable Banking Principles (SLBA, 2018)
S1.2 – Does the framework make reference to established international E&S risk management standards (IFC PSs, EPs)?
Yes
(1) 3.2.2 ESG Risk Management
Global standards and guidelines such as IFC Performance Standards can serve as a reference to assess ESG risk at the project level
Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)
S1.3 – Does the framework make reference to established international sustainability reporting standards (GRI, SASB)?
Yes
(1) 3.2.1 ESG Disclosure – For financial institutions
disclose sustainability policies and programs implemented within the organization. Internationally recognized reporting frameworks, such as Global Reporting Initiative (GRI) and CDP reporting frameworks and Task Force on Climate-related Financial Disclosures (TCFD) recommendations could be references.
Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)
S1.4 – Does the framework make reference to established international climate finance reporting standards (TCFD)?
Yes
(1) 3.2.1 ESG Disclosure – For financial institutions
disclose sustainability policies and programs implemented within the organization. Internationally recognized reporting frameworks, such as Global Reporting Initiative (GRI) and CDP reporting frameworks and Task Force on Climate-related Financial Disclosures (TCFD) recommendations could be references.
Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)
S1.5 – Does the framework ask to make E&S policies, practices and results externally verified (assurance, independent review)?
No
–
–
–
Strategic Development - Multi-stakeholder collaboration
S2.1 – Does the framework involve interagency collaboration between financial supervisors/regulators, industry association, and FIs?
Yes
S2.2 – Does this collaboration also include other public agencies (e.g., environmental agencies, ministries)?
Yes
–
–
–
S2.3 – Does this collaboration also include representatives of civil society (e.g., NGOs, associations, media)?
Yes
–
–
–
Strategic Development - Alignment to NDCs and with National or Regional Climate Change Targets
S3.1 – Is the framework aligned with national NDCs or other national and regional policies on climate?
Yes
(1) 3.1 FINANCING Vision 2030
The Roadmap proposes a series of strategic activities to implement sustainable finance in Sri Lanka. These activities revolve around six focus areas: Financing VISION 2030
Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)
S3.2 – Has the SBN member identified the main climate risks (transition/physical) for their local financial sector?
No
–
–
–
ESG Integration - Governance of E&S
Role of Governing Bodies on E & S
E1.1 – Does the country policy require one of the FI’s governing bodies (e.g., Board of Directors, Executive Committee, Supervisory Board, etc.) to approve an E&S strategy?
No
–
–
–
E1.2 – Does the policy require management to report on E&S strategy implementation to the governing bodies?
No
–
–
–
E1.3 – Does the policy require FI operational bodies to report to the governing bodies (or specific Board committee) on implementation of the E&S strategy?
No
–
–
–
Organization
E1.4 – Does the framework ask FIs to define E&S roles and responsibilities?
Yes
(1) 3.2.2 ESG Risk Management(2) Sri Lankan Sustainable Banking Principles – Principle 5 – https://sustainablebanking.lk/industry-guiding-principles
Establish E&S governance responsibility, including clear lines of responsibility and accountability Incorporate ESG to corporate governance especially by defining roles and responsibilities of the board and senior management with regard to ESG issue
Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019) | Sri Lankan Sustainable Banking Principles (SLBA, 2018)
E1.5 – Does the framework highlight the E&S roles of front office staff and second lines of defense (e.g. risk officers and/or compliance officers)?
No
–
–
–
E1.6 – Does the framework ask FIs to define E&S competencies for each role?
No
–
–
–
E&S Risk Management
E&S Policy
E2.1 – Does the framework ask FIs to formalize an E&S or ESG policy?
Yes
(2) Sri Lankan Sustainable Banking Principles – Principle 1 – https://sustainablebanking.lk/industry-guiding-principles(1) 3.2.2 ESG Risk Management
Develop an appropriate E&S policy in line with financial products and services offered and with priority sectors; at minimum a strict review and potential decline of clients or engagements that do not comply with local E&S laws and regulations.Incorporate ESG risk management to entire decision-making processes, including environmental and social policies,
Sri Lankan Sustainable Banking Principles (SLBA, 2018) | Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)
E2.2 – Does the framework encourage FIs to go beyond E&S requirements of local laws and regulations?
Yes
–
–
–
E2.3 – Does the framework ask FIs to set E&S objectives and targets?
Yes
(2) Sri Lankan Sustainable Banking Principles – Principle 10 – https://sustainablebanking.lk/industry-guiding-principles
Set clear targets and related performance indicators, ensure the required systems are in place to collect reliable data
Sri Lankan Sustainable Banking Principles (SLBA, 2018)
E2.4 -Does the framework ask FIs to publicly disclose their E&S policy and its governance?
No
–
–
–
Risk Assessment
E2.5 – Does the framework require FIs to carry out appropriate E&S due diligence at transaction level?
Yes
(2) Sri Lankan Sustainable Banking Principles – Principle 1 – https://sustainablebanking.lk/industry-guiding-principles(1) 3.2.2 ESG Risk Management
E&S procedures among others include risk screening, risk categorization into high , medium , low risks and determining required due diligence procedures, related governance provisions and risk monitoring. Incorporate ESG risk management to entire decision-making processes, including environmental and social policies, risk assessment, environmental and social covenant (in loan agreements or other financial legal documents), project supervision and portfolio review,
Sri Lankan Sustainable Banking Principles (SLBA, 2018)
E2.6 – Does the framework require FIs to carry out appropriate E&S due diligence at client level?
Yes
(2) Sri Lankan Sustainable Banking Principles – Principle 6 – https://sustainablebanking.lk/industry-guiding-principles
Develop and implement a policy framework and procedures that require a screening of clients and engagements for prohibited, excluded or significantly controversial activities, as defined in a jointly agreed upon exclusion list
Sri Lankan Sustainable Banking Principles (SLBA, 2018)
E2.7 – Does the framework encourage FIs to categorize projects/clients according to their level of E&S risk?
Yes
(2) Sri Lankan Sustainable Banking Principles – Principle 1 – https://sustainablebanking.lk/industry-guiding-principles
E&S procedures among others include risk screening, risk categorization into high , medium , low risks and determining required due diligence procedures, related governance provisions and risk monitoring.
Sri Lankan Sustainable Banking Principles (SLBA, 2018)
E2.8 – For high-risk transactions, does the framework encourage site visits to be organized?
No
–
–
–
E2.9 – In case of negative E&S impacts, does the framework invite FIs to engage with clients to implement mitigation measures?
No
–
–
–
E&S Covenants
E2.10 – Does the framework ask FIs to incorporate E&S covenants and investment conditions into legal agreements with clients?
Yes
(1) 3.2.2 ESG Risk Management
Incorporate ESG risk management to entire decision-making processes, including environmental and social policies, risk assessment, environmental and social covenant (in loan agreements or other financial legal documents)
Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)
Project Supervision & Portfolio Review
E2.11 – Does the framework ask FIs to develop processes to manage E&S risks during supervision?
No
–
–
–
E2.12 – Does the framework encourage a periodic review of E&S risks at aggregate portfolio level?
No
–
–
–
Training
E2.13 – Does the framework ask FIs to develop and maintain E&S capacity through regular training?
Yes
(2) Sri Lankan Sustainable Banking Principles – Principle 8 – https://sustainablebanking.lk/industry-guiding-principles(1) 3.4.2 Capacity building for financial institutions
Provide “Sustainable Banking Training Sessions” across management levels and operational functions. Create practical E&S training tools and resources
Sri Lankan Sustainable Banking Principles (SLBA, 2018)
E2.14 – Does the framework highlight the training of (i) front office staff, (ii) second lines of defense (risk officers and/or compliance officers), and (iii) E&S experts?
No
–
–
–
External Communication Mechanism
E2.15 – Does the policy require FIs to establish and maintain an inquiry/complaints/grievance mechanism in relation to E&S or ESG practices?
No
–
–
–
E & S Reporting
E2.16 – Does the policy require FIs to report regularly on E&S or ESG performance, including publicly, to investors or to regulators?
Yes
(1) 3.6.3 For financial institutions to measure progress and impacts(1) 3.6.2 For regulators to measure progress and impacts(2) Sri Lankan Sustainable Banking Principles – Principle 10 – https://sustainablebanking.lk/industry-guiding-principles
– Encourage the establishment of monitoring and evaluation mechanism of sustainable finance progress and impacts within financial institutions- Require financial institutions to annually report the progress made on sustainable finance related activities along with an action plan for the next financial year- Establish a “Sustainable Banking Reporting Template” and agree on the frequency, nature and format of internal and external reporting, preferably on an annual basis (potentially in line with Sustainability Report)
Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)
E2.17 – Does the policy make E&S or ESG reporting and disclosure more consistent across financial institutions through principles, guidelines, or templates?
No
–
–
–
E & S Integration - Enforcement
E3.1 – Is the implementation of the framework regularly verified or is information regularly collected from FIs?
No
–
–
–
E3.2 – Is there any financial and/or non-financial incentive for establishing ESRM systems?
No
–
–
–
E3.3 – Are there sanctions/penalties/warnings in case of noncompliance with the framework?
No
–
–
–
Climate and Green Finance - Products and Services
Defining sustainable assets and financial products
C1.1 – Does the framework provide definitions and examples of green assets?
Yes
(1) 3.1.1 Sustainable/Green Loan
Innovate loan/saving products for energy efficiency, green building, green urban infrastructure, water saving and efficiency, and climate-smart agriculture through project loans, corporate loans, green mortgage loans,
Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)
C1.2 – Does the framework provide a comprehensive taxonomy of green assets?
No
–
–
–
C1.3 – Does the framework provide definitions, examples, or a taxonomy of social and/or sustainable assets?
Yes
(1) 3.1.1 Sustainable/Green Loan(1) 3.1.2 Sustainable/green leasing(1) 3.1.5 Other sustainable/green products
– Develop sustainable saving products to mobilize small savings for sustainable activities
Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)
C1.4 – Besides debt products (loans, bonds), does the framework provide definitions and examples of different types of sustainable finance products/services (e.g., saving accounts, means of payment, insurance, private equity, etc.)?
Yes
(1) 3.1.2 Sustainable/green leasing(1) 3.1.5 Other sustainable/green products
– Explore a sustainable model of leasing that could extend the lifecycle of equipment, machinery and appliances to promote a circular economy and sustainability- Explore specialized investment instruments to mobilize savings/assets and catalyze them towards sustainable investments- Explore insurance solutions for environmental risks and social inclusion. These could include climate and disaster insurance, crop insurance and home insurance to protect farmers and homeowners especially against the loss of crops and damage to property due to natural disasters. Pollution liability insurance could also be developed to better manage environmental risks and reduce losses from environmental pollution
Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)
Green Finance Product Guidelines
C1.5 – Does the framework provide guidelines for green loan/green credit or other green financial assets (excluding green bonds)?
Yes
(1) 3.1.1 Sustainable/Green loan
Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)
Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)
C1.6 – Does the framework provide guidelines for issuance of green bonds?
Yes
(1) 3.1.3 Sustainable/Green Bond
The global green bond market has grown rapidly in the past years and provides
investors a new way to meet green investment goals
Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)
C1.7 – Does the framework refer to existing standards (e.g., ICMA’s Green Bond Principles or CBI’s Climate Bonds Standard)?
Yes
(1) 3.1.3 Sustainable/Green Bond – For regulators and stock exchange
Such guidance and tools should take into account both local sustainable development needs and international standards and principles such as those by Climate Bonds Initiative (CBI) and International Capital Market Association (ICMA)
Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)
C1.8 – Does the framework recommend external party verification (e.g., second party opinion, assurance, certification)?
Yes
(1) 3.1.3 Sustainable/Green Bond – For regulators and stock exchange
Encourage the adoption of external verification, which could benefit green bond issuance by increasing investor confidence in the environmental credentials of the marke
Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)
Climate and Green Finance - Climate and Green Investment Reporting
Tracking and Disclosure of Climate & Green Finance
C2.1 – Does the framework ask FIs to report on climate/green finance flows (quantitatively or qualitatively)?
No
–
–
–
C2.2 – Does the framework ask FIs to report on climate risk exposure at portfolio level?
No
–
–
–
C2.3 – Does the framework encourage FIs to report publicly on their green finance activities (i.e. not only to the regulator)?
No
–
–
–
Climate and Green Finance - Measurement
Calculation of Environmental Benefits
C3.1 – Does the framework ask FIs to calculate the environmental benefits of their investments? (e.g., CO2 emission reduction, water saving, etc.)
No
–
–
–
C3.2 – Does the framework provide a taxonomy of potential environmental impacts?
No
–
–
–
C3.3 – Does the framework provide methodologies, tools, and/or templates to measure and report these impacts?
No
–
–
–
Climate Risk Exposure Assessment
C3.4 – Does the framework ask FIs to monitor climate risk exposure at portfolio level?
No
–
–
–
C3.5 – Does the framework refer to specific climate risk exposure methodologies (e.g., climate scenario analysis, climate risk stress testing, calculation of carbon risk exposure, tracking of energy efficiency for real estate portfolio)?
Yes
–
–
–
C3.6 – Does the framework encourage FIs to take mitigating steps on these risks?
No
–
–
–
Climate and Green Finance - Incentives
Financial and Non-Financial Incentives
C4.1 – Does the framework provide any type of incentives for green financial products and services?
No
–
–
–
C4.2 – More specifically, does the framework introduce financial incentives on green products and services?
No
–
–
–
