Sri Lanka updates sustainability roadmap as it faces a $10.85bn finance gap

The Central Bank of Sri Lanka (CBSL) has released an updated sustainability roadmap, as the central bank governor highlighted the country’s need to increase its green investments to meet its climate goals.

CBSL governor Nandalal Weerasinghe said Sri Lanka needs an estimated US$10.85bn by 2030 to meet its nationally determined contributions (NDCs) under the Paris Agreement.

“Extreme weather events are no longer anomalies – they are the new normal, sustainable finance is not optional. It is a global imperative, and it is an imperative here in Sri Lanka,” he said during a keynote address at the roadmap launch.

Sri Lanka is prone to extreme weather events from climate change, with losses accounting for about 0.4% of GDP or $300mn. If no action is taken, CBSL estimates losses will triple by 2050 to 1.2% of GDP.

The sustainability roadmap builds on a 2019 framework and covers the next five years. Its scope was extended to include the social aspect and covers a wider spectrum of economic activities.

The roundmap identifies four areas to prioritise:

• climate change mitigation including renewable energy generation and access to clean energy
• climate change adaptation including resilience and climate-proofing
• forests and natural assets
• inclusiveness such as gender inequality and vulnerable groups of the population.

The CBSL hopes to encourage more green financing through various financial instruments such as green loans and debt-for-nature swaps. The roundmap includes plans to raise awareness among financial institutions about these types of financial instruments, as well as introduce incentive packages that do not require fiscal or monetary support.

The central bank also highlighted the need to strengthen the policy and regulatory framework around insurance, especially climate insurance, to support innovative products like index-based policies.

The roadmap also includes plans to improve Sri Lanka’s green finance taxonomy by identifying issues and gaps encountered by financial regulators and to expand the taxonomy to include social activities.

In addition, the central bank plans to guide financial institutions on reporting and disclosure practices, including a requirement to disclose sustainable finance strategies.

“Sustainability cannot be treated as a checkbox. It is a national priority that demands full commitment from all corners of the financial system,” Weerasinghe said.