Banks pitching for green financing
Sri Lankan banks are aiming to apply for the Green Growth Equity Fund to overcome the current economic crisis and improve relations with investors in impact financing.
This is an impact investment fund that mitigates climate change and promotes sustainable economic growth, primarily by investing in measures that reduce energy consumption, resource use, and carbon dioxide emissions.
This came after the Central Bank in May launched the Sri Lanka Green Finance Taxonomy for investors, governments, and bond issuers with guidelines for identifying environmentally sustainable economic assets and activities, as well as guidance on integrating sustainability into investment decisions. The Sri Lanka
Green Finance Taxonomy would apply to all domestic and foreign market participants offering financial products (such as bank lending, debt instruments, portfolio management, and investment funds), large corporations, as well as national and local government bodies.
Amidst the exchange rate issues, lack of reserves, and liquidity in the banking industry, certain commercial banks were in discussion with development finance institutions (DFIs) with green funding lines, to secure credit lines and beef up their foreign reserves.
A commercial bank CEO told the Business Times that they had done about US$15.1 million of green financing last year. “We didn't see many tractions on these types of credit lines since then. However, we're talking to them and keeping them engaged as it is good to go there. Eventually, with the IMF bailout, we can execute these transactions.”
Sri Lanka has been working towards facilitating green projects and green financing over the past few years.
The Global Green Growth Institute (GGGI) is a treaty-based international, inter-governmental organisation dedicated to supporting and promoting strong, inclusive, and sustainable economic growth in developing countries and emerging economies, having welcomed Sri Lanka as its 13th member in 2019, aims to enhance the country’s access to climate finance for the implementation of its national adaptation plan.
Sustainable financing institutions such as the US Development Finance Corporation has committed up to $500 million to Sri Lanka this year. Some of these funds went directly to companies and a larger amount went to banks. “These funds were approved but not dispersed,” a senior banker said noting that the disbursement was delayed due to the crisis in the country.
A second senior banker pointed out that even though these are green financing, they would still want their cashback after realising their investments.
Sri Lanka has been working towards facilitating green projects and green financing over the past few years.