Sri Lanka’s central bank signs green finance deal with IFC

June 4, 2024|Written by |Central Bank of Sri Lanka

The Central Bank of Sri Lanka (CBSL) has signed a deal with the World Bank’s International Finance Corporation (IFC) to receive financial and technical assistance on developing its sustainable finance strategy.

Announcing the collaboration on its official Facebook page, the CBSL said the programme would allow it to update the green finance taxonomy it first released in 2022 to help ascertain the sustainability of different business activities in Sri Lanka.

The central bank has already been developing a sustainable finance roadmap since 2019 with technical support from the IFC, and issued guidelines two years ago that encourage licensed banks to start using green bonds and invest in sustainable activities.

The new IFC partnership will also allow the central bank to “expand the focus of the National Financial Inclusion Strategy”, which was launched three years ago to help facilitate access to affordable financial services for Sri Lankan consumers and businesses.

The strategy will be given a new focus on “inclusive green finance with an emphasis on export-oriented SMEs (small and medium-sized enterprises)” as part of the collaboration with the IFC, according to the CBSL.

The collaboration is being part-financed by an EU programme to support sustainable private sector development in six south Asian countries, including Sri Lanka.

No further details have been released by either the CBSL or IFC, but the announcement comes two weeks after the announcement of an IFC partnership with Sri Lanka’s largest private bank, the Commercial Bank of Ceylon, to scale up green finance.

Sri Lanka is highly exposed to climate risks, as a small island nation that already regularly faces extreme heat as well as floods. The country is hoping to reach net zero by 2050, although President Ranil Wickremesinghe is eyeing an earlier target of 2040 if Sri Lanka were to receive US$100bn of investment.

The IFC is largely focused on the private sector as a development investor, providing loans, blended finance and other financial products to businesses and banks in emerging markets with an emphasis on sustainability in many of its projects.

However, the IFC has also launched various collaborations with central banks in recent years, including a three-year green finance collaboration with the National Bank of Cambodia announced in December that will include the development of a national taxonomy.

The IFC also facilitates the Sustainable Banking and Finance Network, which includes 93 regulatory authorities and industry associations from developing countries, including central banks.

This page was last updated June 4, 2024

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