Commercial Bank of Ceylon PLC has embedded sustainability into its identity, marking its logo with a green border to symbolize its commitment to green banking. This simple yet powerful change reflects the bank's dedication to eco-friendly finance and a sustainable future." The bank has demonstrated a strong commitment to sustainability by winning the prestigious 'Excellent Green Commitment Award' for the Banking Sector in 2019 from the Green Building Council of Sri Lanka (GBCSL). Additionally, it secured triple honours, including two Golds, at the Green Industry Awards 2024 presented by the Industrial Development Board (IDB). As Sri Lanka's first 100% carbon-neutral bank, it was recognized for 'Low carbon and/or climate-resilient production' and 'Green digital and information technologies' for its contributions to environmental sustainability and digital banking adoption.
According to the central bank's report, the total amount of green finance disbursed during FY23 was BDT 126.41 billion by banks and BDT 23.58 billion by NBFIs. Green finance accounted for 5.84 percent of the total term loan disbursements.
In the past few decades, the world has witnessed significant climate change impacts, bringing environmental concerns to the forefront. As global efforts intensify to combat climate change, the financial sector has emerged as a key driver of the green transition. Green finance, which aligns capital investments with sustainable and environmentally friendly projects, has become essential for building a low-carbon, resilient economy. Internation- al agreements such as the Kyoto Protocol, the Paris Agreement, and the UN Global Compact have strengthened the field of green finance, placing banks and financial institutions at the core of this transition.
Green finance refers to financial services that enhance environmental sustainability, covering investments in renewable energy, sustainable agriculture, and pollution prevention. It has evolved from a niche market to a global priority, with governments and corporations focusing on sustainability. The United Nations' Sustainable Development Goals (SDGs) and climate initiatives have spurred financial institutions to proactively support green investments. According to the United Nations Environment Programme (UNEP), trillions of dollars in invest- ments are required annually to meet climate targets.
Banks and financial institutions play a critical role in accelerating the green transition. By integrating environmental, social, and governance (ESG) factors into their lending and investment decisions, they can channel funds toward sustainable initiatives. Green bonds, sustainability-linked loans, and eco-friendly insurance products are reshaping financial markets, making green investments more attractive to businesses and investors. For instance, the International Finance Corporation (IFC) reported that global green bond issuance exceeded $300 billion in 2020, reflecting rising investor interest in sustainable finance.
To drive the green transformation, banks finance renewable energy projects, energy-efficient infrastructure, and low-carbon technologies. They also support sustainable agriculture, electric vehicles, and recycling initiatives. Furthermore, they innovate by developing impact investment funds targeting positive environmental and social outcomes.
Regulatory support has also been instrumental. Financial institutions advocate for policies such as carbon pricing and tax incentives for green projects. For instance, Bangladesh Bank's Sustainable Finance Policy mandates banks to set annual green finance targets and report their achievements. Additionally, the central bank offers several refinancing schemes at lower rates to support green investments, such as the Green Transformation Fund for export-oriented industries.
However, challenges remain. Many banks lack clear guidelines for green financing, leading to uncertainty about capital allocation. Market perception and risk aversion also deter investments in sustainable projects. Further- more, banks need to build internal capacity to effectively assess and manage green investments.
Despite these challenges, green finance presents vast opportunities. Investing in sustainable projects stimulates economic growth, creates jobs, and enhances financial institutions' reputations. As sustainability gains traction among consumers and investors, banks that prioritize green finance can attract socially conscious clients and contribute to global climate goals.
Banks and financial institutions are at the forefront of financing the green transition. By adopting sustainability-driven strategies, addressing challenges, and collaborating with regulators, they can lead the way in building a greener, more resilient global economy.
