Despite Framework, Sri Lanka Seeks ESG Investors for Green Bonds Amid Sovereign Rating Challenges

Faizal Salieh, Chairman of the Securities and Exchange Commission (SEC) of Sri Lanka

Despite the establishment of a robust regulatory framework for Sustainable Bonds in October 2023, Sri Lanka has yet to see new issuances in its local capital market. This delay highlights the challenges and opportunities as the nation seeks to leverage green finance to drive sustainable development.

Speaking at the Asian Development Bank (ADB) Global Sustainability Summit, Faizal Salieh, Chairman of the Securities and Exchange Commission (SEC) of Sri Lanka, addressed the pressing need for active engagement and commitment from all stakeholders. He emphasized the increasing importance of Environmental, Social, and Governance (ESG) factors in shaping investment landscapes globally and the role of sustainable bonds in addressing climate change and fostering a sustainable economic environment.

“Though the regulatory framework has been in place since October 2023, we are yet to see new issues in the local capital market. The challenge is how quickly can Sri Lanka socialize these bonds and attract ESG-conscious foreign investors whilst being mindful of Sri Lanka’s default sovereign rating hurdle,” Salieh noted. He stressed the need for concerted efforts from all stakeholders to initiate bond issuances and build a local investor base mindful of ESG principles.

“We are witnessing a new landscape of ESG conscious investor activism evolving in the world today inspiring and moving markets towards a greener horizon. Investors are becoming more and more conscious and concerned about impact reporting, climate change mitigation, social equity considerations, transition towards a circular economy, and are driving the demand for innovative green financing and green financial instruments. A green and sustainable economic environment is now the joint responsibility of government, business, and civil society,” Salieh remarked.

According to a report by the Climate Bonds Initiative, green bonds issued reached a record high of USD 1.1 trillion in 2023 driven by strong demand from investors seeking to finance climate-friendly projects. Salieh acknowledged the technical support from ADB in establishing Sri Lanka’s regulatory framework for Sustainable Bonds. This framework provides a robust platform for prospective issuers, including the government, parastatal agencies, and private sector entities, to raise capital for environmentally impactful projects. The framework mandates independent verification, performance monitoring, and periodic reporting to ensure transparency and build investor confidence.

Notify of
Inline Feedbacks
View all comments
Would love your thoughts, please comment.x