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Region:

Asia

SBN Member:

Central Bank of Sri Lanka

Year of joining:

2016

Framework:

Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)

Sri Lankan Sustainable Banking Principles (SLBA, 2018)

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PILLARS
Indicators for global benchmarking of sustainable finance
ESG INTEGRATION E&S risk management
  • E&S policy

    Questions

    Does the framework ask FIs to formalize an E&S or ESG policy?

    Does the framework encourage FIs to go beyond E&S requirements of local laws and regulations?

    Does the framework ask FIs to set E&S objectives and targets?

    Does the framework ask FIs to publicly disclose their E&S policy and its governance?

    Answer Source Reference
    • (2) Sri Lankan Sustainable Banking Principles - Principle 1 - https://sustainablebanking.lk/industry-guiding-principles (1) 3.2.2 ESG Risk Management

    • N/A

    • (2) Sri Lankan Sustainable Banking Principles - Principle 10 - https://sustainablebanking.lk/industry-guiding-principles

    • N/A

  • Risk assessment

    Questions

    Does the framework require FIs to carry out appropriate E&S due diligence at transaction level?

    Does the framework require FIs to carry out appropriate E&S due diligence at client level?

    Does the framework encourage FIs to categorize projects/clients according to their level of E&S risk?

    For high-risk transactions, does the framework encourage site visits to be organized?

    In case of negative E&S impacts, does the framework invite FIs to engage with clients to implement mitigation measures?

    Answer Source Reference
    • (2) Sri Lankan Sustainable Banking Principles - Principle 1 - https://sustainablebanking.lk/industry-guiding-principles (1) 3.2.2 ESG Risk Management

    • (2) Sri Lankan Sustainable Banking Principles - Principle 6 - https://sustainablebanking.lk/industry-guiding-principles

    • (2) Sri Lankan Sustainable Banking Principles - Principle 1 - https://sustainablebanking.lk/industry-guiding-principles

    • N/A

    • N/A

  • E&S covenants

    Questions

    Does the framework ask FIs to incorporate E&S covenants and investment conditions into legal agreements with clients?

    Answer Source Reference
    • (1) 3.2.2 ESG Risk Management

  • Project supervision & portfolio review

    Questions

    Does the framework ask FIs to develop processes to manage E&S risks during supervision?

    Does the framework encourage a periodic review of E&S risks at aggregate portfolio level?

    Answer Source Reference
    • N/A

    • N/A

  • Training

    Questions

    Does the framework ask FIs to develop and maintain E&S capacity through regular training?

    Does the framework highlight the training of (i) front office staff, (ii) second lines of defense (risk officers and/or compliance officers), and (iii) E&S experts?

    Answer Source Reference
    • (2) Sri Lankan Sustainable Banking Principles - Principle 8 - https://sustainablebanking.lk/industry-guiding-principles (1) 3.4.2 Capacity building for financial institutions

    • N/A

  • External communication mechanism

    Questions

    Does the policy require FIs to establish and maintain an inquiry/complaints/grievance mechanism in relation to E&S or ESG practices?

    Answer Source Reference
    • N/A

  • E&S reporting

    Questions

    Does the policy require FIs to report regularly on E&S or ESG performance, including publicly, to investors or to regulators?

    Does the policy make E&S or ESG reporting and disclosure more consistent across financial institutions through principles, guidelines, or templates?

    Answer Source Reference
    • (1) 3.6.3 For financial institutions to measure progress and impacts (1) 3.6.2 For regulators to measure progress and impacts (2) Sri Lankan Sustainable Banking Principles - Principle 10 - https://sustainablebanking.lk/industry-guiding-principles

    • N/A

Source Reference
(2) Sri Lankan Sustainable Banking Principles - Principle 1 - https://sustainablebanking.lk/industry-guiding-principles (1) 3.2.2 ESG Risk Management

Develop an appropriate E&S policy in line with financial products and services offered and with priority sectors; at minimum a strict review and potential decline of clients or engagements that do not comply with local E&S laws and regulations. Incorporate ESG risk management to entire decision-making processes, including environmental and social policies,

Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)Download

Sri Lankan Sustainable Banking Principles (SLBA, 2018)Download

Source Reference
(2) Sri Lankan Sustainable Banking Principles - Principle 10 - https://sustainablebanking.lk/industry-guiding-principles

Set clear targets and related performance indicators, ensure the required systems are in place to collect reliable data

Sri Lankan Sustainable Banking Principles (SLBA, 2018)Download

Source Reference
(2) Sri Lankan Sustainable Banking Principles - Principle 1 - https://sustainablebanking.lk/industry-guiding-principles (1) 3.2.2 ESG Risk Management

E&S procedures among others include risk screening, risk categorization into high , medium , low risks and determining required due diligence procedures, related governance provisions and risk monitoring. Incorporate ESG risk management to entire decision-making processes, including environmental and social policies, risk assessment, environmental and social covenant (in loan agreements or other financial legal documents), project supervision and portfolio review,

Sri Lankan Sustainable Banking Principles (SLBA, 2018)Download

Source Reference
(2) Sri Lankan Sustainable Banking Principles - Principle 6 - https://sustainablebanking.lk/industry-guiding-principles

Develop and implement a policy framework and procedures that require a screening of clients and engagements for prohibited, excluded or significantly controversial activities, as defined in a jointly agreed upon exclusion list

Sri Lankan Sustainable Banking Principles (SLBA, 2018)Download

Source Reference
(2) Sri Lankan Sustainable Banking Principles - Principle 1 - https://sustainablebanking.lk/industry-guiding-principles

E&S procedures among others include risk screening, risk categorization into high , medium , low risks and determining required due diligence procedures, related governance provisions and risk monitoring.

Sri Lankan Sustainable Banking Principles (SLBA, 2018)Download

Source Reference
(1) 3.2.2 ESG Risk Management

Incorporate ESG risk management to entire decision-making processes, including environmental and social policies, risk assessment, environmental and social covenant (in loan agreements or other financial legal documents)

Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)Download

Source Reference
(2) Sri Lankan Sustainable Banking Principles - Principle 8 - https://sustainablebanking.lk/industry-guiding-principles (1) 3.4.2 Capacity building for financial institutions

Provide “Sustainable Banking Training Sessions” across management levels and operational functions. Create practical E&S training tools and resources

Sri Lankan Sustainable Banking Principles (SLBA, 2018)Download

Source Reference
(1) 3.6.3 For financial institutions to measure progress and impacts (1) 3.6.2 For regulators to measure progress and impacts (2) Sri Lankan Sustainable Banking Principles - Principle 10 - https://sustainablebanking.lk/industry-guiding-principles

- Encourage the establishment of monitoring and evaluation mechanism of sustainable finance progress and impacts within financial institutions - Require financial institutions to annually report the progress made on sustainable finance related activities along with an action plan for the next financial year - Establish a “Sustainable Banking Reporting Template” and agree on the frequency, nature and format of internal and external reporting, preferably on an annual basis (potentially in line with Sustainability Report)

Roadmap for Sustainable Finance in Sri Lanka (CBSL, 2019)Download

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