Sustainability
Sustainability
Sustainability and sustainable development have become a buzz word during the past decade due to its significance to create the world we want to live in. Finance in particular has been identified as a key resource that fuels both environmental and social sustainability, other than a mere enabler of economic action worldwide. A growing number of financial institutions in the world are adopting policies, standards, and lending practices that reduce the environmental and social impact of their operations. They adopt sustainable financing practices to ensure that economic development doesn’t come at the expense of our ecosystem and the resources of our future generations.
Sustainabile Finance
Definition of sustainable finance and what it constitutes is still evolving. It can be broadly defined as financial services integrating environmental, social and governance (ESG) criteria into the decision-making process and business activities of firms, aiming at long lasting benefits for the firm, its many stakeholders as well as the society and the environment at large. Green Finance is a component of Sustainable Financing which is the channelling of financial flows towards meeting the challenges of climate change and the transition into a low-carbon economy. Sustainable Finance is a primary contributor to United Nation approved Sustainable Development Goals (SDGs). Inclusive and responsible financing are two key components of sustainable finance, that ensures mobilisations of funds to the grassroot levels to fuel sustainable development at all tiers of the social sphere to promote prosperity while protecting the planet.
The Sri Lankan context
In 2016, the Central Bank of Sri Lanka joined the International Finance Corporation (IFC) supported by the Sustainable Banking Network (SBN), which represents 86% of banking assets in emerging markets. CBSL, is the official representative for IFC in Sri Lanka and have an active steering committee for Sustainable Finance with the representation of FHA. ‘The Roadmap for Sustainable Finance was launched in June 2019 with the financial assistance of the Biodiversity Finance Initiative (BIOFIN) of the United Nations Development Programme (UNDP) along with technical assistance of the IFC. The Roadmap was developed in consultation with stakeholders including the Sri Lanka Banks’ Association (Guarantee) Ltd. (SLBA), the Finance Houses Association of Sri Lanka, the BOX 7 A New Era in Banking : Green and Beyond Insurance Regulatory Commission of Sri Lanka and the Securities and Exchange Commission of Sri Lanka.( Annual Report Central Bank of Sri Lanka, 2020).
FHA sustainability mandate
FHA published launched the Sustainability Mandate in November 2020 with the agreement of all LFCs.
The purpose of this mandate is to, “serve as the guideline for the Licensed Finance Companies (LFCs) in Sri Lanka to integrate sustainability principles holistically into their businesses, enabling sustainable value creation through their own sustainable finance approaches, in line with defined sustainability guidelines, that would ultimately contribute towards national sustainability agenda and UN Sustainable Development Goals”
FHA Sustainability Sub Committee
FHA has initiated a subcommittee for Sustainable Finance with the representation of all member companies in 2020. The mandate of subcommittee is as follows.
The purpose
Create an industry movement to promote and support sustainable development.
Objectives
Explore the opportunities jointly to transform the member companies into sustainable and value driven financial institutions.
Create a synergistic partnership to support the sustainability priorities of the country
Collaborate to undertake activities that support sustainable development
Join together to promote the sustainability activities undertaken as individual companies
Mutually support the member companies to increase sustainability literacy, skills and volunteerism of the staff