ADB working to strengthen Sri Lanka’s sustainable finance framework amid low-innovation capital market

The Asian Development Bank (ADB) reaffirmed its commitment to advancing Sri Lanka’s sustainable finance sector during the Serendipity Knowledge Programme on Sustainable Finance, emphasising the country’s untapped potential to leverage capital markets for green investments.

Delivering the closing remarks at the event held on March 19, ADB Sri Lanka Country Director Takafumi Kadono underscored the bank’s role as a “trusted partner” in the nation’s sustainable finance journey, citing collaborative efforts such as the development of Sri Lanka’s green bond framework with the Securities and Exchange Commission (SEC) and Colombo Stock Exchange (CSE).

“ADB is happy to have assisted the SEC and CSE in developing the green bond framework,” he stated, positioning the initiative as a milestone in diversifying financial instruments to attract foreign and local capital.

Kadono highlighted global precedents where sustainable finance flourished even in markets constrained by limited liquidity and product variety. “There is strong potential for sustainable finance using Sri Lanka’s capital market to attract funds,” he said, stressing that product innovation—such as green bonds—could catalyze growth while strengthening market depth. He pointed to the phased rollout of ESG (environmental, social, governance) disclosure standards aligned with IFRS, set to begin in 2025, as a critical step toward building investor confidence.

Sri Lanka’s existing frameworks, including the Central Bank’s 2019 Sustainable Finance Road Map and 2022 green taxonomy guidelines for banks and non-banking institutions, were praised by him as foundational achievements.

ADB Sri Lanka Country
Director Takafumi Kadono

However, Kadono emphasized the need for broader corporate compliance with disclosure norms, capacity-building, and policies that incentivize ESG innovation. “Today’s discussions emphasised raising awareness and fostering an ecosystem where ESG goals can thrive,” he noted, linking these efforts to attracting global investor attention.

Beyond green bonds, ADB’s support spans banking reforms, SME finance, and the establishment of the National Credit Guarantee Institution—initiatives aimed at stabilizing Sri Lanka’s financial ecosystem.

Looking ahead, Kadono revealed plans to prioritize digital finance and fintech to accelerate financial inclusion, stating, “ADB will elevate its support to enhance digital finance in Sri Lanka.”

Kadono lauded the Sri Lankan government’s vision for greening the financial system but urged sustained collaboration to implement reforms. “The discussions today are just the beginning—success will require decisive leadership and resilience,” he concluded, reiterating ADB’s long-term commitment to the country’s sustainable finance goals.

The event, attended by policymakers, financial experts, and global stakeholders, spotlighted Sri Lanka’s incremental progress and the strategic role of capital markets in aligning economic growth with climate resilience. With ADB’s backing, the nation now faces the challenge of translating dialogue into actionable frameworks that unlock sustainable investment.

By Sanath Nanayakkare