ECONOMYNEXT – Green finance is getting greater attention in Sri Lanka, a policy think tank survey of 20 financial institutions has found, with a majority saying that over the next decade they anticipate it will make up close to 25 percent of their lending portfolio.
“Banks and finance companies see it as a new area for lending, and the number of potential projects that need finance keep growing,” the Centre for a Smart Future (CSF) said of its Green Finance Maturity Assessment 2024 report.
CSF collaborated with Biodiversity Sri Lanka to survey 20 financial institutions to understand multiple aspects of their engagement with green finance.
The survey showed that there is strong strategic recognition at board and senior management level, with many financial institutions having a board-approved policy or other form of internal guideline.
“Majority of financial institutions say that over the next 10 years they anticipate up to 25% of their lending portfolio will be projects that utilize green finance.”
However, CSF noted, this agenda is a work in progress as most of the green finance activities are in green lending, with much less on green deposit mobilization.
“The majority of green lending is still limited to mitigation activities. ‘Installation of renewable energy like solar (residential, office, industrial)’ was the top purpose for customers borrowing green facilities.
“Financial institutions reported that their SME customers have limited understanding on green products and potential of green finance, and so more awareness is needed.”
According to the survey, the ‘lack of credit department’s knowledge on environmental issues’ was cited as a top challenge by FIs in assessing green credit proposals.
“While majority of FIs report they engage with environmental organisations to better understand risks and risk mitigation, very few engage with them to inform their green lending products.”
The full report can be accessed here. (Colombo/Jan16/2025)
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