Sri Lanka should accelerate its adoption of sustainable finance frameworks to attract global investors and strengthen its long-term economic resilience, the Asian Development Bank (ADB) said yesterday.
As global investors increasingly seek socially impactful financing mechanisms such as green and sustainability-linked bonds to strengthen the resilience of their investment ventures, Sri Lanka should focus on improving its sustainable finance ecosystem to support these aspirations, ADB officials said.
A well-structured sustainable finance system, backed by internationally accepted regulatory and governance frameworks, will also help the country diversify its financial risks by reducing its reliance on traditional banking channels, the regional development partner said.
“Economic prosperity and quality of life can be improved by reducing waste, reducing costs, and improving the environment. Therefore, it is crucial to promote sustainable finance by strengthening the capacity of institutions and developing innovative financing instruments,” said Takeo Konishi, Director General of ADB’s South Asia Department.
He made these comments while participating virtually in the Serendipity Knowledge Program on Sustainable Finance organized by ADB in Colombo yesterday.
Addressing the forum, Konishi commended the Securities and Exchange Commission of Sri Lanka and the Colombo Stock Exchange for their initiatives to implement green bond regulations and increase awareness among issuers and investors.
He acknowledged that efforts have already led to successful green bond issuances, including DFCC Bank’s first green bond issuance in September 2024 and Alliance Finance PLC’s in February 2025, both of which were fully subscribed, mainly by institutional investors.
“The next phase now should focus on further developing the sustainable finance ecosystem and stimulating capital markets to introduce instruments that raise funds for sustainable projects,” Konishi said.
Reiterating his sentiments, ADB Country Director for Sri Lanka, Mr. Takafumi Kadono, reaffirmed ADB’s commitment to supporting Sri Lanka in developing regulatory frameworks that enhance investor confidence in Sri Lanka.
He shared that ADB’s support will focus on establishing regulatory frameworks for thematic bonds, improving disclosure and reporting standards, and collaborating with credit and audit institutions to enhance investor confidence, with a focus on strengthening the sustainable finance ecosystem.
“Sri Lanka has strong potential in sustainable finance to attract foreign and domestic funds, which will benefit the capital market through product diversification and issuance of innovative instruments,” said Mr. Kadono.
Datuk Zainal Islan Zainal Abidin, Senior Advisor at the Asian Sustainable Finance Institute, also highlighted the growing importance of sustainable finance, with countries emphasizing the need to adopt impactful financing frameworks that address both global and domestic challenges.
Mr. Abidin pointed to the rapid growth potential of the global sustainable finance market, which was approximately US$5.4 trillion as of the third quarter of 2024.
Citing the Moody’s report, he noted that sustainable bond issuance is expected to reach US$1 trillion in 2025, and that the sustainable debt market and its growing demand for ESG-aligned financial solutions amounted to nearly US$992 billion in 2024.
“Therefore, it is timely for Sri Lanka to share knowledge and experience in creating a financial ecosystem that delivers impactful sustainable finance, which is essential in supporting the country’s sustainability aspirations,” said Mr. Abidin.
He recommended that countries take proactive steps to invest in sustainable infrastructure, integrate ESG principles into business strategies, and align with the growing expectations of global supply chains.
“These are critical tools for managing sustainability risks and meeting society’s growing expectations for a more sustainable economy,” said Mr. Abidin.
