The Central Bank of Sri Lanka (CBSL) is developing a green finance taxonomy that will provide a framework for investment analysis when funding green projects.
According to Daily News Sri Lanka, the taxonomy will be the framework for investment analysis for banking sector when investing in more sustainable projects.
CBSL Deputy Governor K M M Siriwardana explained at an event that low carbon energy projects such as solar generally require higher capital than gas or coal power plants, which he added increases the difficulty of accessing affordable financing for non-renewable energy projects.
The Deputy Governor also underlined that low carbon energy sources will not only enable Sri Lanka to reduce carbon emissions but will also reduce the country’s expenditure on imported fossil fuels allowing savings that can be delivered towards other goals.
He said, “It will also reduce Sri Lanka’s vulnerability to external commodity price shocks like the one that we are currently experiencing. Considering the massive investment needs, renewable power projects, the financial system of the country has a major role to play in the low carbon development parts of Sri Lanka.
“Therefore our financial system also needs to be reformed to create incentives for the private sector to make investments in low carbon energy projects. The financial institutions are giving due consideration to climate risks and social and environmental costs of energy projects and we can create incentives for the private sector to invest in sustainable energy projects instead of high carbon emissions projects.”
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