Investors more conscious now about transition towards circular economy

Investors are becoming more and more conscious and concerned about impact reporting, climate change mitigation, social equity considerations, and transition towards a circular economy,” said Securities and Exchange Commission Chairman, Faizal Salieh at the event.

“They are driving the demand for innovative green financing and green financial instruments. A green and sustainable economic environment is now the joint responsibility of Government, Business, and Society.”

Climate Bonds Initiative, Green Bond issuance reached a record high of over USD 1 trillion in 2023. Sustainable Bonds, Green Bonds, Blue Bonds, Social Bonds and other sustainable debt instruments have a common purpose and goal – to create a sustainable ecosystem. They are becoming an important part of global fixed income markets.

“They are being driven by strong demand from investors seeking to finance climate-friendly projects. We must also congratulate DFCC Bank for being the first mover in this segment and I also wish to congratulate the CSE for facilitating the first listing of a Green debt instrument in the capital market.”

The challenge we are facing now in Sri Lanka is how quickly can we socialize these bonds and attract ESG conscious foreign investors, whilst being mindful of Sri Lanka’s current default sovereign rating.

“In the Global Stock take, Nature and Biodiversity are key factors to mitigate the risks in a heating planet and protect vulnerable communities from the impacts of a changing climate.Nature-based financial solutions are crucial in this regard. This is the compelling reason for markets to embrace and enable sustainable debt instruments.”

Many have identified the continuing prevalence of a large climate finance gap, an even larger overall environmental finance gap, and a huge UN Sustainable Development Goals (SDG) finance gap.

“To close these gaps, we need to mobilize much more private capital at a much faster pace through the capital markets, and allocate it to projects, products, and processes that have a positive impact on the sustainability agenda.”

Investors are actively seeking to align their investments with ESG principles and contribute to the transition to a climate-friendly, low-carbon economy. Green finance instruments are increasingly being integrated into mainstream investment portfolios. Sustainable Bonds can raise funds for projects in renewable energy, energy efficiency, clean transportation, green buildings, wastewater management and climate change adaptation in line with the globally defined and accepted Principles and requirements that govern the issuance of Sustainable Bonds.

In response to this, SEC, with the technical assistance of the ADB, has established an enabling policy and regulatory framework for Sustainable Bonds. By expanding the availability of green finance instruments and fostering collaboration between investors, issuers, and regulators, financial markets will be able to accelerate the transition to a more sustainable and resilient financial system.