Climate change today is affecting the financial system due to its far-reaching impact across all sectors and geographies. As risks associated with environmentally damaging products and services increase, it is expected that purchasing and investing in green alternatives will become the norm. This has led to the undertaking of initiatives to mitigate the negative impacts to the environment and sustainability through the mobilization of sustainable sources of finance for their activities.
This growing need for environmental sustainability has given rise to green financing, which comprises of loans or investments that supports all industries in the economy ranging from manufacturing, agriculture, tourism, waste management, energy, real estate and many more. Green financing presents tremendous opportunity for organizations to upgrade and improve existing infrastructure to be more sustainable or even build new infrastructure at a lower cost. Therefore, financial institutions need to address these issues in developing climate strategies and in rolling out diverse green finance instruments to seize these business opportunities.
With green financing presenting itself as an exciting avenue for financial institutions, PwC Sri Lanka has come forward to offer their comprehensive, well-structured portfolio of advisory services surrounding green finance to the financial services sector in the country.
From assisting financial institutions to comply with regulatory developments on ESG risk assessment, measurement and disclosure, developing ESG policies and frameworks to support their investment decisions, PwC, backed by an experienced team of industry experts, will support the financial sector with end-to-end assistance in defining and prioritizing projects that focus on ESG considerations.
Speaking of the opportunities presented through green financing, Ruvini Fernando, Deals Leader, Sri Lanka and Maldives at PwC stated, “given their central role, financial institutions are uniquely positioned to benefit from the exponential growth in the sustainable finance market. With climate risk now being globally recognized as a business risk that is also driving investor decisions, more money is being invested into businesses to help them become greener. This can help businesses to grow by accessing larger pools of capital available globally, help create jobs, reduce carbon emissions, and stimulate investment, where both the economy and environment simultaneously benefit. However, finance institutions can only take advantage of this market if they build a strong reputation based on credible commitments to sustainable financing. “
According to Zahra Cader, ESG Leader and Director for PwC Sri Lanka, green financing provides a new way of financing not only projects, but also sustainable activities. This means that finance institutions would require to engage in new financial instruments, such as green bonds and carbon market instruments. These initiatives will enable financial institutions to provide capital to finance investments in renewables, climate adaptation technologies and ESG related projects. “Such solutions will highlight the responsibility of finance institutions to be at the forefront of change and to adopt and promote climate-resilient practices to support customers in this transition”, she added.
With more industry stakeholders comparing finance institutions based on their sustainability pledges, financial institutions can show their commitment to sustainability, promote their credibility and reduce the risks of greenwashing by putting in place an effective ESG strategy and targets. In short, sustainability is here to stay and sustainable finance is the future, where finance institutions are expected to play a key role in the transition to a greener economy.