Financing the future: Sri Lanka embraces sustainable finance through GSS+ products

BY SECURITIES AND EXCHANGE COMMISSION OF Sri LANKA

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THE Securities and Exchange Commission of Sri Lanka (SEC) in collaboration with the technical expertise sourced from the Asian Development Bank (ADB) has facilitated the Regulatory Framework for issuing and trading a suite of Environment, Social and Governance (ESG) related Bond products at the Colombo Stock Exchange (CSE).

Accordingly, issuers can now raise funds in the Capital Market by way of issuing Green, Blue, Social and Sustainability Linked (identified as GSS+) Bonds.

The Regulatory Framework for Green Bonds was published in April 2023 and subsequently was extended to include Blue Bonds. With the recent SEC approval, now issuers have the option of focusing on two additional products; Social and Sustainability Linked Bonds. Whilst Green, Blue and Social Bonds provide issuers (Sovereigns and Corporates) the impetus for directing issue proceeds towards eligible Projects that will generate positive environment and social outcomes, Sustainable Linked Bonds identified as a "filler" in the ESG space provides businesses and investors more options for financing and investing in sustainability initiatives.

In response to the calls for action on climate change stemming from global agreements such as the Paris treaty, Sri Lanka is committed to achieve carbon neutrality by year 2050. In the journey of transitioning to a low carbon economy and a cleaner Sri Lanka through the development of the ESG pillars, the Government of Sri Lanka and environmentally and socially responsible corporates could make great use of innovative sustainable financing tools such as GSS + bonds introduced at the CSE.

Putting your money where your values are: GSS+ products explained

GSS+ refers to a category of financial products designed to fund projects with positive environmental and social impacts. The following are types of sustainable bond products within the GSS+ framework.

1. Green Bonds