ESGNexus.lk · Policy & Regulation
The Central Bank of Sri Lanka launched its most ambitious sustainable finance framework to date on 5 May 2025. Roadmap 2.0 goes well beyond green lending — expanding into social equity, MSMEs, and gender equality. Every bank, every large corporate borrower, and every financial institution in Sri Lanka needs to understand what it requires.
By the ESGNexus Editorial Team · June 2026 · Estimated reading time: 7 minutes
KEY TAKEAWAYS
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On 5 May 2025, the Central Bank of Sri Lanka unveiled the Sustainable Finance Roadmap 2.0 — the most significant update to the country’s sustainable finance framework since the original roadmap was launched in 2019. The new framework, which runs from 2025 to 2029, was developed with technical and financial support from the International Finance Corporation (IFC) in partnership with the European Union under the Accelerating Climate-Smart and Inclusive Infrastructure in South Asia programme.
The launch was not a routine policy announcement. CBSL Governor Dr. Nandalal Weerasinghe used the occasion to deliver a direct message to Sri Lanka’s financial sector: sustainable finance is no longer a voluntary commitment. It is, in his words, an economic, social, and environmental imperative. For banks, insurers, and the large corporates they finance, the implications are immediate and practical.
This article explains what Roadmap 2.0 requires, how it differs from the 2019 original, what it means for Sri Lankan banks, and what corporate borrowers should expect as the framework takes hold.
“Sustainable finance is no longer optional. It is an economic, social, and environmental imperative.”
— Dr. Nandalal Weerasinghe, Governor, Central Bank of Sri Lanka, 5 May 2025
From Green Finance to Sustainable Finance — What Changed
The original 2019 roadmap was a significant first step, but its scope was largely environmental — focused on green lending, climate risk management, and directing capital toward cleaner economic activities. Roadmap 2.0 is a fundamentally different document.
The most important conceptual shift is the explicit incorporation of the social dimension of sustainability. Under the new CBSL Act, financial inclusion is now a formal duty of the central bank — not just an aspiration. Roadmap 2.0 translates that mandate into concrete actions for financial institutions, making social equity, support for MSMEs, gender equality, and financial literacy core pillars of the framework alongside environmental concerns.
The other significant change is scope. Roadmap 1.0 focused primarily on the banking sector. Roadmap 2.0 was developed with active participation from the Securities and Exchange Commission of Sri Lanka, the Insurance Regulatory Commission, the Colombo Stock Exchange, the Sri Lanka Banks’ Association, and the Finance Houses Association — meaning it is designed to reshape practices across the entire formal financial system.
| Roadmap 1.0 (2019) | Roadmap 2.0 (2025–2029) | |
|---|---|---|
| Focus | Green finance and environmental risk management | Green finance + social equity, MSMEs, gender equality |
| Scope | Banking sector primarily | Banking, insurance, capital markets, NBFIs |
| Social dimension | Limited | Explicit — embedded in CBSL Act mandate |
| Taxonomy | Green Finance Taxonomy (2022) | Expanded to include social activities |
| Key partners | IFC, UNDP, SBFN | IFC, EU (ACSIIS programme), SBFN, World Bank |
| Implementation period | 2019–2024 | 2025–2029 |
Source: CBSL Sustainable Finance Roadmap 2.0 (2025); CBSL Sustainable Finance Roadmap (2019); SBFN, ‘Central Bank of Sri Lanka Launches Sustainable Finance Roadmap 2.0’, May 2025
The Numbers That Make This Urgent
Roadmap 2.0 opens with a frank assessment of what is at stake. The numbers are significant enough to warrant quoting directly from the framework.
USD 10.85 billion. That is what Sri Lanka needs to mobilise by 2030 to meet its Nationally Determined Contributions (NDCs) under the Paris Agreement. The NDCs represent the country’s formal commitment to climate action, and the gap between current financing flows and that target is large.
0.4% of GDP — approximately USD 300 million per year. That is the current annual economic cost of climate-related losses in Sri Lanka, affecting agriculture, energy, and infrastructure. CBSL’s own modelling estimates that without action, this figure will triple to 1.2% of GDP by 2050.
USD 4.2 trillion. The Network for Greening the Financial System (NGFS) estimates this is the value of global financial assets at risk from climate change. Sri Lanka’s financial system is not insulated from these pressures.
These figures frame the urgency of the roadmap. Sri Lanka’s banking sector is the primary domestic channel through which sustainable investment can be mobilised. Roadmap 2.0 is, in part, a framework for making that mobilisation happen.
Source: Green Central Banking, ‘Sri Lanka updates sustainability roadmap’, May 2025; CBSL Sustainable Finance Roadmap 2.0 — cbsl.gov.lk
The Three Priority Action Areas
Roadmap 2.0 structures its requirements around three priority action areas. Each has direct implications for financial institutions operating in Sri Lanka.
Priority 1: Environmental and Social Risk Management
Financial institutions are required to embed ESG risk — both environmental and social — into their core credit assessment and portfolio management processes. This means that when a bank evaluates a loan application from a large corporate, it must consider not just the borrower’s financial creditworthiness, but also the climate risks associated with the business, the business’s supply chain labour practices, and its governance quality.
Roadmap 2.0 specifically prioritises climate and business risk analysis, value chain evaluation, and technology-driven ESG measurement. Governor Weerasinghe highlighted that such risk evaluation is not only essential for targeted action but also for strengthening the overall resilience of lending portfolios — reducing the risk of climate-driven non-performing loans.
The green finance taxonomy, first introduced in 2022, is being expanded under Roadmap 2.0 to include social activities. This means financial institutions will have a standardised classification system for both green and social lending — enabling them to track, report, and scale sustainable finance products more effectively.
Priority 2: Improved Reporting and Disclosure
CBSL has already issued a Direction requiring licensed banks to report their sustainable financing activities. This is not a future obligation — it is in force now. Roadmap 2.0 further raises the ambition, pushing for improved standardisation and comparability of sustainability reporting across financial institutions.
For banks, this means building internal systems to track and report on ESG-related lending volumes, climate risk exposures, and social financing activities. For bank sustainability and finance teams, the reporting requirements under Roadmap 2.0 will require investment in data infrastructure and internal capacity that many institutions have not yet made.
Priority 3: Governance and Institutional Coordination
The third pillar recognises that sustainable finance cannot be achieved by banks acting alone. Roadmap 2.0 establishes a framework to strengthen coordination among CBSL, the SEC, the CSE, the Insurance Regulatory Commission, industry associations, and international partners. New working groups are being established to guide implementation.
On climate insurance specifically, the roadmap flags the need to strengthen the policy and regulatory framework around insurance products — particularly index-based climate insurance policies that can support farmers, MSMEs, and infrastructure projects facing climate risks. This is an emerging opportunity for the insurance sector.
Source: SBFN, ‘Central Bank of Sri Lanka Launches Sustainable Finance Roadmap 2.0’; ESG News, ‘Sri Lanka Launches Sustainable Finance Roadmap 2.0 to Tackle Climate Risk and Boost Inclusion’, 2025
What This Means for Sri Lankan Banks
For banks, Roadmap 2.0 represents a structural shift in how lending decisions will need to be made over the next five years. The practical implications fall into three areas.
- ESG due diligence in lending. Banks will need to build or strengthen ESG screening processes for large corporate loans. This means developing internal ESG assessment tools, training relationship managers, and integrating climate risk into credit risk frameworks. Banks that have already begun this work — primarily the larger licensed commercial banks — have a head start. Many mid-tier banks do not yet have these capabilities.
- Green and social product development. Roadmap 2.0 actively promotes green loans, debt-for-nature swaps, and inclusive green finance products targeting MSMEs. The expanded taxonomy gives banks the classification framework they need to develop and market these products. Banks that develop credible, sustainable finance product lines early will gain a competitive advantage in attracting both international funding lines and ESG-conscious corporate clients.
- Reporting compliance. The existing CBSL Direction on sustainable financing reporting is already in force. Banks must report sustainable financing activities — and Roadmap 2.0 signals that reporting expectations will become more granular and standardised over the 2025–2029 period. Building the data systems to support this now is significantly cheaper than retrofitting them under regulatory pressure later.
Source: CBSL Sustainable Finance page — cbsl.gov.lk/en/financial-system/financial-system-stability/sustainable-finance
What This Means for Corporate Borrowers
The implications of Roadmap 2.0 extend well beyond the banking sector. Any company that borrows from a Sri Lankan bank — particularly a large listed or unlisted corporate — will increasingly feel the effects of the framework in its lending relationships.
ESG credentials are becoming a factor in lending. As banks embed ESG due diligence into credit assessment, companies without sustainability reporting, emissions data, or basic governance disclosures will face harder conversations with their relationship managers. This is already happening in markets where similar frameworks are more mature — Sri Lanka is moving in the same direction.
Green lending terms for strong ESG performers. The flip side of increased scrutiny for weak ESG performers is preferential terms for strong ones. As green loan products develop in the Sri Lankan market, companies with credible sustainability strategies and verifiable ESG data will be well-positioned to access them. The mandatory sustainability reporting requirements under SLFRS S1 and S2 — discussed in our previous article — will generate exactly the kind of data that green lending assessments require.
Sectoral risk profiling. Roadmap 2.0’s emphasis on value chain evaluation and climate scenario analysis means banks will increasingly profile the climate risk of the sectors they lend to. Companies in high-risk sectors — agriculture, export manufacturing, coastal tourism, energy — should expect climate risk to become a more explicit part of credit discussions.
Companies that cannot demonstrate basic ESG governance will face tougher lending discussions as banks embed Roadmap 2.0 into credit assessments. This is not a future risk. It is the direction of travel, and the pace is accelerating.
Sri Lanka’s Position in the Region
It is worth noting that Sri Lanka’s commitment to sustainable finance frameworks puts it ahead of most South Asian peers. The country joined the Sustainable Banking and Finance Network in 2016, launched its first roadmap in 2019, released a Green Finance Taxonomy in 2022, and is now implementing a second-generation framework with explicit social dimensions — all with credible international institutional backing from the IFC, the European Union, and the World Bank.
In 2023, Sri Lanka became the 20th member of the International Platform on Sustainable Finance — the EU-established forum for dialogue between policymakers on sustainable investment. This membership signals the country’s intent to align with the global mainstream of sustainable finance regulation.
The challenge, as with the mandatory sustainability reporting standards discussed elsewhere on ESGNexus, is implementation. The regulatory architecture is credible. The question is whether Sri Lanka’s financial institutions — and the corporates they finance — will build the internal capacity to meet the framework’s requirements within the 2025–2029 window.
ESGNexus will track implementation progress against Roadmap 2.0 milestones, monitor which banks are developing sustainable finance products, and report on how ESG due diligence is changing lending practices in Sri Lanka. Subscribe to the ESGNexus Weekly for regular updates.
Sri Lanka’s sustainable finance architecture is more developed than most South Asian peers. The question now is whether the financial sector will build the internal capacity to match its regulators’ ambition.
Sources & Further Reading
CBSL — Official news release: cbsl.gov.lk/en/news/CBSL-launches-the-sustainable-finance-roadmap-2.0
CBSL — Sustainable Finance Roadmap 2.0 (PDF): cbsl.gov.lk/sites/default/files/cbslweb_documents/sustainable_finance_roadmap_2.0.pdf
CBSL — Sustainable Finance page: cbsl.gov.lk/en/financial-system/financial-system-stability/sustainable-finance
SBFN — Central Bank of Sri Lanka Launches Sustainable Finance Roadmap 2.0: sbfnetwork.org
ESG News — Sri Lanka Launches Sustainable Finance Roadmap 2.0 to Tackle Climate Risk and Boost Inclusion (2025): esgnews.com
Green Central Banking — Sri Lanka updates sustainability roadmap, May 2025: greencentralbanking.com
Daily FT — CBSL charts greener future with Sustainable Finance Roadmap 2.0, 6 May 2025: ft.lk
BIS — Governor Weerasinghe keynote speech at Roadmap 2.0 launch: bis.org/review/r250617p.htm
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Data disclaimer: Information in this article is sourced from publicly available documents. ESGNexus does not independently verify company disclosures. Errors and omissions excepted. |