Climate Change Adaptation Crucial For Corporate Sector
Sri Lanka has taken many a beating in recent years from extreme weather that devastated large swaths of commercial crops and other livelihood by flash floods and severe drought. A study shows that a 4.5 degree Celsius increase in global temperatures could cut global gross domestic product by US$ 72 trillion.
Maritime shipping, which accounts for around 80% of global trade by volume, could experience negative consequences, for instance from more frequent port closures due to extreme events. IFC Country Officer Sri Lanka and the Maldives, Victor Antonypillai said Sri Lanka too bears witness. “Our economy has taken a beating many a time owing to extreme floods or prolonged drought. Climate-smart approaches to business is not an option anymore. It is estimated that Sri Lanka stands to lose 1.2 percent of annual GDP by 2050 unless we address these issues.”
He said increasing pressure on the environment, the need to be conscious of social stakeholders and sharper scrutiny of corporate governance present businesses greater challenges in the modern world. “We cannot deny that business as usual will not take us very far, the needle has moved.
“The new normal has unfolded. Understanding the risks and adapting to it, is key. Environmental and social sustainability will define how ‘smart’ businesses are,” Antonypillai said, adding that no economic development of a sizable magnitude is possible unless there is an adequate degree of capital formation. Banks play an important role in capital formation and help the growth process. He said globally, from an investment angle, evidence for the new normal is even more compelling. Sustainable investment assets which include environmental, social and governance (ESG) and impact investing has surged worldwide by more than a third since 2016.
According to the Global Sustainable Investment Alliance, the investment assets in Europe, United States, Japan, Canada, Australia and New Zealand have reached over $30 trillion by the beginning of last year, a healthy 34% growth. What is significant is that, these assets now represent close to 40% of total investments in these countries. “Sustainable finance has become a means of doing business in the ‘new normal’ era. One may ask why financial services? It is true that ESG standards should cut across sectors, then, should it not be championed by industry bodies and regulators as well?,” Antonypillai queried, adding that globally business leaders are realising their responsibility to preserve scarce resources to ensure a sustainable yet profitable future.
Governments and development institutions are emphasising the need to approach the most pressing development challenges through the lens of environment and social governance. While climate change takes center stage in our lives, most stakeholders are making important strides to guide the global economy on a sustainable path. Sustainability is at the heart of IFC’s business model. “We work with financial institutions, regulators, stock exchanges and industry bodies across emerging markets. We help the stakeholders understand and manage ESG risks, find innovative solutions that open-up opportunities for economically, socially, and environmentally sustainable private investments,” he said.
The IFC’s role does not stop at merely creating the rules of engagement but continues into providing finance and advisory services for sustainable endeavours in the private sector.Creating employment and ensuring sustainable economic growth is also part of our priorities. The Women in Work program, in partnership with the Government of Australia, is one such program, which is aimed at creating more and better private sector employment and business opportunities for women.
“Our $ 100 million investment and advisory services in the Commercial Bank of Ceylon to help the bank increase its lending to sustainable energy financing projects is by far the largest financing from our own account in the country. We expect this facility to help reduce greenhouse-gas emissions, promote energy efficiency, and support the expansion of conventional and non-conventional renewable energy projects. This is one of many different projects we have supported in this space,” Atonypillai said.
The roadmap that was launched will be an effective platform for knowledge and learning exchanges among financial market regulators and Financial Institutions on green finance. As part of the roadmap, it is essential to recognise the significance of developing implementation tools including reporting templates on banks’ performances, green taxonomy, environmental and social risk management guidelines. There will also be training and capacity building for local banks, encouraging them to expand climate finance and to build new business opportunities.
The CB joining the IFC-supported Sustainable Banking Network (SBN) initiative will help draw knowledge and experience from other regulatory partners of the network spanning 34 countries. This will forge a path to build a greener and inclusive future through sustainable finance.