Pioneering sustainable finance in Sri Lanka
When DFCC Bank issued its LKR 2.5 billion green bond in September 2024, it solidified its place in national and sustainable finance history – not just because it is the institution’s inaugural green bond, but because it is also the first green bond to emerge from the South Asian country.
To find out more about this pioneering move and what it means for the future of sustainable finance in Sri Lanka, we sat down with Thimal Perera, CEO of DFCC Bank to learn more.
In the 1990s, DFCC financed Sri Lanka’s first private sector grid-connected mini-hydro power project, laying the groundwork to pave the way for the country’s sustainable finance journey three decades later.
“DFCC Bank’s inaugural green bond issuance represents a groundbreaking moment in Sri Lanka’s journey toward sustainable finance,” says Mr Perera of DFCC.
Originally listed on the Colombo Stock Exchange in Sri Lanka in September 2024, the pioneering green bond has now also made its debut on the Luxembourg Stock Exchange (LuxSE) and is displayed on the Luxembourg Green Exchange (LGX), the world’s leading platform for sustainable securities.
“This pioneering endeavor highlights DFCC Bank’s role as a leader in sustainable finance, with the funds dedicated to projects that combat climate change, enhance energy efficiency, and promote environmental conservation. The enthusiastic response we received from the market and from our investors reflects growing confidence in Sri Lanka’s green investment opportunities, particularly as the nation strives to increase renewable energy to 70% of its energy mix by 2030. Such initiatives pave the way for greater private sector participation in advancing climate resilience and sustainability goals,” highlights Mr Perera.
Being “delighted to return to Luxembourg” for the listing if its inaugural green bond, DFCC prepared well for its sustainable bond issuance journey.
“At DFCC, we embrace challenges and transform them into opportunities. Our dedicated internal sustainability team rose to the occasion, crafting a comprehensive Green Bond Framework within a remarkably short timeframe. Recognising the potential for further refinement, we sought the expertise of the Asian Development Bank, which provided invaluable guidance to enhance the framework with additional insights and content. This collaborative effort underscores our commitment to excellence and innovation in sustainable finance,” says Mr Perera.
Beyond the invaluable guidance of the Asian Development Bank, in October 2023, DFCC’s Vice President of Sustainability & Consulting Nalin Karunatileka attended a special capacity building training held by LuxSE’s LGX Academy lecturers and United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP) in Sri Lanka.
“The training that I attended in October 2023 was incredibly useful when it came to DFCC’s green bond issuance journey. It allowed me to gain in-depth knowledge of ICMA’s principles, different taxonomies, Second Party Opinions, and so much more. Before this training, we were only aware of green bonds as a concept. The actual mechanisms of a green bond issuance were something that we discovered during this training, which of course was crucial in our own green bond issuance journey,” reflects Nalin.
“Despite minimal advertising or promotional efforts, the bond was oversubscribed on the very first day! We had a cornerstone investor who committed to taking up to 80% of the total offering. So, rather than targeting multiple international markets, we chose to first test the Sri Lankan market’s appetite for green bonds, ensuring the success of our domestic launch before exploring opportunities abroad. After all, this was the very first green bond for both DFCC and for Sri Lanka,” says Mr Perera.
“Our initial focus was on building visibility and establishing connections, with the possibility of pursuing a future listing in Luxembourg as part of our broader strategic goals,” Mr Perera continues.
Now that DFCC’s sustainable bond journey has begun, the next question is where to go from here.
Casting his eyes towards DFCC’s future in sustainable finance, Mr Perera says:
“We are in the process of developing and updating our Green Bond Framework to a Sustainable Bond Framework as we speak! Our Sustainable Bond Framework aims to outline a roadmap for issuing all categories of sustainable bonds and using the proceeds to fund green and/or social projects that will improve people’s lives in Sri Lanka. This framework establishes the foundation for identifying, selecting, verifying, and reporting eligible sustainable financing opportunities that can be directly or indirectly financed through DFCCs’ sustainable bonds, as well as managing the associated proceeds.”
Saying a final few words on this important issuance and what it means for the future of Sri Lanka, Mr Perera underlines that the green bond represents nothing less than “a transformative step in diversifying Sri Lanka’s financial markets. It demonstrated the country’s ability to attract a broad spectrum of investors who are keen to align their financial goals with meaningful environmental and societal impact.”
If you would like to learn more about DFCC’s inaugural green bond and the important projects it is funding to help improve the lives of people in Sri Lanka, consult the bank’s issuer card on LuxSE’s website.
To find out more about this pioneering move and what it means for the future of sustainable finance in Sri Lanka, we sat down with Thimal Perera, CEO of DFCC Bank to learn more.
The beginning of a journey
DFCC Bank was set up in 1955 as Sri Lanka’s first development finance institution. Thanks to its 70-year history, DFCC has financed sustainable projects on the South Asian island since well before the official inception of sustainable finance.In the 1990s, DFCC financed Sri Lanka’s first private sector grid-connected mini-hydro power project, laying the groundwork to pave the way for the country’s sustainable finance journey three decades later.
“DFCC Bank’s inaugural green bond issuance represents a groundbreaking moment in Sri Lanka’s journey toward sustainable finance,” says Mr Perera of DFCC.
Originally listed on the Colombo Stock Exchange in Sri Lanka in September 2024, the pioneering green bond has now also made its debut on the Luxembourg Stock Exchange (LuxSE) and is displayed on the Luxembourg Green Exchange (LGX), the world’s leading platform for sustainable securities.
Shining the light on investment opportunities in Sri Lanka
The LKR 2.5 billion (approximately EUR 8 million) green bond will focus on advancing Sri Lanka’s solar energy system.“This pioneering endeavor highlights DFCC Bank’s role as a leader in sustainable finance, with the funds dedicated to projects that combat climate change, enhance energy efficiency, and promote environmental conservation. The enthusiastic response we received from the market and from our investors reflects growing confidence in Sri Lanka’s green investment opportunities, particularly as the nation strives to increase renewable energy to 70% of its energy mix by 2030. Such initiatives pave the way for greater private sector participation in advancing climate resilience and sustainability goals,” highlights Mr Perera.
Forming the foundation
Back in the 1990s, several of the bonds issued by DFCC were listed on LuxSE, and after a more than 20-year hiatus, DFCC is now back among LuxSE’s active issuers.Being “delighted to return to Luxembourg” for the listing if its inaugural green bond, DFCC prepared well for its sustainable bond issuance journey.
“At DFCC, we embrace challenges and transform them into opportunities. Our dedicated internal sustainability team rose to the occasion, crafting a comprehensive Green Bond Framework within a remarkably short timeframe. Recognising the potential for further refinement, we sought the expertise of the Asian Development Bank, which provided invaluable guidance to enhance the framework with additional insights and content. This collaborative effort underscores our commitment to excellence and innovation in sustainable finance,” says Mr Perera.
Beyond the invaluable guidance of the Asian Development Bank, in October 2023, DFCC’s Vice President of Sustainability & Consulting Nalin Karunatileka attended a special capacity building training held by LuxSE’s LGX Academy lecturers and United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP) in Sri Lanka.
“The training that I attended in October 2023 was incredibly useful when it came to DFCC’s green bond issuance journey. It allowed me to gain in-depth knowledge of ICMA’s principles, different taxonomies, Second Party Opinions, and so much more. Before this training, we were only aware of green bonds as a concept. The actual mechanisms of a green bond issuance were something that we discovered during this training, which of course was crucial in our own green bond issuance journey,” reflects Nalin.
A taste of what’s to come
Once it came time for this inaugural green bond and indeed DFCC to make their debut in the world of sustainable finance, the market’s response speaks for itself.“Despite minimal advertising or promotional efforts, the bond was oversubscribed on the very first day! We had a cornerstone investor who committed to taking up to 80% of the total offering. So, rather than targeting multiple international markets, we chose to first test the Sri Lankan market’s appetite for green bonds, ensuring the success of our domestic launch before exploring opportunities abroad. After all, this was the very first green bond for both DFCC and for Sri Lanka,” says Mr Perera.
“Our initial focus was on building visibility and establishing connections, with the possibility of pursuing a future listing in Luxembourg as part of our broader strategic goals,” Mr Perera continues.
Now that DFCC’s sustainable bond journey has begun, the next question is where to go from here.
Casting his eyes towards DFCC’s future in sustainable finance, Mr Perera says:
“We are in the process of developing and updating our Green Bond Framework to a Sustainable Bond Framework as we speak! Our Sustainable Bond Framework aims to outline a roadmap for issuing all categories of sustainable bonds and using the proceeds to fund green and/or social projects that will improve people’s lives in Sri Lanka. This framework establishes the foundation for identifying, selecting, verifying, and reporting eligible sustainable financing opportunities that can be directly or indirectly financed through DFCCs’ sustainable bonds, as well as managing the associated proceeds.”
Saying a final few words on this important issuance and what it means for the future of Sri Lanka, Mr Perera underlines that the green bond represents nothing less than “a transformative step in diversifying Sri Lanka’s financial markets. It demonstrated the country’s ability to attract a broad spectrum of investors who are keen to align their financial goals with meaningful environmental and societal impact.”
If you would like to learn more about DFCC’s inaugural green bond and the important projects it is funding to help improve the lives of people in Sri Lanka, consult the bank’s issuer card on LuxSE’s website.
