Address by Ms. Renuka Fernando, CEO of Nations Trust Bank

Some of the phenomena that have manifested in the recent past in Sri Lanka such as the increasing climate variability, with droughts and floods becoming more intense each year; the crisis in waste management; and incidence of diseases such as dengue, cancer and chronic kidney disease of unknown etiology have exposed Sri Lanka's vulnerabilities and shown the inadequacy of capacity of the country to meet these burgeoning challenges.

It is also clear that no one is immune to the effects of vulnerabilities such as climate change impacts or dengue outbreak and that it is our collective responsibility to tackle these issues together rather than just the Government or development organizations alone. Some of the industry practices such as heavy use of agrochemicals and heavy reliance on fossil fuel based thermal energy bring serious questions about food safety and energy security in Sri Lanka and some of the lifestyle choices have become untenable as is evidenced by traffic congestion and the waste crisis in the country. Government has been forced to bring in drastic regulations such as ban on glyphosate and ban on polythene, Styrofoam and other non-recyclable packaging material but is faced with issues in practicality of implementation that it cannot resolve alone.

As banks and corporate that exist to create value over the long term for our investors, customers, employees and other stakeholders, we would need to manage the short-term pressures and at the same time strive to enhance their quality of life. Therefore, we will need to play a positive role in helping the country address the vulnerabilities and engage proactively to find solutions. If our clients are involved in unsustainable practices, with greater possibility of disruptions to their business, including from sudden regulations that might come about; and have weak resilience to recover from such disruptions, then it is in our interest to help these clients early on to identify vulnerabilities and provide them with solutions that can address these risks by transitioning to more sustainable products, processes and practices. This will help us improve our asset and portfolio quality and minimize non-performing loans while also improving customer profitability.

Sustainability should not be viewed merely from the risk management viewpoint but also in terms of productivity gains and growth opportunities it offers. The quantum of value that could be unlocked by pursuing business opportunities that promote the sustainable development goals is immense and financing entrepreneurs that creatively engage in this sphere does hold lot of promise for future earnings growth of our banks. However, to make use of these opportunities, banks in Sri Lanka would need to innovate and adapt to changes in business ecosystems and models such as the growth of the sharing and circular economies and to changes stemming from the fourth industrial revolution such as AI and fintech by tailoring our product offerings and making the transition smoother for our stakeholders in Sri Lanka.

In terms of our operations, lean transformation, digitalization and energy management measures can together enhance green productivity and help us make a dent on our energy and material costs and I'm pleased to note that most our banks are making great strides on this regard.

Transition to a green economy cannot be done by one bank or organization alone. It must be a multi-stakeholder engagement and this is where the Sustainable Banking Initiative seeks to add value. The initiative was launched in November 2015, in the immediate aftermath of the launch of Sustainable Development Goals in September 2015, by the Sri Lanka Banks' Association, with the support of DEG.

I wish to take this opportunity to thank Ms. Manuela Marques and DEG as well as Mr. Jonathan Alles, SLBA Chairperson at the time, and his bank, HNB, for the role played in helping the Association set up this initiative and taking the onus to promote this platform to the level that it has achieved today.

The first phase of the initiative saw 11 sustainability principles being codified after industry wide consultations and I'm pleased to note that 18 banks are signatory to the initiative and have pledged to take meaningful action on these principles. Signatories have already internalized sustainability in to business with some even making changes to strategy and structure with allocation of dedicated personnel and resources for coordination of these sustainability efforts and implementation pursued organization wide.

However, to broad base implementation, capacity will need to be developed across the board and this is the objective of Phase II of the initiative that we are launching today. I wish to thank DEG, FMO, OeEB and Proparco for coming forward to support the Association in developing and funding the implementation of this phase. With their support we have been able to obtain the services of InnovativKonzept and Khokhela Consult joint venture consultancy. InnovativKonzept has been involved in the consultation phase and launch of Phase I and is aware of the formative process. These expert consultants had been involved in the Kenyan and Nigerian Finance Initiatives, which are cited as benchmark case studies, and they bring a wealth of knowledge and insight from those exposures.

Under Phase II, we want to encourage banks to learn from the experiences of each other through sharing of case studies on what has worked and what could be done better on environmental and social performance. Phase II will also involve setting up of an e-Learning platform for benefit of our banks' staff and also training of expert consultants locally that our banks could tap on for support. Ms. Mellissa Makwarimba representing Khokhela Consult will be taking you through the plans ahead in subsequent sessions in more detail.

With the Government of Sri Lanka placing a greater emphasis on sustainable development with an Act of Parliament being discussed; with Central Bank of Sri Lanka signing on to Sustainable Banking Network and working with IFC on Sustainable Financing; with Colombo Stock Exchange becoming a member of UN Sustainable Stock Exchanges initiative; we see a greater alignment and congruence in Sri Lanka's financial industry architecture towards sustainability.

Sri Lanka Banks' Association, as umbrella body that brings all Sri Lankans banks together, stands ready to support all stakeholders on this common vision through the Sustainable Banking Initiative. I wish to invite banks who are not yet members of this initiative to become signatories and make use of the support that this initiative affords. I also wish to commend signatory banks for progress so far and request them to continue strengthen their efforts on the 11 principles, finally I wish to invite all of you and the institutions you represent to stay engaged in this initiative and forge the way ahead in achieving the sustainable development goals together.

We look forward to your involvement and commitment in today's session and beyond and hope you have productive dialogue today.

Ms. Renuka Fernando,
SLBA Chairperson, and CEO of Nations Trust Bank