Climate risk is reshaping banking in Sri Lanka. At Sampath Bank, sustainability now informs risk management, governance, and capital allocation. The Bank has strengthened its Environmental and Social Management System to embed climate risk into lending, launched Green Fixed Deposits to mobilise capital, and invested directly in community-linked ecosystem restoration through initiatives such as “A Breath to the Ocean” and “Wewata Jeewayak”.
Dr. Lalith Weragoda, Chief Transformation Officer at Sampath Bank, outlines how these measures form a coordinated strategy to manage climate risk, channel long-term capital, and support Sri Lanka’s shift towards a low-carbon economy.
Climate risk is now emerging as a core financial risk. How is Sampath Bank integrating climate risk into its lending and overall risk management framework?
We treat climate risk as a core financial risk, not a sustainability add-on. It affects credit quality, asset valuation, operational continuity, and long-term portfolio resilience. We have strengthened our Environmental and Social Management System (ESMS) to anchor climate risk within our lending and risk management framework.
The enhanced ESMS applies across all credit facilities, excluding schematised retail products. Under this framework, sector-specific environmental and social risk screening is mandatory and embedded across the lending processes. High-impact and climate-sensitive sectors undergo enhanced due diligence, incorporating physical and transition risk assessments.
This framework enables us to identify, assess, and mitigate climate-related exposures at the point of credit origination. Climate considerations sit within our broader risk governance, supported by Board oversight and cross-functional accountability. With the ESMS at the centre of strategy, we ensure climate risk management is systematic, measurable, and aligned with long term sustainable growth.
With the implementation of SLFRS S1 and S2, how has sustainability reshaped decision-making and accountability at the leadership and governance level?
The implementation of SLFRS S1 and S2 has been a pivotal moment in embedding sustainability into our governance architecture. Rather than treating these standards purely as disclosure requirements, we used them as a catalyst for structural transformation.
At the leadership level, we established a dedicated Board Sustainability Committee to provide focused oversight on climate and broader ESG matters. This places sustainability alongside financial performance and risk within the Bank’s governance framework. At the management level, we formalised accountability through an ESG Committee responsible for implementation, performance monitoring, and cross-functional coordination.
To operationalise SLFRS S1 and S2, we formed a cross-functional Implementation Group comprising representatives from risk, finance, sustainability, credit, strategy, secretariat, and internal audit. This ensures disclosures are accurate and decisions are impactful. Finally, an ESG Working Group across business units supports execution, embedding sustainability into daily operations.
How do initiatives such as Green Fixed Deposits and planned Green or Sustainability Bonds position Sampath Bank in mobilising capital for Sri Lanka’s transition to a low-carbon economy?
At Sampath Bank, Green Fixed Deposits and planned Green or Sustainability Bonds are central to mobilising capital for Sri Lanka’s low-carbon transition. We have launched Green Fixed Deposits under a defined Green Deposit Framework, which identifies eligible sectors and project categories aligned with environmental objectives and similarly for Green or Sustainability Bonds also we have developed a comprehensive Sustainability Bond Framework.
The launch event of Sampath Green Fixed Deposit
To strengthen transparency and depositor/investor confidence, we obtained an independent limited assurance on both the frameworks. This assures customers that their funds support verified, environmentally responsible investments. Both Green Fixed Deposits and future Green or Sustainability Bonds channel savings/investments from individuals and institutions into national climate priorities.
The transition to a low-carbon economy cannot be financed by banks alone; it requires the active participation of both individuals and institutions. Through capital market instruments, we broaden the investor base and mobilise larger funding pools. Our Green Deposit and Sustainability Bond Frameworks define high-impact sectors such as renewable energy and energy efficiency, ensuring disciplined allocation and measurable outcomes supporting sustainable economic transformation.
Sampath Bank has invested directly in ecosystem restoration, from mangroves to tank restoration. Why is it strategically important for a bank to invest in natural capital, beyond its role as a financier?
Our climate strategy rests on two pillars. First, we support the low-carbon transition through sustainable finance and strengthened environmental due diligence across our lending portfolio. Second, we invest in strengthening natural carbon sinks on land and in the ocean, recognising that mitigation and resilience must advance together.
Through sustainable finance, we channel capital to renewable energy, energy efficiency, sustainable transportation etc. Our enhanced environmental due diligence framework, alongside our ESMS, ensures climate and environmental risks are identified and managed across our lending portfolio. This protects asset quality and supports responsible growth.
Beyond financing, we invest in ecosystem protection. Through our “A Breath to the Ocean” programme, we support coral and mangrove restoration, turtle conservation, and ocean plastic reduction. Healthy marine ecosystems strengthen carbon sequestration, coastal protection, and livelihoods tied to fisheries and tourism.
On land, our “Wewata Jeewayak” initiative restores traditional irrigation tanks across the island. These systems support agriculture while strengthening water security, flood control, and drought resilience. We also fund reforestation in areas such as Kanneliya, Udawalawa, and Matale to enhance biodiversity and expand long-term carbon absorption.
This integrated approach reduces climate risks, protects livelihoods, and safeguards long-term financial stability; reinforcing the link between environmental sustainability and economic resilience.
Looking ahead, how does Sampath Bank see its role evolving in enabling businesses and the broader economy to transition towards climate resilience and sustainability?
Sri Lanka’s recent crises have underscored the urgency of environmental resilience. As a financial institution, we see our role as influencing capital flows and shaping behaviour. By integrating environmental criteria into lending, we can incentivise responsible practices.
However, ensuring climate resilience requires collaboration. That’s why we work with public and private sector stakeholders to scale sustainable investment and align investment with national priorities.
Ultimately, financial resilience and sustainability are interconnected. By embedding environmental considerations into business models, especially among SMEs, we aim to reduce long term risk, protect livelihoods, and strengthen economic stability. We believe financial institutions must act early and decisively, rather than wait for policy mandates, to accelerate Sri Lanka’s transition towards a more climate-resilient economy.