Sanath Manatunge, Managing Director/Chief Executive Officer of Sri Lanka’s biggest private sector bank Commercial Bank of Ceylon PLC, talks about the bank’s sustainability agenda and its impact. He begins this interview by explaining how Commercial Bank’s ESG strategy is integrated into its core operations:
Built on a robust framework, our ESG strategy delivers responsible financial services fostering growth in an environmentally sustainable, socially inclusive, and economically enriching manner. Pillars like Sustainable Banking, Responsible Organization, and Community Engagement guide our alignment with eight key United Nations Sustainable Development Goals (SDGs), fortified by global and national guidelines and strategic partnerships. The guidance of the Executive Sustainability Committee and Sustainability Working Committee ensures effective management of goals in line with strategies.
The Bank has launched innovative products like green loans, leases, and home loans, establishing us as a top choice for sustainable finance. Social responsibility permeates our operations, evidenced by a dedicated CSR unit and a commitment to allocate up to 1% of post-tax profit earnings to community support.
Good governance and transparency are of paramount importance to us, led by our Executive Sustainability Committee and reflected in our adherence to global reporting standards. Our operational practices, including our status as Sri Lanka’s first carbon-neutral bank, demonstrate our environmental commitment. Engagement with stakeholders, including strategic partnerships, underscores our dedication to sustainable banking. Future commitments include further investments in sustainable projects and green finance innovations, bolstered by developing a Climate Transition Plan in collaboration with the International Finance Corporation (IFC).
Can you share specific key performance indicators or metrics your bank uses to measure the environmental and social impact of its initiatives? How do these metrics tie into your broader sustainability goals?
One primary area we focus on is the green financing volume, where we meticulously track the amount of financing allocated to green projects such as renewable energy, sustainable infrastructure, and green buildings. Utilizing the Climate Assessment for Financial Institutions (CAFI) tool of IFC, ensures accuracy and transparency in this measurement, allowing us to effectively monitor our contributions to fostering a low-carbon economy.
To address the potential negative impacts of our lending activities, we have established a Social & Environment Management System (SEMS). This system assesses and mitigates environmental and social risks associated with our lending practices, ensuring that our financial services prioritize economic growth alongside environmental protection and social well-being. This proactive approach signifies our commitment to responsible banking and supports sustainable development across our operations.
Additionally, we prioritize carbon footprint reduction efforts. Rigorously quantifying our operational carbon footprint, we set ambitious targets for reduction, measuring energy consumption and emissions while implementing initiatives to mitigate these impacts. Our efforts have led us to become the first carbon-neutral bank in Sri Lanka.
Community investment is another core focus, where we invest in Social Enterprise Projects and initiatives addressing crucial social issues like financial inclusion, education, and health. These efforts aim to make a meaningful difference in the communities we serve, reinforcing our commitment to social responsibility.
Diversity and Inclusion (D&I) are critical areas of focus as well. We measure and promote diversity within our workforce, leadership, and recruitment practices across various dimensions such as gender and ethnicity, recognizing the value of diverse perspectives and experiences.
Employee engagement in sustainability is another key metric, reflecting our commitment to embedding sustainability into our corporate culture. We encourage employee participation in sustainability-related initiatives, training programmes, and volunteer activities to ensure shared purpose and collective action.
To amplify the impact of these initiatives, we provide specific Key Performance Indicators (KPIs) to key stakeholder departments within the Sustainability Working Committee. This strategic dissemination ensures sustainability objectives are deeply integrated across our operations, driving department-specific and bank-wide efforts towards our sustainability goals.
Can you describe the process of stakeholder engagement in shaping your bank’s ESG agenda?
At the core of our bank’s Environmental, Social, and Governance (ESG) agenda lies a robust stakeholder engagement process, driven by the belief that diverse perspectives enhance our sustainability endeavours. We begin by identifying a broad spectrum of stakeholders, including clients, employees, investors, regulatory bodies, and community members, ensuring a comprehensive grasp of various interests and concerns. Through surveys, interviews, and focus groups, we actively gather insights into the ESG issues most pertinent to our stakeholders so we can develop effective initiatives.
We establish dedicated platforms for ongoing dialogue, such as advisory councils and regular stakeholder meetings, facilitating a two-way exchange of information and feedback. This continuous engagement enables us to dynamically integrate stakeholder perspectives into our ESG strategy, shaping priorities, objectives, and the implementation of specific initiatives. Our approach ensures that our ESG agenda evolves in tandem with stakeholder expectations, enhancing its relevance and impact.
Transparency and accountability define the implementation of our ESG initiatives, with regular reporting on our progress towards established metrics and goals. This open communication underscores our commitment to not only meeting but exceeding stakeholder expectations, fostering a climate of trust and mutual respect. It also allows us to continually assess and refine our efforts, ensuring alignment with both our corporate values and societal needs.
How does your bank leverage technology and innovation to address environmental and social challenges?
Our strategic digital roadmap is meticulously crafted to align with our vision and mission. Apart from providing various services that facilitate the utmost convenience to our customers, our digital banking platform and apps also provide environmentally friendly and socially responsible services. For example, our Flash app offers tools to track carbon footprints, empowering customers to make sustainable choices.
The bank’s collaboration with various industry leaders, opinion leaders and global organizations drives innovation in addressing environmental and social challenges. One such key partnership was the launching of a unique and comprehensive digital business ecosystem, Commercial Bank LEAP Globallinker, together with IFC, taking our SMEs to the global stage by providing a platform where they can showcase their businesses to a global audience.
We also use technology to enhance internal operations, adopt energy-efficient technologies, digitize processes to reduce paper usage and promote sustainable supply chain practices.
How does the bank involve employees in its sustainability initiatives?
To better engage our employees in sustainability, we’ve launched the “Best Sustainability Branch and Department Award.” This initiative cultivates environmental responsibility across our business units, showcasing our dedication to sustainable development. The award recognizes excellence in Sustainable Performance, Innovations, Behaviours, and Projects, incentivizing various aspects of sustainability within the organization.
Under the Sustainable Projects category, employees are encouraged to undertake volunteer-based sustainability projects. This fosters active participation and enables direct contributions to our environmental goals through tangible projects.
To further support our commitment and streamline volunteer efforts, we’ve formed the “Future Force” volunteer group. This group coordinates and executes volunteer initiatives, ensuring our sustainability efforts are impactful and aligned with our objectives. Through these initiatives, we aim to embed sustainability into our corporate culture, empowering employees to be proactive environmental stewards.
How does your bank proactively adapt to evolving ESG regulations, and how do these changes impact your overall strategy and operations?
In the financial sector, climate risk has become a focal point, spurred by initiatives like the Network for Greening the Financial System (NGFS). Regulators are leaning towards mandating stress tests on bank portfolios to gauge vulnerability to climate scenarios, along with imposing stricter capital requirements for sectors with significant environmental impact.
Enhanced transparency is crucial as regulators aim to monitor and incentivize sustainable practices among banks. Forthcoming standardized reporting frameworks like the IFRS S1 and S2 will compel banks to disclose various ESG performance metrics, including emissions from loans and investments, board diversity, and anti-corruption measures.
Regulatory bodies are urging banks to develop financial products and services that bolster sustainability objectives. This might entail incentivizing green bond issuance or offering favourable terms for loans supporting renewable energy projects.
Although not immediately applicable to banks, the Corporate Sustainability Due Diligence Directive (CSDDD) in Europe signals a broader trend towards holding financial institutions accountable for their contributions to environmental and social sustainability.
Among key regulatory bodies, the International Sustainability Standards Board (ISSB) is pivotal in establishing global ESG disclosure standards, including the upcoming IFRS S1 and S2. Meanwhile, the Basel Committee on Banking Supervision (BCBS) is instrumental in crafting frameworks for assessing capital adequacy amid climate-related financial risks.
The national regulator, the Central Bank of Sri Lanka (CBSL), plays a vital role in tailoring international standards to fit their specific contexts. Initiatives like the Green Finance Road Map and Banking Act Directions No.5 of 2022 guide sustainable financing activities of licensed banks and green taxonomy.
Efforts are underway to harmonize ESG regulations globally, aiming for consistency and a level playing field for banks across jurisdictions. Regulations are expected to become more detailed and demanding over time, with potential penalties for non-compliance.
Proactive adaptation to evolving ESG regulations involves monitoring upcoming regulations, conducting gap analysis, developing ESG strategies, streamlining internal processes, investing in technology and processes, and fostering a culture of sustainability within the bank.
Adapting to evolving ESG regulations necessitates a comprehensive and proactive approach. By aligning strategies and operations with emerging standards, banks can ensure compliance while seizing opportunities to lead in sustainable finance, enhancing reputation, and attracting investors and clients aligned with ESG values.
What is your bank’s long-term vision for sustainability, and how does it contribute to broader societal and environmental goals? How do you ensure that sustainability remains a central focus as your organization evolves?
Our bank aspires to lead the change in sustainability, aiming to set a new standard in the financial sector by becoming a ‘Net Zero Bank.’ This goal showcases our firm dedication to climate action and reflects our overarching commitment to sustainable banking practices that benefit both the environment and society.
At the core of our long-term vision is the advancement of our SDG Impact Strategy. By bolstering our efforts aligned with the Sustainable Development Goals (SDGs), we strive to make significant strides towards fulfilling Sri Lanka’s 2030 targets outlined by the United Nations. This strategic approach enables us to tackle pressing global issues, including climate change and social inequality, through targeted financial solutions and strategic partnerships.
As pioneers in the realm of social enterprise, we are dedicated to crafting and delivering financial solutions that foster social entrepreneurship. This not only fosters economic resilience and sustainability but also empowers communities by integrating them into the broader economy.
Our leadership in sustainable financing is evident through our proactive adoption of the Central Bank of Sri Lanka’s Sustainable Financing Taxonomy. This initiative places us at the forefront of offering innovative financial solutions driven by environmental, social, and governance (ESG) criteria. The development of sustainable financial instruments underscores our commitment to catalyzing market transformation towards more responsible investment practices.
Crucially, a cornerstone of our vision is promoting financial inclusivity. By empowering women, differently-abled individuals, and marginalized communities, we expand access to financial services and cultivate a more inclusive economic landscape. This steadfast commitment ensures that sustainability remains central to our organizational evolution, guiding both our internal strategies and our contributions to broader societal and environmental objectives.