39811 - DCM CBC DPR Green

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Summary of Investment Information

Project Number

39811

Company Name

COMMERCIAL BANK OF CEYLON PLC

Date SPI Disclosed

May 22, 2017

Country

Sri Lanka

Region

South Asia

Projected Board Date

Jun 30, 2017

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Nov 30, 2023

Department

CFGS5 - Global Industry, Financial Markets/FIG Operations - CSA

Industry

Financial Markets

Previous Events

Approved : Jun 22, 2017
Signed : Jun 23, 2017
Invested : Sep 6, 2017

Sector

Commercial Banking - General

Project Description

The project comprises of a senior senior loan of US$100 million secured by future foreign currency flows to Commercial Bank of Ceylon PLC (‘CBC’, the Bank), the largest private commercial bank in Sri Lanka and an existing IFC client. The funds will be utilized by the Bank to fund the growth in its green lending portfolio. The financing provided is a fit with the World Bank and IFC strategy of promoting sustainable growth and sustainable energy usage in Sri Lanka.

CBC was established in 1969 and is one of five systematically important banks in Sri Lanka. IFC first engaged with CBC in 2003 with an equity investment, followed by a trade line in 2008, risk share facility in 2009, senior loan back by a future foreign currency flows in 2012 and a sub debt in 2013.

Associated Advisory Engagement

IFC will be assisting CBC to develop the Bank’s green lending strategy and provide capacity building to CBC to implement the strategy. The capacity building will include amongst others; training, pipeline development, monitoring and impact measurement.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	100.0
Equity

Development Impact

1) Promoting Sustainability and GHG Reduction: The facility will allow CBC to provide funding at competitive rates for Green projects. This will help improve environmental as well as financial sustainability of CBC's clients, especially given the GHG emissions and high energy costs in Sri Lanka. 2) Expanding access to finance for energy efficiency: Through this project, IFC will provide funding to invest in energy efficiency projects to c. 5,000 SMEs. This will also be a demonstration effect in the SME energy efficiency finance space. This will also contribute towards GHG reduction via energy efficiency projects and use of cleaner energy sources. Where required, this will be supported with advisory. 3) Job creation and poverty reduction: Based on the IFC Jobs study, Sri Lanka (2012), every $100,000 of lending is estimated to have created 10-31 new jobs. Accordingly, c. 7,500-23,250 new direct jobs will be created by this investment. In addition, there will be indirect job creation, which cannot be directly quantified.

1) Develop Green-finance: The proposed project builds on IFC's partnership with CBC and involves advisory support to help CBC lend to Green-finance projects, a segment currently underserved by banks. Other banks are expected to also develop Green lending, thus creating a new market. 2) Longer-Tenor Funding: There is a clear role for IFC in providing a large amount of longer-tenor funding, not readily available from local or global investors at this time due to economic and political uncertainty and global market conditions. 3) E&S Standard Setting: CBC is in the process of further strengthening its E&S risk management capacity. IFC is uniquely placed to help CBC develop E&S and Green lending capacity, which will support sustainable economic development in line with the vision of the President of Sri Lanka.

E&S Category Rationale / Risks and Mitigation

IFC funds will be used for onlending to eligible entities/projects meeting the IFC climate finance definition. Therefore, the end use of funds could be in one or more of these sectors, i) non-conventional/ renewable energy (solar energy including rooftop photovoltaic, wind energy, small-medium hydropower, biomass, energy storage, transmission systems etc.); ii) energy efficiency improvements and low carbon generation (in commercial/industrial/residential buildings /projects, green buildings etc.); iii) carbon smart agriculture, afforestation, biofuels; iv) water/wastewater treatment, waste to energy projects; and v) general GHG reduction initiatives including in transport and vehicle segment. This further includes potential financing to manufacturers and suppliers of equipment for above mentioned projects. Most of these investments will be site specific and will have limited environmental and social risks or impacts with low probability of projects/investments having major adverse impacts. These E&S risks and impacts can primarily be identified and managed through adequate due-diligence, implementation of mitigation measures and monitoring. The current pipeline of the client comprises small hydro, wind and solar projects. Therefore, the overall E&S risk of the IFC investment is considered medium and the project is categorized as FI-2. The applicable E&s requirements include, IFC Exclusion List, National E&S laws and regulations, and IFC Performance Standards.

The key E&S risks and impacts derive from the bank's capacity to manage the potential environmental and social risks associated with its operations. The typical risks and impacts in SME segment are limited and site specific (e.g. related to occupational health & safety, emergency response, waste-water discharge, air emissions, labour, etc.). The bank is an existing IFC client and thus the bank has appointed an E&S specialist and is implementing an adequate E&S risk management system (ESMS) including an external communications mechanism. The existing ESMS will continue to be implemented for this project as well. The bank has adequate HR policies in line with IFC Performance Standard - 2 requirements for its operations in Sri Lanka and is in the process of upgrading its HR policies for Bangladesh. The bank will ensure that the upgrades are in line with IFC Performance Standard -2 requirements.

Task Title & Description	Status	Comments	Completion Date
Formalize procedures	Completed	Completed document with IFC	06/30/2017
Staff Training	Completed	Training stats submitted	06/30/2017
Other1 ECM	Completed	ECM operationalised	06/30/2017

Contacts

For Inquiries About the Project, Contact

Commercial Bank of Ceylon PLC
Mr Nandika Buddhipala
Chief Financial Officer
+94112430420
Nandika_Buddhipala@combank.net
21,Sir Razik Fareed Mawatha, Colombo 1, Sri Lanka
http://www.combank.net/newweb/en/

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