Category: Daily Financial Times

The recent flash floods in Uttarakhand, India where over 100 people went missing, are just one among thousands of climate-related disasters in recent years. For banks, the impact is direct washed-out assets, loan defaults, and rising credit risk. This is not tomorrow’s threat; climate risk is already reshaping financial stability today. In the end, banks become the ultimate receivers of climate shocks, bearing the financial fallout of environmental catastrophes. Banking risk management is entering a new era. Traditional frameworks built around credit, market, liquidity, and operational risk are no longer sufficient to address the growing complexities of a changing world.

Among the most disruptive forces is climate risk, which is rapidly emerging as a critical, system-wide challenge. I strongly believe despite increasing global awareness, many financial institutions have yet to fully grasp the gravity of climate risk and its potential to fundamentally reshape the financial landscape. The implications spanning credit risk, operational resilience, regulatory exposure, and reputational damage are often underestimated or overlooked. As climate related disruptions intensify, institutions that delay integration of climate risk into their governance and strategy may face systemic vulnerabilities, eroding stakeholder trust and losing access to global capital markets What makes it distinct is not just its severity or frequency, but its ability to reshape the entire risk landscape demanding a fundamental transformation in how banks assess, manage, and govern risk.

With my three decades of experience in banking and research across various subjects, including risk management, this article aims to provide an overview of how climate risk is poised to redefine banking risk management, potentially overtaking traditional risk areas in both significance and impact. To start with, as Mark Carney, then Governor of the Bank of England, famously said in 2015, ‘Climate risk is not just environmental it’s financial.’ This statement marked a turning point in how global financial institutions began to view climate change not merely as an environmental concern, but as a systemic risk to financial stability and long-term economic resilience.

Climate risk demonstrate in two main forms:

Physical risk: Damage caused by extreme weather events such as floods, droughts, cyclones, and rising sea levels.

Transition risk: Arising from regulatory, technological, and market changes as economies shift toward a low-carbon future.

For banks, these risks can severely impact:

Deterioration of asset quality

Due to physical damages (floods, droughts) or loss of value in carbon-intensive assets.

Creditworthiness of borrowers

Borrowers in vulnerable sectors (e.g., agriculture, fossil fuels, real estate) may face default due to policy or physical risks.

Operational continuity

Disruptions to branches, data centres, or supply chains due to extreme weather events.

Reputation and investor confidence

Increased scrutiny from regulators, investors, and the public; failure to act may erode trust and share value.

Constraints in finding new funding avenues and losing global listing opportunities: Institutional investors’ growing focus on the Principles for Responsible Investment (PRI) and Principles for Responsible Banking (PRB) means banks face increasing scrutiny over their climate risk management

Green bond pitfalls: Misreading the market and stalling capital flows

Negative impact on international trade operations: Climate risk disrupts international trade by damaging infrastructure and complicating compliance with evolving regulations, increasing risks for banks involved in trade finance.

Growing exposure to stranded assets and valuations

Long-term assets becoming unviable due to new climate regulations or market shifts.

Impact on financials: High impact to Expected Credit Loss (ECL), Impairment and Overlays. Adjustments in provisioning due to higher risk exposures, including scenario-based overlays. High probability to increase Probability of Default (PD)

Risk of losing Correspondent Banking Relationships (CBR-De-risking)

Global banks may terminate relationships with banks that fail to meet climate risk or ESG standards.

Regulatory and compliance pressure

Increasing demands from central banks, supervisors, and standard setters (e.g., ISSB, NGFS, TCFD).

Capital adequacy and risk weight adjustments

Capital buffers may be required for exposures to high-risk sectors under evolving prudential rules.

Rising insurance costs or reduced coverage

Physical risks make it harder and costlier to insure certain collateral or operational assets.

Litigation and legal risk

Legal action from shareholders, customers, NGOs or communities for financing environmentally harmful projects.

nMisalignment with ESG and sustainable finance markets

Difficulty accessing green bonds, sustainable finance facilities, or being included in ESG investment indices.

Increased cost of capital

Investors may demand a premium or avoid banks not aligned with climate goals

Financial institutions often face challenges in identifying viable climate mitigation and adaptation projects

This can result in delays in deploying green bond proceeds, leading to opportunity costs from idle funds.

Displacement or financial exclusion of MSMEs unprepared for climate transition

Small businesses lacking adaptive capacity may face exclusion from credit, higher risk of failure, and informalisation impacting financial inclusion and national economic resilience

Talent attraction and retention challenges

Younger workforce and stakeholders prefer working with and supporting climate-responsible institutions.

Traditional risk frameworks are not designed to handle this level of complexity. Climate risk is therefore poised to surpass traditional banking risks in significance. It is not merely an additional category, it is a risk amplifier that simultaneously magnifies credit, market, operational, and liquidity risks.

Climate risk is unique in critical ways:

1. It is systemic: It doesn’t just affect individual borrowers but entire sectors and geographies simultaneously

2. It spans multiple risk types simultaneously:

Climate risk impacts credit risk, market risk, operational risk, liquidity risk, and legal risk all at once, making it multifaceted and complex to manage.

3. It is forward-looking and uncertain: Unlike credit or market risk, climate risk doesn’t follow historical patterns.

4. It is deeply linked to reputation and stakeholder trust: Investors and the public increasingly scrutinise banks’ climate positions.

5. It is intensifying: With every delay in climate action, the risk compounds potentially creating sudden and nonlinear impacts

6. It can amplify social and economic inequalities:

Climate risk disproportionately affects vulnerable populations and businesses (e.g., MSMEs), potentially triggering broader socio-economic instability.

Key emerging changes in banking risk policy

Climate risk intergration in enterprise risk management ERM:

Financial institutes are adding climate risk as a core component across credit, market and operational risk frameworks.

Policy updates across risk lifecycle:

Credit underwriting, collateral valuation, and loan pricing now incorporate climate risk factors and ESG premium

Capital and stress testing:

Regulators require climate scenario stress tests to inform capital adequacy and resilience planning.

Loan pricing is adapting to ESG risk premiums, and CBSL should consider reflecting climate and sustainability factors in its policy rate decisions.

Portfolio-level climate risk analysis – Banks should conduct a comprehensive assessment of their asset books and categorise exposures according to the GHG Protocol to identify carbon-intensive assets and align with climate risk management standards.

Climate-linked lending and portfolio shift

Banks set targets to cut high-emission exposures and boost green financing, adjusting risk limits accordingly.

Skill upgrades for valuators:

Government and valuation bodies must enhance valuators’ expertise to accurately factor climate risks into asset valuations.

Collateral valuation models are to be enhanced to incorporate future climate scenarios, accounting for potential devaluation from physical and transition risks.

Rebalancing climate finance: Banks should focus on reducing the acceleration of mitigation finance growth to create more balance, while increasing equity and concessional finance for climate adaptation projects.

If we further analyse the importance, integrating climate risk into the CAMELS framework enhances traditional bank risk management by embedding environmental vulnerabilities into core supervisory metrics. Each component of CAMELS Capital Adequacy, Asset Quality, Management Quality, Earnings, Liquidity, and Sensitivity can be directly influenced by climate-related physical and transition risks. Capital Adequacy must now account for potential losses from climate-exposed loans and stress scenarios. Asset Quality is impacted by the declining value of assets tied to carbon-intensive sectors or those vulnerable to natural disasters. Management Quality reflects how well a bank integrates climate risk into governance, policies, and enterprise risk management (ERM). Earnings can be affected by increased costs from climate compliance or reduced profitability from high-risk portfolios, while climate-related disruptions may challenge Liquidity through sudden funding pressures. Lastly, Sensitivity includes volatility from climate policy shifts, carbon pricing, and investor sentiment toward ESG performance. Embedding climate risks into CAMELS ensures a more resilient and forward-looking banking sector aligned with sustainability goals.

Conclusion

Climate risk is not just an emerging issue, it is a transformational force. As regulatory expectations tighten and environmental realities escalate, banks must shift from reactive compliance to proactive adaptation. Climate risk may not replace traditional risks immediately, but it is already reshaping how credit, market, and operational risks are understood and managed. This demands a change in thinking: policies, skills, and decision-making must evolve. Banks that make climate awareness a core part of their business will be the ones that remain strong in a climate-challenged world. If we fail to act now, climate risk will grow beyond the banking sector and become a national economic issue.

(The writer, holding a PhD, MBA, FIB, FCPM, MCIM, PgBFA, Dip.SF, is a senior banking professional with over 30 years of leadership experience in local and international banks. His expertise spans Retail, MSME, Corporate Banking, Risk Management, and Sustainable Finance, with a strong advocacy for green finance. He served as Vice President of the Association of Banking Sector Risk Professionals, Sri Lanka, where he played a key role in leading industry initiatives. He can be contacted via: a.gishan@yahoo.com.)

Hayleys Fibre PLC yesterday said it has appointed Ajith Karunarathna to its Board as an Executive Director.

He served as CFO of the eco solution sector at Hayleys Fibre PLC overseeing financial reporting, taxation, IT and related functions.

With over 20 years of experience in finance, he possesses expertise in strategic financial management, operational oversight and corporate governance across a range of industries including healthcare, manufacturing, technology and retail.

Karunarathna holds a BSc in Accountancy and Financial Management with First Class Honours from the University of Sri Jayewardenepura. He is a Fellow of the Institute of Chartered Accountants of Sri Lanka, the Association of Chartered Certified Accountants (UK), and the Institute of Certified Management Accountants of Sri Lanka.

The Sri Lankan national swimming team delivered strong performances at the Junior World Swimming Championships held in Otopeni, Romania, during the end of summer, with several athletes achieving personal best times and showing steady progress on the international stage.

During the competition, the Ambassador of Sri Lanka to Romania Madurika Joseph Weninger met with the athletes and team officials, extending warm congratulations and offering words of encouragement. The Ambassador commended the swimmers for their dedication, discipline, and the positive manner in which they represented Sri Lanka.

Standout performances came from Julie Hope, Christina Perumal, M.F. Muhammad, Aasif Imran, and the men’s 4x100m freestyle relay team, all of whom recorded personal bests in their respective events. These results reflect encouraging development and growing competitiveness among South Asian nations.

The team was led by Dr. Ghefair Dulapandan, who expressed pride in the swimmers’ commitment and growth stating: ‘This group of young athletes continues to set new benchmarks for Sri Lankan swimming. Their dedication, both in and out of the pool, is truly commendable.’

The Ambassador Madurika Weninger conveyed best wishes to the team for their future competitions and encouraged the athletes to continue pursuing excellence and representing Sri Lanka with pride.

The Sri Lanka Hospitality Graduates’ Association (SLHGA), the largest body of professional hoteliers, marked a historic milestone with the appointment of its first-ever woman President Dr. Gitanjali Chakravarthy, a trailblazer who has been shaping Sri Lankan hospitality for decades.

From her beginnings as a Senior Lecturer at the Sri Lanka Institute of Tourism and Hotel Management to leading world-class properties such as Hilton Yala Resort and Uga Ulagalla, Dr. Chakravarthy has seamlessly combined academic rigor, operational excellence, and visionary leadership.

Her global experience with COMO Hotels and Resorts, together with her expertise in procurement and performance management, has set new benchmarks in the industry. Her outstanding contributions have been recognised with numerous accolades, including being named a Global Woman Leader at the World Women Leadership Congress, receiving the Global CEO Top Business Women Award, and being listed among Sri Lanka’s Top 50 Career Women. Properties under her leadership have also earned prestigious honours such as the Connie Award, Tripadvisor Traveler’s Choice Award, and multiple World Luxury Hotel Awards.

Today, as the first woman to lead SLHGA, Dr. Chakravarthy not only breaks barriers but also serves as an inspiration to countless women in Sri Lanka and across the region. Guided by her leadership philosophy-anchored in trust, collaboration, and empowerment-she continues to influence the future of hospitality and nurture the next generation of leaders.

The Overseas School of Colombo (OSC) has once again achieved international acclaim, winning Gold at the prestigious International ARC Awards in New York for its 2023/24 Annual Report, Timeless Dedication: Celebrating the Faces Behind Our Progress.

‘This triumph is not just about an award, but a reflection of OSC’s philosophy, of who we are: a community rooted in trust and openness, where every individual is part of the story, striving for excellence in all we do, and carrying the Gecko spirit from Colombo to the world stage with pride,’ OSC’s Head of School Nel Capadona, captured the essence of the Gecko ethos: a spirit embodied daily by every teacher, student, staff member, and parent who shapes OSC’s enduring legacy.

This marks back-to-back Gold victories (2024/2025), following a Silver in 2022, making OSC the only IB World School globally – and the only Sri Lankan educational institution ever – to triumph at the ARCs.

Often hailed as the ‘Oscars of Annual Reports,’ the ARC Awards are now in their 39th year, recognising the highest standards in corporate communication and transparency. Past and present winners include global icons such as PepsiCo, McDonald’s, IBM, Coca-Cola, Nike, Boeing, PETRONAS, Walmart, Harley-Davidson, BMW, and Volkswagen.

Yet for OSC, this victory represents more than a prestigious trophy. Timeless Dedication is a tribute to the very heart and soul of the school; the teachers who inspire, the staff who uphold, the students who strive, and the community that binds it all together.

OSC Director of Marketing and Communications Jehan de Silva said: ‘As the saying goes, it takes a village to raise a child – and at OSC, it is about celebrating the extraordinary people who bring professionalism, creativity, and heart to our community year after year. The theme of last year’s report was about valuing everyone; academic, administrative, service, and beyond. This victory is not about the accolade itself, but about honouring the true faces behind OSC’s remarkable journey.’

The Royal Melbourne Institute of Technology (RMIT) is in high-level talks to establish an innovation hub in Sri Lanka that will connect universities, industry, and Government institutions with international research expertise, the President’s Media Division (PMD) said.

At a meeting held at the Presidential Secretariat on Tuesday, RMIT officials and senior representatives of the Secretariat discussed the initiative, which is being coordinated through the National Initiative for Research and Development Commercialisation (NIRDC).

According to the PMD, the proposed RMIT Sri Lanka Innovation Hub will strengthen joint doctoral programs, align research with national priorities, and expand opportunities for commercialising innovation.

The hub is also expected to provide training and global access for local researchers, students, and professionals, while creating avenues for new funding and investment into Sri Lanka’s R and D sector.

Participants at the discussion included Senior Additional Secretary to the President Russell Aponso, RMIT Deputy Vice-Chancellor (Research and Innovation) Prof. Calum Drummond, STEM College Deputy Vice-Chancellor (Research and Innovation) Prof. Sujeewa Sethunga, NIRDC Director General Dr. Muditha D. Senarath Yapa, and other officials.

England Captain Harry Kane continued his incredible goalscoring run with two goals as Bayern Munich crushed Pafos in the Champions League.

Kane, 32, has now scored 102 goals in 105 games for the German giants following his £ 86.4 million move from Tottenham in August 2023.

He has 17 goals in nine club matches in 2025-26, including 11 in his past five appearances, as well as one goal for England in their 5-0 thrashing of Serbia this month.

Bayern, two points clear at the top of the Bundesliga, have now won all nine of their matches this season, scoring 35 goals in the

process, and have two victories from two in the Champions League.

The Informatics Institute of Technology (IIT) proudly welcomes our newest cohort to the Business Degree programmes. This is the start of an exciting journey where you’ll gain practical knowledge, discover your passions, and build a strong professional network.

At IIT, we’re dedicated to empowering the next generation of business leaders through an environment that inspires innovation, growth, and success. We can’t wait to support you as you embark on this journey and make your mark in the world of business.

The Informatics Institute of Technology (IIT), Sri Lanka’s leading private higher education provider with over 35 years of excellence, offers Foundation, Bachelor’s, and Master’s degree programmes in collaboration with two prestigious UK universities – the University of Westminster and Robert Gordon University.

The Colombo Stock Exchange (CSE) Annual Report 2024, themed ‘Redefining Horizons’, has achieved global recognition by taking home the Gold Award amongst five other awards under the Financials – Capital Markets category, at the League of American Communications Professionals LLC (LACP) 2024 Vision Awards.

The CSE had the distinction of holding the award back-to-back having also won the Gold Award for its annual report in 2023.

The report’s compelling design, in-depth content, and innovative presentation earned its five 2024 vision awards including the Gold Award, the Technical Achievement Award, ranked as the Top Ranked Sri Lankan Report, and ranked amongst the Top 100 Reports in the Asia-Pacific Region and Top 100 Reports Worldwide.

The LACP Vision Awards, widely regarded as one of the most prominent platforms for recognising annual reports worldwide, received submissions from leading organisations across the globe.

The Annual Report 2024 captures the CSE’s strategies, achievements, and vision, illustrating its pivotal role in navigating market dynamics while integrating technological advancements and inspiring trust in stakeholders. The recognition reaffirms the CSE’s position as a leading force in Sri Lanka’s financial sector and a benchmark for reporting standards in the region.

CSE Senior Vice President Finance and Admin Kusal Nissanka said that this year’s theme Redefining Horizons reflects the CSE’s support for a year of transition towards a green Sri Lankan economy in line with its vision to create sustainable wealth and value.

The year 2024 saw the CSE initiate Green Bond trading, an innovative financial instrument to raise capital for environmental benefits, and initiate frameworks for Sustainable Bonds including the unique Blue Bonds, tied to protection of Sri Lanka’s diverse marine life.

With a Sri Lankan capital market primed with attractively competitive Price-Earnings ratio in a strengthened economy the CSE continues to innovate in the Sri Lankan capital market. These successive back-to-back awards demonstrate the organisation’s professionalism and dedication to create a transparent and productive capital market inspiring confidence abroad and domestically.

Sri Lanka Tourism showcased ‘Destination Sri Lanka’ at the International and French Travel Market (IFTM) Top Resa 2025, held at Porte de Versailles in Paris from 23 to 25 September 2025. The spacious, well-designed Sri Lanka Pavilion, organised by Sri Lanka Tourism, was a key attraction at the fair, presenting the many facets of Sri Lanka along with Ceylon tea and traditional Sri Lankan dance and music.

Thirty (30) Sri Lankan travel and tourism companies took part in this year’s IFTM, including leaders in the French market such as Aitken Spence Travels, Jetwing Travels, Connaissance de Ceylan, Oak Ray Holdings, Thema Collection, Walkers Tours Ltd., and LSR Travels, among others. Several new companies, including Orinway Leisure Ltd., also joined the French travel fair for the first time.

The Sri Lanka Pavilion was formally inaugurated by the Ambassador of Sri Lanka to France and Permanent Delegate to UNESCO, Manisha Gunasekera, who graced the occasion as Chief Guest, together with Sri Lanka Tourism Promotion Bureau Director (Marketing) Dushan Wickramasuriya. Also present were Sri Lankan Airlines Regional Manager for Europe and the Americas, Chinthaka Weerasinghe, industry leaders, and representatives including senior members of the Sri Lanka Association of Inbound Tour Operators and the Association of Small and Medium Enterprises. The ceremony was followed by the serving of Sri Lankan delicacies and Ceylon tea.

In her remarks, the Ambassador underlined the pivotal role of the travel and tourism industry in driving Sri Lanka’s economic growth and development. She commended the Sri Lanka Tourism Promotion Bureau for showcasing the country at IFTM with a state-of-the-art pavilion, and congratulated industry leaders for their enduring commitment to promoting Destination Sri Lanka in France.

Sri Lanka Tourism Director (Promotion) warmly welcomed the French travel industry to the Pavilion, emphasising the resilience, dynamism, and upward trajectory of Sri Lanka’s tourism sector and its strong potential. He also referred to several major promotional campaigns in the pipeline aimed at further consolidating France as a top target market for Sri Lanka.

On 23 September, the Embassy of Sri Lanka hosted a networking dinner reception at its premises for Sri Lankan travel and tourism representatives. Distinguished French participants at the reception included MEDEF President of the Sri Lanka-France Business Council Eric Le Corre, and Guayapi Lanka Founder Claudie Ravel.

France is Sri Lanka’s sixth largest source market and the second largest within the European Union. From January to August 2025, 83,011 French tourists visited Sri Lanka, reflecting a 23.3% increase compared with the same period last year. This positive trend is expected to continue.

IFTM Top Resa is the foremost and most prestigious travel and tourism exposition in France, showcasing over 170 destinations and bringing together nearly 30,000 industry professionals from the travel and leisure sector annually in Paris. Sri Lanka’s participation in IFTM 2025 was facilitated by the Sri Lanka Tourism Promotion Bureau in partnership with the Embassy of Sri Lanka in France. The Embassy Commercial Secretary Prasadi Boomawalage, and Sri Lanka Tourism Promotion Bureau Assistant Director, Viranga Bandara were also associated with the event.