Sri Lanka’s First-Ever Green Bonds from DFCC Bank Oversubscribed on Opening Day

DFCC Bank has made history again by successfully concluding Sri Lanka’s first-ever Green Bond issuance, which was heavily oversubscribed on its opening day, 12th September 2024. This is a significant milestone for the country’s financial sector, underscoring DFCC Bank’s unwavering commitment to sustainability. The Issue represents a substantial boost for the nation’s solar energy sector, as the proceeds are earmarked exclusively for renewable (solar) energy projects that generate significant environmental benefits. DFCC Bank’s Green Bonds will soon be listed on the Colombo Stock Exchange (CSE) and traded publicly.

Expressing his appreciation to investors, Thimal Perera – Director/CEO of DFCC Bank, said, “The overwhelmingly positive response to our Green Bond issue is a powerful validation of the confidence that investors have in DFCC Bank’s sustainability strategy and our vision for green finance. Being heavily oversubscribed on the opening day, we have set a new benchmark for the Sri Lankan financial sector and taken a decisive step in fostering the growth of renewable energy in the country. This achievement reaffirms our vision of a greener future and our commitment to driving sustainable economic growth. We take this opportunity to thank our investors and all those who supported us in this achievement.”

The bonds are classed as Type A, with a tenure of 03 years and a fixed interest rate of 12.00% per annum, with annual interest payouts and a bullet capital repayment at the end of the bond’s tenure. The Green Bond Issue also aligns with DFCC Bank’s Green Bond Framework, developed in collaboration with the Asian Development Bank (ADB), adhering to the International Capital Markets Association (ICMA) Green Bond Principles. Accordingly, the Issue raised the full LKR 2.5 billion it sought through an initial issue of LKR 2 billion and an option to raise an additional LKR 500 million if oversubscribed. The offer price per bond was LKR 100/-, and the minimum subscription requirement was set at 100 bonds or LKR 10,000/- or multiples thereof.

DFCC Bank’s Green Bond Issue received substantial interest from investors, with Ceylinco Life Insurance Limited acting as the anchor investor. Acuity Partners Private Limited and Capital Alliance Partners Limited, key players in Sri Lanka’s capital markets, played crucial roles as joint managers and financial advisors, sharing their expertise and experience in the corporate debt market. Meanwhile, the Trustee to the Issue was People’s Bank, while SSP Corporate Services Private Limited served as Registrar to the Issue, alongside KPMG as the Independent External Reviewer and Nithya Partners as the Lawyers to the Issue. Additionally, the bonds have received, from Fitch Ratings (Lanka) Limited, an Instrument Rating of A- (lka), further backed by DFCC Bank’s Issuer Rating of A- (lka)/Stable.

Being the first of their kind in Sri Lanka, the Colombo Stock Exchange has specially facilitated the trading of these Green Bonds. These bonds are classified as “innovative financial instruments where the proceeds are invested exclusively in green projects that generate climate or other environmental benefits, for example, in renewable energy, energy efficiency, sustainable waste management, sustainable land use (forestry and agriculture), biodiversity, clean transportation and clean water.” This unique feature of the bonds aligns with DFCC Bank’s commitment to sustainability. Meanwhile, the bonds will be traded and settled in a manner identical to conventional bonds to ensure consistency and convenience for investors.

DFCC Bank has long been at the forefront of sustainability in Sri Lanka. It was the first local Bank to implement a formal sustainability strategy encompassing key areas such as renewable energy, education, and entrepreneurship. Since the 1990s, the Bank has been instrumental in financing renewable energy projects and establishing policy frameworks supporting the sector today. This Green Bond issuance thus represents a continuation of that legacy, reinforcing DFCC Bank’s leadership in green finance.