#1SDCSL Sustainable Development Council of Sri L BOI UN SDG Impact SRI LANKA DIP Sri Lanka SDG Investor Map //////////// Investment Opportunities to Further the SDGs#2Background Sri Lanka SDG Investor Map launched in August 2022 in partnership with the Sustainable Development Council of Sri Lanka and the Board of Investment. Knowledge partner - Ceylon Chamber of Commerce. The Map lays out investable opportunities in sectors that enable the SDGs and have potential to create deep development impact + commercial returns to investors. The process follows a standardized 8-step methodology used in 24 countries with 20 more countries in the pipeline The Sri Lanka Map has identified 15 Investment Opportunity Areas (IOAS) across 5 key sectors: Healthcare Renewable Energy Food and Beverages Consumer Goods Infrastructure UN DP#3SDG Lens Focus of Analysis through 3 Lenses National priorities Purpose & impact driven investments Private Sector Interest UN DP#4Themes driving Sri Lanka's Economic Revival Key Themes for Consideration FOCUS ON ENERGY SECURITY Sri Lanka has a policy target of achieving 70% renewable energy by 2030. The foreign exchange shortage has highlighted the dependence of the country on imported fossil fuels and the need to accelerate investment into renewable energy either through solar, wind and indigenous sources like bio-fuels. INCLUSIVITY AND FOCUS ON COMMUNITIES While the focus is on the macro picture, it is also important to focus on the micro-economy and the role it can play in driving the economy. It is important to understand focus areas and investments that can help communities and regions in the country to find new jobs, increase household income, reduce dependency on imports while reducing wastage as much as possible. Focus on jobs and income creation for women in both an urban and rural context is also important. FOCUS ON FOOD SECURITY UNICEF's April 2022 national survey showed that 70% of households have reduced their food consumption. Agriculture is a sector which accounts for 7.3% of GDP, comprising 21.8% of Goods Exports and employing 27% of the Labor Force. ROLE OF EXPORTS IN DRIVING ECONOMIC RECOVERY Despite multiple crises, Sri Lanka's merchandise exports have been resilient in the last 18-24 months with a 14% growth in the first half of 2022 compared to the same period in 2021. To ensure this growth momentum sustains, Sri Lanka will need to look at diversifying its export basket while looking at enablers that can catalyse export growth. FOCUS ON HEALTHCARE Sri Lanka has primarily a state-funded healthcare system and achieved great progress on many indicators relative to the South Asian region. However, the country is seeing an increase in the rate of Non-Communicable Diseases and with 51% of the total health spending financed out of pocket, investment in healthcare will be required both from a human capacity perspective and learning from the pandemic, improving on the manufacturing aspect. ALIGNMENT TO THE GREEN TAXONOMY The Central Bank of Sri Lanka in May 2022 launched the Sri Lanka Green Finance Taxonomy following the Roadmap for Sustainable Finance launched in 2019.#5Renewable Energy 1. Grid-connected solar power generation 2. Grid-connected wind power generation 3. Sustainable Fuelwood Plantation (SFP) for solid biofuel production 4. Biomass terminals/depots for solid biomass fuel (Biofuel) production, primarily based on Sustainable Fuelwood Plantations (SFPs). 5. Deployment of Solid Biofuel fired Improved Cook Stoves (ICSS) in the Domestic Sector. 6. Deployment of Improved Biomass Energy Technologies for Thermal Energy Applications in MSMEs and Institutions. AFFORDABLE AND CLEAN ENERGY LIFE 15 ON LAND 12 RESPONSIBLE CONSUMPTION AND PRODUCTION Healthcare 1. Manufacturing of Pharmaceuticals 2. Healthcare professional training academy Sri Lanka SDG Investor Map Infrastructure 1. Material Recovery Facilities for Recyclable Solid Waste 2. Deploying Biogas digesters for Local Authorities (LAS), institutions/commercial sector and households with end-use energy applications. 5 sectors 8 sub-sectors U 15 15 IOAS Consumer Goods 1. 11 SUSTAINABLE CITIES AND COMMUNITIES RESPONSIBLE 12 CONSUMPTION AND PRODUCTION Food & Beverage 1. Input side digital platforms to serve farmers 2. Development of smart information systems to improve knowledge and accessibility for laboratories 3. Cold Chain Storage for Agriculture 4. Development of sustainable commercial- scale aquaculture 2 ZERO HUNGER SSS Development of Fabric and textile manufacturing 12 RESPONSIBLE CONSUMPTION AND PRODUCTION Со GOOD HEALTH AND WELL-BEING W 9 INDUSTRY INNOVATION ANDINFRASTRUCTURE#6IOAs are underpinned by 20 actionable data points spanning business and impact considerations (Sub)sector and Location Sector Sector, subsector and priority region Subsector and Industry Target Locations Pipeline Opportunity Business model and case studies Business Model Case Studies Business Case Business metrics and market risks Market Size and Environment Indicative Return Investment Timeframe Ticket Size Market Risks and Scale Obstacles Impact Case Impact metrics, risks and impact classification Sustainable Development Need Expected Development Outcome SDGs and SDG Indicators Stakeholders Impacted Outcome and Impact Risks Enabling Env. Policy, regulatory and Policy Environment Regulatory Environment Financial Environment Active Actors financial factors and actors IMP Impact Classification UN DP#7Sample investment opportunity area Grid-connected solar power generation 11 Business Model: Invest in or provide project financing for large-scale ground-mounted and floating Solar PV power generation and supply the generated capacity to the national grid for both, residential and industrial/commercial consumption. Renewable Energy & Alternative Resources Solar Technology and Project Developers 7 AFFORDABLE AND CLEAN ENERGY 12 RESPONSIBLE CONSUMPTION AND PRODUCTION 9 AND INFRASTRUCTURE INDUSTRY, INNOVATION 11 AND COMMUNITIES SUSTAINABLE CITIES 13 CLIMATE ACTION DEVELOPMENT NEED • The dependence on imported fossil fuels is a critical challenge and has adverse impacts on energy security • Yet, there is a huge renewable energy (RE) resource potential, estimated as 133 GW. • ☑ EXPECTED DEVELOPMENT OUTCOMES Large scale deployment of solar energy will replace imported fossil fuels. • An effective way for the required transition towards a carbon zero economy, by 2050 and ensure sustainable development. • STAKEHOLDERS IMPACTED © Corporates: Industrial or commercial use of solar rooftop based electricity will enable corporates to reduce their electricity expenditure in the long-run. Exporters will benefit in meeting supply chain standards. • Small businesses that are part of the energy value chain and other businesses/households with round the clock need for electricity IMPACT MANAGEMENT PROJECT IMP CLASSIFICATION C: Contribute to Solutions given solar-based electricity generation will serve household, commercial, industrial, e-mobility needs and increase the proportion of RE in the total energy mix. 0·00 ECONOMIC CONSIDERATIONS • Out of the RE capacity of 8,560 MW, estimated to be achieved by 2030, Solar PV capacity of 4,600 MW is expected through rooftop, floating and ground-mounted systems. • • Projects related to solar can lead to IRR and ROI of between 15-20%. ENABLING FACTORS Sri Lanka Green Finance Taxonomy by CBSL in May 2022 is expected to enable financial market participants to raise low-cost funding for green activities through both domestic and foreign markets INVESTMENT TIMEFRAME Government has calculated a 6-year payback period. The short span of time firms have taken to be successful is testimony to this. Source: Sri Lanka SDG Investor Map, 2022, UNDP. RISK FACTORS Although locations have been identified, environmental approvals will have to be obtained by individual developers. For solar projects over 10MW it will be carried out through competitive bidding ⚫ If targets are not achieved there will be more dependence on fossil fuel which could result in higher consumer tariffs.#8SDG Investor Map Sector Deep Dives#9High-level, cross-cutting insights from Sri Lanka • Policy intervention to facilitate private sector participation Offer a conducive environment for investors by simplifying procedural or regulatory norms • Set-up one consolidated entity for simplifying regulations and procedures both investors and businesses through a single window. Establish a standardised regulatory framework and resolve prevailing tariff issues in sectors like Renewable Energy (RE) to attract investors. Building a foundation for a self-sustainable future • To achieve self-sustainability by 2050, Sri Lanka needs to adopt a more accelerated and aggressive implementation process in sectors like RE and F&B. • Sectors like, consumer apparel, have set key precedents from an economic and inclusion perspective by supporting employment generation and harnessing the talent of the country's rural areas. Foreign currency financing UN DIP Prevailing currency devaluation has resulted in high energy prices in Sri Lanka, and impacted investments across sectors. However, these issues are likely to be resolved in future, normalizing the energy pricing in Sri Lanka at par with international standards. • To attain competitive tariffs, Rupee tariffs may not be sufficient alone, and procuring dollar funding should be given more emphasis. • Forging meaningful partnerships Ecosystem strengthening through intelligent fund deployments [philanthropic + commercial] will necessarily require different parties to come together with clear roles, responsibilities, and commitments.#10High-level, cross-cutting insights from Sri Lanka • Traditional funding in Sri Lanka Banks face the following challenges in issuing working capital loans for funding local companies: ⚫ incapability of locking-in equity after the initial working capital was fully utilized. ⚫ for investment opportunities such as biofuels, significant demand arising from the electricity crisis caused farmers to raise prices for biomass raw materials, which adversely impacted the powerplants. ⚫ costs associated with transport of raw materials from other provinces to manufacturing units, drive up the costs. Green financing opportunities • The country rating will invariably be a restriction for green bonds. However, development organizations like DFCs can support by offering credit guarantees. UN DP Role of philanthropic capital It is important to utilize the incoming aid and commitments of philanthropic capital to create a segue for private sector investments in the medium to long term. ⚫ Philanthropic capital maybe required for supporting SMEs' survival in the short term. • Such capital should be structured to make such businesses competitive in the medium to long term at which point more commercial deployments can take over.#11- Example: Renewable Energy – Grid connected solar and wind power Financing model • Encourage buyer-side momentum by offering concessional financing to install solar rooftops or electricity cost rebates for transferring back electricity to the grid. • Blended financing is viable for Solar PV plants under IPP or PPP schemes. Ecosystem development • Inadequacy of documents, lack of transparency and arduous laws restrict large scale solar development investments. • Solar rooftop developers can lower their costs by employing locally available raw materials and value additions. • Developers can convert the current Net Plus systems into Net Metering systems to utilize the existing infrastructure. Investor activation • The cabinet is proposing to pass a bill which would encourage commercial banks to lend at nominal interest rates and enable improved cash flows for developers. UN DP Policy reform / advocacy • Recent budget proposals on land aim to resolve land issues which restrict growth of RE and sustainable energy sector. •GOSL has issued various policies on RE with anticipated 70% power generation from RE by 2030. • Improving production facility of solar panels, electric vehicles, and assembly of these vehicles are key focus areas.#12Financing Models for identified Investment Opportunity Areas UN DP#13Biomass Funding sources include Venture Capitalists (VCS), Private Equity (PEs), and Development Finance Institutions (DFI). • Catalytic and philanthropic funding is also a viable alternative to supplement traditional banking facilities. Food and Beverages Application of innovative financial instruments or funding structures needs improvement, and minimum support infrastructure is required for their development. Innovative financing instruments such as impact-linked bonds, sustainable finance bonds, women livelihood bonds, guarantee funding facilities and catalytic instruments can be used for start-ups and agri-led entities. Consumer Goods Commercial Banks promote sustainability in financing through various programs which have a special focus on SMEs, MSMEs and women banking. • To define the 'Green' concept, SME banks not only consider profits, but also the impact on environment and the society (triple bottom line concept profit, people, and the planet). - • Capacity building for SMEs to monitor, report and track social impact and SDG linkages, while also linking the financing made available for them, would help them unlock more opportunities for SMEs. Infrastructure • Investor appetite is not geared towards MSMEs, who are the primary players in the waste management industry. Hence, the solution is to opt for a microfinancing structure. • Prevailing funding issues in this industry stress on the importance of a blended finance fund. Healthcare • Investable and scalable models, including those based on concessionary financing, should be explored in the healthcare sector. • Dedicated special economic zones must be established to provide infrastructure and financing support to manufacturers.#14How to leverage the insights from the SDG Investor Maps UN DP#15Identify Investment Opportunities Identify specific sectors and regions with the greatest potential for sustainable investments. Areas where substantial private sector financing is required for SDGs and insights on where banks can direct their investments for maximum impact. Risk Assessment • The Map can help bankers assess environmental, social, and governance (ESG) risks associated with potential investments. • It provides information on the sustainability challenges and opportunities in various sectors, enabling bankers to make more informed decisions that consider long-term sustainability factors. Client Engagement • The SDG Investor Map can be used to engage with clients and investors interested in aligning their portfolios with SDGs. • A tool to educate clients about the benefits of sustainable investments and help them make choices that align with their values and long-term financial objectives. Product Development: Financial products and services tailored to the needs of clients who want to invest in SDG-aligned projects can be developed. These products can include green bonds, sustainable investment funds, and impact investment portfolios, which can attract a growing segment of socially and environmentally conscious investors. Partnerships and Collaborations Identify potential partners among businesses, governments, and NGOs actively working to achieve SDGs. • Collaborative efforts can lead to innovative financing models and projects with more significant sustainable development impact.#16We have developed resources to share Sri Lanka SDG Investor Map findings: UN DP The full map is available on the Global SDG Investor Platform = DP SDG Investor Platform By SDG Impact GLOBAL INVESTMENT FOR SUSTAINABLE DEVELOPMENT in partnership with CISD Alliance Filters Showing 8 Investment Opportunity Areas Q Find an opp Region Sub-Saharan Africa Distance learning Institutional education finance Low- to mid-fee private schooling Country Select Country: SCALE UP INVE Pipeline of inves opportunities Sector EDUCATION EDUCATION EDUCATION South Africa South Africa. Education Subsector Select Subsector SDGs Addressed Select SDGs Addressed Indicative Return Select Indicative Return EXPECTED IMPACT Improve accessibility, quality and educational outcomes of distance learning. INDICATIVE RETURN < 5% TIMEFRAME Medium Term ESTIMATED MARKET 33-40% of total higher education enrolments in distance education (8) EXPECTED IMPACT Improve quality and accessibility to education. INDICATIVE RETURN 5%-10% TIMEFRAME Short Term ESTIMATED MARKET 1,922 registered private schools and 402 private tertiary institutions in South Africa (12) South Africa EXPECTED IMPACT Enable access to more affordable private school options and help address education access and quality needs INDICATIVE RETURN 20%-25% TIMEFRAME Short Term ESTIMATED MARKET 538,000 students are enrolled in private schools BOL SRI LANKA S What is an SD OBOI O SRI LANKA ST What' How Brochure SDG Investor Map Development Process ON 05 08 15 10AS mapped to priority sectors Renewable Energy Food and Beverages NA Infrastructure Opportunity Areas Healthcare 15 de and med noms have b Consumer Goods We have dentified 38 white spaces that seed policy inter regulatory reem to cerage better private sectors and better vipation wwww https://investormap.sdg.lk/ https://www.undp.org/srilanka/publications/report- key-findings-sri-lanka-sdg-investor-map-sector-deep- dives#17UNDP's ecosystem approach to attract private sector capital in Sri Lanka Supply side convenings • Thematic enterprise support programs Deal preparedness • Investment match-making • Investor convenings Networking opportunities through ecosystem builders such as LIIN, AVPN Mobilizing catalytic funding to de-risk investments Pipeline development Converting white spaces into policy briefs • Policy dialogues Policy strengthening Impact Education IMM Public assets ⚫IMM Advisory • IMM institutionalization within public systems Strong gender and maginalization lens Partnership and collaboration for effectiveness and speed Integrated Impact Measurement and Management approach to embed sustainability UN DP#18THANK YOU! Contacts: Dulani Sirisena [email protected] Devahuti Choudhury [email protected] ZERO HUNGER 555 3 GOOD HEALTH AND WELL-BEING SDCSL Sustainable Development Council of Sri Lanka 7 AFFORDABLE AND CLEAN ENERGY BOI UN SDG Impact SRI LANKA DP Sri Lanka SDG Investor Map INDUSTRY, INNOVATION 9 AND INFRASTRUCTURE 11 SUSTAINABLE CITIES AND COMMUNITIES 12 AND PRODUCTION CONSUMPTION RESPONSIBLE GO