Major sustainable finance initiative
Sri Lanka’s financial sector is steadily moving toward instruments that meet both economic and developmental goals, especially as the country deepens its focus on environmental stewardship and inclusive growth. The Bank of Ceylon (BOC) is opening the largest ever Sustainability Bond issue on 22nd December 2025, intended to expand lending to projects that deliver measurable environmental and social impact while strengthening its capital position.
Given the significance of the issue and its alignment with the growing market for sustainable finance, this Q&A provides a clear breakdown of the mechanics, purposes and processes behind BOC’s latest initiative.
1. What is BOC planning to issue, and what are the key features of this instrument?
We are planning to issue a listed, rated, unsecured, subordinated, redeemable five-year Sustainability Bond, fully compliant with Basel III Tier II regulations and incorporating a non-viability write-down mechanism. The bonds will be denominated in Sri Lankan Rupees and listed on the Colombo Stock Exchange. Investors may choose between two interest options: a fixed rate of 10.50 percent per annum or a floating rate priced at two percentage points above the weighted average 12-month Treasury bill rate, reset annually. For both types, interest will be paid once a year. The instrument carries an issue rating of AA- (Stable) from Lanka Rating Agency, while BOC’s issuer rating stands at AA-(lka)/Stable from Fitch Ratings Lanka.
The minimum subscription for qualified investors is Rs. 10,000, while individual investors are required to apply for at least Rs. 5 million.
2. How much does the Bank intend to raise, and how is the offering structured?
The initial issue comprises 100 million bonds at Rs. 100 each, enabling the Bank to raise Rs. 10 billion. If demand warrants, BOC may issue an additional 50 million bonds and a further 50 million thereafter, giving it the capacity to expand the total offering to 200 million bonds and raise up to Rs. 20 billion. The subscription list will open at 9.30 a.m. on 22nd December 2025 and will remain open for 14 market days unless the Bank decides to close it earlier based on subscription levels.
- BOC to open the largest sustainability bond issue on 22 December 2025
- BOC is a Corporate Finance Advisor licensed by the Securities and Exchange Commission of Sri Lanka
3. Why is the Bank issuing a Sustainability Bond at this time?
Aligning with national economic priorities, as the country rebuilds confidence after challenging economic disasters, BOC intends to expand the sustainable loan portfolio to cater the rising eligible social and green projects. During the third quarter of 2025 alone, eligible sustainability loans increased by Rs. 10 billion. By raising up to Rs. 20 billion, the Bank intends to meet the growing credit requirement for projects aligned with environmental resilience, social wellbeing and national development priorities.
Bank also intends to strengthen the Tier II capital base under Basel III requirements. This has a direct impact on the Bank’s Capital Adequacy Ratio (CAR). As of 30 September 2025, BOC’s total CAR stands at 16.76 percent, above the minimum regulatory requirement and with the funds raised through the bond issue, the Bank expects this ratio to increase up to 18.48 percent. The proposed issuance is also expected to support liquidity management and better align the tenors of assets and liabilities. Raising mid- to long-term subordinated debt provides greater stability to the Bank’s funding structure and supports its capacity to grow sustainable lending.
4. How will the proceeds from the bond be used?
All proceeds will be allocated to eligible social and green projects that fall under the Bank’s Sustainable Finance Framework. The Bank intends to allocate up to 75 percent of the proceeds to social projects, with the remaining portion channelled into eligible green projects.
Eligible projects are defined in accordance with international guidelines and national standards. The Sustainable Finance Framework is aligned with the International Capital Market Association’s Green Bond Principles (June 2025), Social Bond Principles (June 2025), and Sustainability Bond Guidelines (June 2021), as well as the Sri Lanka Green Finance Taxonomy issued by the Central Bank of Sri Lanka in 2022. The Bank’s framework also aligns with Sri Lanka’s Nationally Determined Contributions under the Paris Agreement.
Proceeds cannot be used to finance any project listed under the exclusion list in the Bank’s Sustainable Finance Framework. This ensures that only projects delivering clear environmental or social benefits receive funding.
5. What types of green and social projects qualify under the Framework?
Eligible green project categories include renewable energy projects such as solar, wind, hydro, and biogas; energy efficiency improvements in buildings and industrial facilities; green construction, including development or renovation of certified green buildings; clean transportation initiatives that promote low-carbon mobility; sustainable water and wastewater management; and pollution prevention and control, including waste collection, sorting, recycling, composting and waste-to-energy.
Eligible social project categories cover initiatives that promote employment generation, particularly for Micro, Small, and Medium Enterprises (MSMEs) affected by economic shocks or natural disasters; food security and sustainable food systems, including infrastructure that reduces losses within the agricultural value chain particularly benefiting smallholder farmers; access to essential services such as public healthcare and education through the construction or refurbishment of hospitals, clinics, schools, universities and vocational training facilities; and affordable basic infrastructure that expands access to clean water, sanitation and essential utilities.
6. How does BOC evaluate and approve projects for funding?
BOC has a comprehensive evaluation and selection process to ensure that the proceeds from the Sustainability Bond are allocated to eligible projects that meet the environmental and social objective. The evaluation process begins with the respective business unit, which first assesses the creditworthiness of a project under standard banking criteria. Once a project is deemed creditworthy, it is evaluated against the Sustainable Finance Framework and the Environmental and Social Management System (ESMS) Policy of Bank of Ceylon to determine whether it qualifies for financing from bond proceeds. This Environmental and Social Due Diligence review will be in line with the National Environment Act, Central Bank directions and international standards, including those of the Asian Development Bank and the Asian Infrastructure Investment Bank. Following this review, the project is submitted for approval of the management with a diverse oversight for project selection and the application of sustainability criteria.
7. How will the Bank manage the bond proceeds once raised?
The Bank will manage the proceeds in accordance with the Sustainable Finance Framework and the relevant ICMA principles. The Bank will maintain a dedicated internal system to track allocations and ensure that funds are used only for approved sustainable projects. Until allocation, unutilized proceeds will be held in cash or government securities.
The Bank is required to make ongoing disclosures through interim and annual financial statements, providing information on the amounts allocated, utilization levels and any unallocated funds. These disclosures are made in compliance with the continuous listing requirements applicable to Sustainability Bonds on the Colombo Stock Exchange and aligned to ICMA harmonized framework. These reports provide required information on the environmental and social benefits achieved through the financed projects to ensure transparency to the investors.
8. How will the Bank ensure independent verification of its sustainability commitments?
The Sustainability Bond is subject to both pre-issuance and post-issuance external assurance. Before issuance, KPMG as the independent reviewer will assess whether the framework and eligible projects align with the Green Bond Principles (GBP) (June 2025), Social Bond Principals (SBP) (June 2025) and Sustainability Bond Guidelines (June 2021) published by the International Capital Markets Association (ICMA) and the Sri Lanka Green Finance Taxonomy (May 2022) issued by the Central Bank of Sri Lanka (CBSL). The review will also examine the sustainability benefits of the projects selected and the robustness of the Bank’s internal processes. The pre-issuance assurance report is published on the Bank’s website and the Colombo Stock Exchange website.
One year after issuance, and annually thereafter, the Bank will undergo an external review of its allocation and impact reporting. This review will confirm that proceeds have been allocated to eligible projects, evaluate the accuracy of benefit reporting and assess ongoing compliance with the framework. These annual assurance reports will also be made publicly available.
9. What role does this Sustainability Bond play in Sri Lanka’s development?
This Sustainability Bond issue complements Sri Lanka’s broader transition toward climate resilience, social inclusion and responsible economic growth. By aligning with global and national sustainability frameworks, the Bank reinforces its long-term commitment to environmental stewardship, social wellbeing and transparent governance. The instrument strengthens BOC’s capital structure, enhances its capacity to support long-term lending and contributes to a financing ecosystem that increasingly emphasizes measurable impact and accountability.
For investors, the bond provides an opportunity to participate in a structured, regulated and independently verified sustainable finance initiative, while supporting projects that contribute directly to Sri Lanka’s long-term development trajectory.
10. What is your message to the prospective investors?
Bank of Ceylon is opening the subscription list of the BASEL III Sustainability Bond Issue on 22nd December 2025. With over 85 years of trust, stability and leadership in the Sri Lankan banking industry, BOC is one of the major contributors to the country’s economic development. We invite local and foreign qualified investors to join hands with us by investing in this Sustainability Bond and support the country’s environmental and social commitments.
You can now download the Prospectus and Application forms from the web sites of the CSE; www.cse.lk and BOC; www.boc.lk.
For more details, please contact;
Managers to the Issue
Bank of Ceylon
Investment Banking Division,
7th Floor,
“BOC Square’’, No:01,
Bank of Ceylon Mawatha,
Colombo 01
Tel : +94 11 2448348, +94 11 2203640-48
