Sri Lanka is highly vulnerable to climate change impacts, including temperature increases, rainfall variability, and rising sea levels, which exacerbate existing socio-economic challenges. Extreme weather events such as droughts and floods have intensified, disrupting livelihoods, particularly for outdoor laborers, and impacting public health and biodiversity. 

• The proposed Readiness grant addresses critical barriers to climate finance and implementation in Sri Lanka. Key barriers include: 
• Limited national and provincial capacity and an underdeveloped enabling environment 
• Weak operational systems and limited capacity in local financial institutions  

The proposed readiness grant will play a critical role in this effort by not only strengthening institutional capacity and enabling access to international climate finance but also directly supporting the development of green bond frameworks for local financial institutions. Through these interventions, the grant is expected to leverage over $40 million in green investments, facilitated by the issuance of green bond or sustainable bonds. 

This transformational approach reshapes Sri Lanka’s access to international climate finance, creating pathways for private sector engagement and scalable investments in climate resilient projects: 

• Strengthened NDA systems and stakeholder networks to enhance coordination and align with GCF and international climate finance mechanisms. 
• Improved capacity of provincial stake holders to integrate climate finance planning into local governance structures, supported by tailored capacity building workshops and matchmaking sessions. 
• Development of enabling environments for private sector investment, including ESMS guidelines, su stainable banking frameworks, and green bond development. 

By addressing gaps in climate finance readiness, fostering collaboration, and introducing innovative financial instruments, this Readiness grant lays the groundwork for scaling up climate action in Sri Lanka.