By Sarah Hannan Three months have passed since Sri Lanka published its second Voluntary National Review (VNR). Although the report was handed to its participating stakeholders in June this year, there are gaps that have not been captured. This means that the key drivers that launched the present economic instability have not been captured in the included datasets. Titled ‘Inclusive Transformation Towards a Sustainably Developed Nation for All: National Review on the Implementation of the 2030 Agenda for Sustainable Development in Sri Lanka,’ the second VNR is technical in nature.  Here, The Sunday Morning delves into its contents in an eight-part article series that will look at Economic Diversification, Blue-Green Economy, Protecting Biodiversity and Addressing Climate Change, Knowledge-Based and Technology-Driven Transformation, Social Inclusivity, Public Sector Reforms and Innovation, Strengthened Law Enforcement, and Rights Protection in the upcoming weeks. The Sunday Morning learns that there were multiple stakeholders involved in drafting the document, which focuses on key innovative reforms Sri Lanka can adopt and explores how Sri Lanka can overcome its limitations of fiscal space and multilateral and bilateral partnerships, as well as south-south cooperation in being able to achieve the Sustainable Development Goals (SDGs). Sri Lanka’s scores The second VNR highlights that despite the challenges Sri Lanka underwent since the first VNR owing to the 2019 Easter Sunday bombings and the Covid-19 pandemic lockdowns, Sri Lanka scored 70 points, placing itself above the regional average of 65.9.  Sri Lanka achieved such a score due to the National Policy Framework (NPF) that was in place under the ‘Vistas of Prosperity and Splendour’ programme implemented by former President Gotabaya Rajapaksa. The NPF that was set in motion following his appointment was well-aligned with the SDGs that the country had to achieve.  [caption id="attachment_221123" align="alignleft" width="723"] Level of integration of SDGs into the National Development Agenda[/caption] When the steering committee commenced its consultations for the second VNR, the gaps from the first VNR had been identified. This led the steering committee to engage multi-stakeholders at the national and sub-national levels that included Government institutions as well as private sector institutions, international development partners, civil society, and academia. A total of 400 stakeholders gathered the necessary primary data. In addition, 89 documents in the forms of reports, statistics, short- and long-term plans, policy documents, and gazette notifications that were relevant to keeping the SDG roadmap on track were taken in for review along with inputs gathered from the consultancies. Validation was carried out by the VNR steering committee, observers, steering committee support, and institutional consultancy when the VNR was prepared for publication. Structural and innovative reforms The need to employ structural and innovative reforms in the public sector is one of the key areas that the second VNR highlights. Outlining immediate measures Sri Lanka could take given the present condition of the country, the report pointed out that the lockdown imposed in 2020 which continued through 2021 had leapfrogged the initiatives as citizens were encouraged to explore possibilities of remote or hybrid work structures. Take for instance the E-Government Development Index in 2018 and its score for Sri Lanka; the country was ranked 94th with a score of 0.58 whereas in 2020 it moved up to the 85th rank and the score improved to 0.67, which reflects the progress of the public sector in the use of technology, the increase in internet use, and smartphone penetration. This has also prompted the public sector to look at streamlining data with the statistical input of the Department of Census and Statistics to have accurate and timely data available in the public domain. The Covid-19 pandemic has in fact accelerated the digitisation of public institutions through innovative solutions to enhance public access to service delivery and access to information such as e-government projects. For these projects to succeed, the report recommends that standards need to be set and that skill development for public sector officers is required.  Movement restrictions during the pandemic also saw successful collaborative efforts of the Information and Communication Technology Agency (ICTA), which provided digital solutions to the Government to continue its operations online. Addressing limitations However, the stakeholders along with the steering committee of the VNR have identified limitations that are presented in terms of fiscal space and multilateral and bilateral partnerships as well as south-south cooperation. So how can Sri Lanka overcome these limitations in the coming months? At present investors, both local and international, are facing challenges in establishing businesses or services in Sri Lanka owing to its macroeconomic climate. Unable to access international capital markets, there is heavy reliance on domestic borrowings and foreign bilateral and multilateral borrowings.  Following up on the ‘Roadmap for Sustainable Finance of Sri Lanka’ report published by the Central Bank of Sri Lanka (CBSL) in 2019, a classification system to define and categorise the economic activities that are environmentally sustainable was launched in May 2022 as the Sri Lanka Green Finance Taxonomy (SLGFT). According to the main messaging listed under the second VNR, reforming the Sri Lankan economy whilst minimising adverse effects on vulnerable groups is highlighted as the key to achieving macroeconomic stability and overcoming the current economic crisis.  To this effect, the CBSL through its SLGFT tool sets out environmental objectives and guiding principles to aid financial institutions, investors, corporate, and green-bond issuers to transition to low-carbon, climate-resilient, and resource-efficient industries, thus paving the way for Sri Lanka to achieve the SDGs set for 2030.  The SLGFT encompasses four environmental objectives: climate change mitigation, climate change adaptation, pollution prevention and control, and ecological conservation and resource efficiency. These objectives are carried out in accordance with the guiding principles that are set forth to monitor substantial contribution, do no significant harm, respect Sri Lanka’s green development priorities, science-based screening, compatibility with international standards and practices, and dynamic adjustment. The environmental objectives are then benchmarked using local and international standards:

• Climate Change Mitigation – IPSF Common Ground Taxonomy – Climate Change Mitigation (2021), Sri Lanka updated NDCs (2021), EU Taxonomy – Climate Delegated Act (2021), China Green Bond Endorsed Project Catalogue (2021)
• Climate Change Adaptation – Sri Lanka updated NDCs (2021), National Adaptation Plan for Climate Change in Sri Lanka 2016-2025, IFC Climate Smart Agriculture Financing Opportunities in Sri Lanka (2021)
• Other Green Objectives (covering environmental objectives 3 and 4) – Green Bond Endorsed Project Catalogue (2021), Colombia Green Taxonomy (draft 2021), IFC Guidelines for Blue Finance (2022) 

SDG Investor Map In terms of improving multilateral and bilateral partnerships, the SDG Investor Map launched in August 2022 provides clear insights on how Sri Lanka can utilise private capital and SDG-related investments to revive its economy. The Sunday Morning spoke to the SDG Investor Map Principal Consultant and Ceylon Chamber of Commerce Chief Economist Shiran Fernando on how potential investors could use the SDG Investor Map to revive Sri Lanka’s economy in a short- or long-term investment plan. “The SDG Investor Map produced by UNDP in collaboration with the Sustainable Development Council and Ceylon Chamber of Commerce is a market intelligence tool that seeks to direct private capital where Sri Lanka’s Sustainable Development Goals (SDG) priorities, Government policy, and market opportunity intersect.  “While Sri Lanka is pursuing the International Monetary Fund (IMF) programme to stabilise its macro-economy and restructure its external debt, private capital, Foreign Direct Investments (FDIs), blended finance options, and Public-Private Partnerships (PPPs) are all needed. Innovative financing mechanisms become imperative to synergise the Government, private sector, and capital markets to generate the additional resources needed to finance the SDGs,” Fernando responded. Fernando further noted that the SDG Investor Map would be of importance when channelling these funds to investments for social and environmental objectives – towards green development, women’s economic empowerment, and social sector development (example: health). The SDG Investor Map is therefore a timely intervention that will provide potential investors with the required market information relating to potential investment opportunity areas. “The map can be used by investors wishing to explore Sri Lanka as an investment destination while also rendering benefits for local communities and the environment. It will help private investors (funds, financiers, corporations), who recognise that sustainable investments have higher financial payoffs in the long term, and who want to increase the SDG-related impacts of their investments, to identify bankable investment opportunities and business models that advance the SDGs,” Fernando elaborated. A standardised eight-step methodology was employed, which combined secondary data research; the data was later analysed to refine Investment Opportunity Areas (IOAs) and data-backed business models that show significant financial and impact potential in their specific contexts. The eight-step methodology used to create the SDG Investor Map:

1. Collect information on national sustainable development needs and policy priorities
2. Synthesise needs and policies into a set of national priority sectors
3. For each sector, collect information on sectoral SDG needs and sectoral investment policies
4. Synthesise needs and policies into a set of priority subsectors
5. Identify the subregions most aligned to each subsector
6. Synthesise information into a set of priority sub regions
7. With this context, identify potential business models that could tackle sub-sectoral and sub-regional SDG needs whilst capitalising on policy and investment momentum
8. For each business model, add a range of supporting information that can help investors to perform due diligence and eventually shape impactful deals

According to the SDG Investor Platform, there are 15 such IOAs in Sri Lanka. Using the SDG Investor Map as a guide to channel investments to achieve social and environmental objectives, investors, enterprises, and Government agencies can initiate projects in these IOAs.

• Six IOAs under the Renewable Resources and Alternative Energy category – grid-connected solar power generation, grid-connected wind power generation, improved Biomass Energy Technologies (BET), biomass terminals/depots for solid biomass fuel (biofuel), Sustainable Fuelwood Plantation (SFP) for solid biofuel production, and solid biofuel fired Improved Cook Stoves (ICS) in the domestic sector
• Four IOAs relating to Food and Beverage – cold chain storage for agricultural products, smart information systems to improve the quality of food products, input side digital platforms to serve farmers, and sustainable commercial scale aquaculture
• One IOA under Consumer Goods focuses on fabric and textile manufacturing plants
• Two IOAs pertaining to Infrastructure in terms of material recovery facilities for recyclable solid waste and solid waste management
• Two Healthcare sector related IOAs in the form of a healthcare professional training academy and manufacturing of pharmaceutical products

In conclusion, Fernando noted: “Issues investors could face include the lack of a viable pipeline and market intelligence for SDG-aligned investments, lack of sufficient data to have a good understanding of the process for SDG-aligned investments, and the lack of impact measurement to reflect the true value of investments. A stronger enabling environment and strengthening of the policy environment especially in emerging investment areas (such as renewable energy) also need to be created to encourage more investment into these areas.” UN contribution  Speaking about the contribution from United Nations agencies to support Sri Lanka in addressing aspects of sustainable development, Department of National Planning Additional Director General – Social Infrastructure J.M.S.D. Rathnayaka said: “In line with the national-level plan on achieving the SDGs, the UN Sri Lanka Country Office has also launched the United Nations Sustainable Development Cooperation Framework (UNSDCF) for the period of 2023-2027 in August. This framework was developed through a consultative process, which included the Government, private sector, civil organisations, and the UN country team in Sri Lanka.” The UNSDCF is structured around four interrelated and mutually-reinforcing strategic priorities in economic, social, and environmental dimensions of sustainable development, for which the UN system will provide expertise to support Sri Lanka to make transformational and accelerated progress. The UNSDCF will be funded through core budget allocations of an estimated $ 60 million, in addition to $ 325 million through other resources, spread across the five-year period of implementation. “The UNSDCF will be subjected to an annual review and for each year, the fund allocations will be based on the four strategic priorities that we have recognised.”