OUR COMMITMENT TO NATURAL CAPITAL

At DFCC Bank, sustainability is embedded in our core business philosophy. We recognise that nature’s limited and invaluable resources are increasingly at risk due to environmental degradation, climate change and unsustainable exploitation for short-term gain. As a financial institution committed to sustainable growth, we understand the importance of balancing economic progress with the preservation of natural capital. Through responsible resource management and proactive sustainability initiatives, we strive to protect ecosystems, enhance resilience, and contribute to a more sustainable future for generations to come.

Dynamic and evolving approach

As a financial institution, we recognise the vital role we play in driving sustainable socio-economic development by channeling capital into the real economy. Our financing decisions are guided by a steadfast commitment to enabling, the transition to a net-zero future. We strongly believe that our success is inherently linked to a thriving economy, a well-functioning society, and a healthy environment.

As part of this interdependent system, we acknowledge
the increasing impact of challenges such as climate change, poverty, and social justice on the financial landscape. By embedding sustainability into our business strategy, we strive to create long-term value for all stakeholders, while fostering a resilient and sustainable future. All our corporate sustainability initiatives and Environmental and Social (E&S) due diligence procedures are seamlessly integrated into this system, ensuring a structured and accountable approach, as illustrated on Environment page.

At DFCC Bank, we enhance sustainable finance as more than just a commitment-it is a responsibility. Our approach integrates Environmental, Social, and Governance (ESG) considerations into every aspect of financial decision-making, from lending and investing to advisory services. By aligning with global sustainability frameworks, including the UN Sustainable Development Goals (SDGs) and the Paris Agreement, we aim to drive positive change, while fostering long-term economic resilience.

With over three decades of leadership in green finance, DFCC Bank remains steadfast in financing and advocating for low-carbon, environmentally responsible ventures. By integrating environmental and social due diligence into our financial strategies, we champion a necessary shift away from conventional “business as usual” models. Our goal is to inspire and empower stakeholders to embrace sustainable solutions, positioning DFCC Bank as a trusted leader in responsible banking, while fostering a greener, more resilient future.

Pioneering Sustainable Finance for a Greener Future

Sustainable finance is an ever-evolving landscape, and so is our commitment to it. We continuously refine our internal data dictionary, ensuring our sustainable finance and investment practices remain aligned with emerging global standards, evolving taxonomies, and best practices. This involves refining product definitions, expanding qualifying financial instruments, strengthening internal policies, and enhancing reporting and governance structures.

Our commitment to green financing extends beyond numbers—it is about creating meaningful impact. By supporting environmentally responsible projects, DFCC Bank is not only enabling sustainable business growth but also playing a pivotal role in shaping a cleaner, healthier, and more prosperous future for generations to come. One of DFCC Bank’s key commitments to green finance this year is the issuance of a Green Bond.

Note: Value of Sustainable Financing as at 31 December 2024 was LKR 12,889 Mn

Green Bond 2024

Utilisation of proceeds as of 31 December 2024

Report on allocation of proceeds as of 31 December 2024

Eligible category	Project type	Allocation/ earmark of proceeds LKR Mn	Allocation/ earmark of proceeds	Use of proceeds/ disbursements LKR Mn	Use of proceeds/ disbursements
Renewable Energy – Ground mounted solar	New projects*	185	7%	185	7%
	Refinanced projects*	990	40%	990	40%
Total		1,175	47%	1,175	47%

*In the above, new projects and refinanced projects both to refer one ground mounted solar project under implementation, where LKR 990 Mn had been disbursed prior to the bond issuance, and refinanced upon bond allotment.

IMPACT REPORT AS OF 31 DECEMBER 2024

Eligible category	Impact indicator
Renewable energy-ground mounted solar	Renewable energy capacity installed	10 MW
	Energy generated since commissioning	4,165 kWh
	Avoided/reduced carbon emissions	3,001 tCO 2 e
	DFCC Bank’s share at 75% of avoided/reduced carbon emissions	2,251 tCO 2 e

Green Finance Reporting and Compliance

DFCC Bank submits quarterly reports on its Sri Lanka Green Finance Taxonomy (SLG FT) – compliant green portfolio as per the Banking Act Direction No. 05 of 2022 issued by CBSL. As of 31 December 2024, the Bank has classified and reported LKR 12.889 Mn in green loans, accounting for 3.0% of its total gross loans and receivables portfolio. Furthermore, in 2024, DFCC Bank disbursed or partially disbursed new green facilities amounting to LKR 4,413 Mn supporting growth across key economic sectors.

Through initiatives like a special allocation for renewable energy, we provide concessionary funding to support environmentally friendly projects, driving innovation and sustainable development. By prioritising resource conservation, DFCC Bank remains committed to creating long-term value and fostering a greener future.

DFCC GREEN DEPOSIT

Funds mobilised from the Green Deposit have been reinvested by the Bank in green projects that comply with the SLGFT. The selected loans were vetted by KPMG.

Green Climate Fund

DFCC Bank continued to be the only Sri Lankan entity to obtain the Accreditation of the Green Climate Fund (GCF), the world’s largest fund for climate action. GCF Accreditation allows the Bank to access concessionary funding from GCF for projects with a value of up to USD 250 Mn per project, enabling the financing of climate mitigation and adaptation projects across Sri Lanka. The Bank has finalised three Concept Notes for submission to GCF. Two of the Concept Notes were developed in collaboration with UNDP in the renewable energy and agriculture sectors, and the third Concept Note was developed in collaboration with FAO in the fisheries sector.

ENVIRONMENT AND SOCIAL DUE DILIGENCE IN LENDING

Recognising the significant role financial institutions play in shaping a sustainable future, we have established a robust Environmental and Social Management System (ESMS) to systematically assess and mitigate risks associated with our lending activities.

While our direct E&S impact is relatively minimal, we acknowledge that financing diverse projects carries inherent risks, including pollution, resource depletion, unsatisfactory labour practices, and community displacement. To address these challenges, we have integrated environmental and social due diligence into our credit evaluation and monitoring process, ensuring responsible lending that aligns with regulatory requirements and global best practices.

DFCC Bank’s Environment and Social Management System (ESMS)

Since its inception in 2016, our ESMS has evolved to meet international standards, with revisions in 2021 and 2023 incorporating all International Finance Corporation (IFC) Performance Standards on Environmental and Social Sustainability. The ESMS was further revised in 2024. The Sustainability Department plays a pivotal role in implementing this framework, overseeing risk assessments, and conducting regular training to equip staff with the knowledge required for effective E&S compliance.

A key aspect of our due diligence process involves screening all business related facilities exceeding LKR 25 Mn to ensure compliance with environmental regulations. We employ an internal E&S risk categorisation framework to assess projects, define due diligence plans, and monitor adherence throughout the loan tenure. Additionally, we evaluate loans sanctioned under various credit lines, including those funded by the Asian Development Bank (ADB) and the US Development Finance Corporation (DFC).

To strengthen transparency and reporting, we have enhanced our loan appraisal systems to capture detailed facility-level data, with updates to our core banking system enabling more comprehensive future disclosures. These measures not only safeguard against environmental and social risks but also empower businesses to operate sustainably.

DFCC Bank believes that integrating sustainability into an organisation’s culture through training and awareness initiatives is essential for fostering responsible business practices, achieving long-term success, and making a positive impact on the planet and society as a whole. To this end, the Sustainability Department conducts various training programmes on lending-related Environmental and Social (E&S) aspects and the Green Finance Taxonomy to ensure that officers are well-equipped with the necessary knowledge and skills. (Refer employees section on Employees page ).

IMPACT ASSESSMENT OF GREEN FINANCING

OUR APPROACH TO ESG RELATED RISKS

As a leading financial institution, we recognise that climate-related and sustainability-related risks are key factors that shape our operations, lending strategies, and long-term resilience. From physical climate risks to regulatory shifts and evolving market dynamics and changing stakeholder expectations are the factors transforming the financial landscape.

In response, DFCC Bank has embraced the principles of sustainability related reporting standards, from a qualitative perspective ensuring transparency in how we identify, assess, and manage these risks—while seizing new opportunities in sustainable finance. Through a comprehensive evaluation of the current landscape as per the Bank’s policies for risk management, we have identified the most material Climate Related Risks and Opportunities (CRROs) and Sustainability Related Risks and Opportunities (SRROs) impacting the Bank. These aspects, outlined in Table below, form the foundation of our approach to building a more sustainable, future-ready financial institution. DFCC Bank recognises the growing impact of climate risks and integrates them into our sustainability and risk management frameworks. These risks are categorised into physical and transition risks, with short, medium, and long-term implications.

Physical Risks

The Bank and customers are exposed to acute risks such as extreme weather events (floods, droughts, cyclones) as well as chronic risks like rising temperatures and sea levels. These risks could affect the Bank’s infrastructure, customer assets, and overall credit risk exposure.

Transition Risks

As Sri Lanka moves toward a low-carbon economy, businesses may face challenges due to policy changes, evolving market trends, and new technologies. DFCC Bank actively supports clients in adapting to these changes by providing green finance solutions and sustainable investment opportunities.

Time Horizons

• Short-Term (0-1 year): Immediate risks include extreme weather events disrupting operations and impacting asset valuations.
• Medium-Term (1-5years): Increasing regulatory changes and technological shifts may affect clients’ financial stability and creditworthiness.
• Long-Term (Over 5 years): Systemic climate impacts, such as resource scarcity and economic shifts

To effectively manage Climate-Related and Sustainability-Related Risks and Opportunities (CRROs & SRROs), DFCC Bank has an established framework to oversee their integration into enterprise risk management. By strategically diversifying our portfolio, DFCC Bank aims to reduce exposure to high-carbon sectors, while expanding investments in green finance. Additionally, the Bank actively engages with regulators, investors, and industry partners to drive sustainable finance initiatives. Committed to transparency, DFCC Bank ensures future compliance with SLFRS S1 & S2 standards, strengthening its data-driven approach to climate and sustainability disclosures.

Whilst this reporting is in line with the Bank’s sustainability and corporate strategies, the transition and physical risk with respect to the lending portfolio will be incorporated by way of documentation and analysis such as checklists, score cards and scenario analysis.

Responsible consumption of natural resources

In the financial sector, direct consumption of natural resources is significantly lower than that of other industries like manufacturing. However, we acknowledge our responsibility to minimise environmental impacts and drive sustainable progress. DFCC Bank has undertaken a range of initiatives to reduce its operational footprint while embedding sustainability across all aspects of our business. This includes integrating sustainable practices into our lending approach, internal operations, customer-facing activities, and digital innovations to optimising daily banking operations. Through these efforts, the Bank aims to minimise its carbon footprint, while maintaining operational efficiency and environmental responsibility.

ENERGY MANAGEMENT

Banks, while not as energy intensive as most manufacturing industries, still require a considerable amount of energy to support their operations, including branches, data centres and digital banking infrastructure. At DFCC Bank, key areas of consumption include air conditioning, lighting, and IT systems. To reduce our environmental footprint, we have adopted energy-efficient technologies, expanded the use of renewable energy, and advanced digital innovations to optimise resource use.

The Energy Task Force, in collaboration with the Premises and Administrative Services Department, actively monitors and implements best practices for responsible energy consumption. In 2024, several key initiatives were continued to enhance efficiency, including targeted energy conservation measures.

Through regular assessments, DFCC Bank ensures continuous progress in achieving long-term carbon reduction goals while reinforcing its commitment to sustainability.

A significant milestone in our sustainability journey has been the installation of solar PV module rooftops at five of our main branches, reducing dependence on the national grid by 7% and contributing to the reduction of our internal carbon footprint.

Solar power generation/savings

		DFCC Bank
Location	Installation month/year	System Capacity kWp	Solar power generation kWh				Savings LKR
			2024		2023		2024
Negombo	June 2017	27.00	39,745		40,140		1,921,745
Ramanayake Mawatha	June 2017	36.40	46,679		46,960		2,250,996
Kurunegala	October 2021	50.00	77,760		80,834		3,724,222
Head Office – Colombo	November 2023	150.15	202,673		22,690		9,827,631
Borella	April 2024	40.00	38,169		–		1,699,988
Total			405,026		190,624		19,424,582

Subsidiary – LINDEL
Location	Installation month/year	System Capacity kWp	Solar power generation kWh				Savings LKR
			2024		2023		2024
Industrial Park – Makola	2014-2022	1,440.50	1,476,044		1,591,144		Consumption is not netted
Total			1,476,044		1,591,144

Energy highlights – 2024
Electricity consumption: – DFCC Bank Head Office – DFCC Bank Ramanayaka Mawatha	598,930 kWh 655,314 kWh
Energy intensity ratios: Electricity consumption per employee – DFCC Bank Head Office – DFCC Bank Ramanayaka Mawatha	1,446.69 kWh 2,206.44 kWh
Reduction in electricity consumption – DFCC Bank Head Office – DFCC Bank Ramanayaka Mawatha – Solar power generation	85,660 kWh 48,648 kWh 405,026 kWh
Energy consumption (non-renewable sources) – Fuel for Company-owned vehicles (Diesel) – Fuel Company-owned vehicles (Petrol) – Fuel for Standby generators Head Office (Diesel)	56,925 liters 32,510 liters 30,284 liters
Heating consumption	No
Cooling consumption	No
Steam consumption	No
Standards, methodologies, assumptions, and/or calculation tools used	None
Conversion factors used	None
Energy consumption outside the organisation	Not applicable

Water consumption

The Bank’s water usage is exclusively for office purposes, with some branches relying on domestic supplies and others on Public Water Supply.

Beyond monitoring consumption, the Bank has implemented various initiatives to reduce water usage. These include installing sensor-based systems, water filtration systems for drinking water, and promoting awareness across the organisation.

Waste Management

We continue to manage solid waste generation through the 3R principle (Reduce, Reuse, Recycle).Reducing consumption remains a priority of the Bank. Additionally we focus on responsible use and disposal of resources. Waste segregation at source is a standard practice within the Bank, ensuring efficient disposal and recycling processes.

Paper waste is segregated at source based on confidentiality. Confidential documents are shredded on-site, and the shredded paper is sent for recycling. Non-confidential documents are sent directly for recycling.

Electronic waste is collected by a registered e-waste handler for proper disposal of such waste. Food waste is disposed of through local authorities or sent to farms.

Note: Figures confirmed by Neptune Recyclers (paper waste) and Cleantech (e-waste)

INITIATIVE FOR EMPLOYEES
TO PROMOTE 3R CONCEPT

As part of DFCC Bank’s commitment to sustainability and resource efficiency, the 3R’s for the Vesak Lantern Competition was introduced in 2024. Organised by the Sustainability Department, the initiative encouraged all employees to apply the Reduce, Reuse, Recycle (3R) concept in creating Vesak lanterns, using discarded and reusable materials.

The competition saw enthusiastic participation from branches and departments, with creative entries crafted from used envelopes, disposable cardboard, gunny bags, and even coconut shells. The initiative not only highlighted the importance of minimising waste but also fostered teamwork and innovation among employees.

Towards a Paperless Office

In line with DFCC Bank’s commitment to sustainability and operational efficiency, significant strides were made in 2024 towards reducing paper consumption and embracing digital solutions. Several key initiatives were implemented to support the Bank’s transition to a paperless environment, fostering both environmental responsibility and cost optimisation.

Through these initiatives, DFCC Bank continues to embed sustainability into its operational framework. By leveraging digital advancements and optimising resource allocation, the Bank is on track to significantly reduce its paper footprint, reinforcing its commitment to environmental stewardship and operational excellence. The ongoing projects are expected to further accelerate the Bank’s digital transformation in the coming year.

Despite the drive for digitalisation, certain mandatory regulatory requirements and traditional banking practices still necessitate the use of physical documents making a complete transition to be paperless office challenging.

Emissions Management

In 2024, DFCC Bank expanded its emission management framework to encompass not only the Bank but also its subsidiaries: Lanka Industrial Estates Pvt Ltd (LINDEL), Synapsys Pvt Ltd, and DFCC Consulting Pvt Ltd. This strategic move aligns with our commitment to comprehensive environmental stewardship and adherence to evolving sustainability disclosure standards.

The assessment was conducted in partnership with RR Associates Pvt Ltd and adhered to ISO 14064-1:2018 standards, following the Greenhouse Gas (GHG) Protocol guidelines. Verification was obtained from the Sri Lanka Climate Fund, an accredited verifier, ensuring the accuracy and credibility of our emissions data.

GHG Emission Summary

	Emission in tCO2e
Scope	DFCC Bank PLC (including subsidiaries 1 ) Y/A 2024		DFCC Bank Only Y/A 2023- Base year (re-calculated)2
Scope 1 – Direct GHG emissions	594.11		466.43
Scope 2 – Indirect GHG emissions	2675.06		2413.00
Scope 3 – Other indirect GHG emissions	2446.23		1929.90
Total GHG emissions	5715.40		4809.34

Note:

1. Subsidiaries include DFCC Consulting Pvt Ltd., Synapsys Pvt Ltd. and Lanka Industrial Estates Pvt Ltd. (LINDEL).

2. Total GHG emissions for 2024 and 2023 cannot be compared as boundaries were changed. 2023 base year GHG emission amounts were recalculated during the 2024 assessment to ensure a clearer comparison, reflecting updated emission factors.

GHG EMISSION OF DFCC BANK PLC BY SOURCE AND THE TYPE OF GHG

Boundary: DFCC Bank PLC, DFCC Consulting (Pvt) Ltd., Synapsys (Pvt) Ltd., Lanka Industrial Estates (Pvt) Ltd.

Standards/protocols: ISO 14064-1:2018, GHG protocol.

Scope	Category	Emission sources	GHG emission								Total GHG emission
			CO2		N20		CH4		HFC		ton CO2e
Scope 1	Category 1	Stationary combustion	81.36		0.18		0.33		–		81.86
		Mobile combustion	239.33		3.23		1.39		–		243.95
		Fugitive emissions	0.25		–		–		169.69		169.94
		Emission from waste water treatment plant	–		–		15.30		–		15.30
		Emission from waste incineration	74.88		0.89		7.30		–		83.07
		Category 1 – Total	395.82		4.30		24.32		0.00		594.12
Scope 2	Category 2	Purchased electricity	2,675.06								2,675.06
		Category 2 – Total 2 –	2,675.06								2,675.06
Scope 3	Category 3	Business air travel	36.07		0.18		–		–		36.25
		Employee commuting	1,954.39		11.14		5.05		–		1,970.58
		Purchased goods	2.93		0.09		–		–		3.02
		Downstream – land	0.06		–		–		–		0.06
		Category 3 – Total 2 –	1,993.45		11.41		5.06		–		2,009.91
	Category 4	Waste generation	0.19		–		–		–		0.19
		Category 4 – Total	0.19		–		–		–		0.19
	Category 6	Transmission and distribution loss	248.78		–		–		–		248.78
		Purchased from the National Water Supply Drainage Board (NWSD)	187.34		–		–		–		187.34
		Category 6 – Total	436.12		–		–		–		436.12
		Total emissions	5,670.33		15.70		29.38		-		5,715.41

Expanding our reporting boundary is a key step toward comprehensive, group-wide climate-related disclosures, aligning with IFRS/SLFRS Sustainability Reporting standards. This initiative reinforces DFCC Bank’s commitment to transparency, accountability, and proactive environmental stewardship.

An assessment of our operations confirmed that no significant air emissions, ozone depleting substances, pollutants, or hazardous compounds arise from our business activities. Since 2020, we have prioritised greening our internal processes, focusing on reducing paper usage and conserving natural resources. Our digital transformation has accelerated these efforts. (Refer Digital journey on Digital journey page).

Financed emissions

At DFCC Bank, we recognise the pivotal role that financial institutions play in driving the transition to a low-carbon economy. As part of our commitment to sustainability, our goal is to achieve net-zero status (including financed emissions) in line with the country’s commitments to achieve it by 2050.

Tracking financed emissions presents significant challenges, including customer awareness, data availability, evolving methodologies, and shifting industry standards. As such, we are committed to refining and enhancing our disclosures as the landscape matures. Our approach takes a sector-specific view, mapping emissions across the entire value chain; upstream, midstream, and downstream in key industries. While data limitations currently restrict our ability to report financed emissions in the current report, we remain proactive in seeking solutions to achieve this in 2025.

With the mandatory adoption of SLFRS S1 and S2, we are reinforcing our dedication to transparent and timely reporting, ensuring that our stakeholders have a clear view of our progress.