📈 Climate Crisis: A Strategic Risk for Sri Lankan Business

The Global Climate Risk Index ranks Sri Lanka as the 88th most vulnerable nation. Climate-related disruptions could cost the country up to 3.5% of GDP annually by 2050 if mitigation is not prioritized. • Economic Impact & Losses • Annual average disaster losses: US$ 380 Mn. • Floods: Cost approx. US$ 240 Mn per year. • Energy: 2019 drought slashed hydropower to 15% of total generation, increasing reliance on costly fuel imports. • Sector Breakdowns • Agriculture: Contributes 7.5% to GDP. 2023/24 rice production losses exceeded US$ 150 Mn. Coconut production saw US$ 166 Mn in damages during 2017/18 droughts. • Tourism: 40% of assets are in high-risk coastal zones. Threats include coral bleaching and severe beach erosion. • Apparel & Textiles: Facing pressure from the EU Green Deal and Carbon Border Adjustment Mechanism (CBAM) to verify environmental credentials. • SMEs & Emissions • SMEs comprise 75% of businesses but lack resources to buffer climate shocks. • National Emissions: Energy (64.1%), Agriculture (29.5%), and Industrial Processes (2%). • Strategic Response • Mandatory Reporting: Top 100 listed firms must disclose climate risks (SLFRS S1 & S2) starting January 2025. • Opportunities: Investing in renewable energy (70% target by 2030) and green finance (sustainability-linked loans) to build resilient supply chains.