Sri Lanka’s Securities and Exchange Commission (SEC) plans to introduce carbon credits as an underlying asset class in the upcoming multi-asset derivatives exchange at Colombo’s Port City.
Initially, the SEC began crafting a regulatory framework specifically for a carbon credit exchange. However, after a thorough review, it was determined that the new SEC Act, along with its rules and regulations, already permits the licensing of a derivatives exchange across various asset classes, including the relevant depository and clearing house. This discovery led to the decision to launch a multi-asset derivatives exchange where carbon credits can be traded.
Earlier this year, the SEC issued an Expression of Interest (EOI) request, inviting eligible entities to take part in establishing and operating the exchange. Responding to market feedback, the SEC extended the submission deadline to allow more time for interested parties.
The SEC highlighted that this initiative is not only intended to spur capital market growth but also to support Sri Lanka’s economic recovery and sustainable development. By enabling carbon credits to be traded as derivatives, the SEC aims to expand the capital market’s reach while fostering sustainable business opportunities.
“This initiative will offer a price discovery mechanism for carbon credits, allowing companies to trade their carbon credit units. It is also expected to enhance access to carbon financing, supporting investment and conservation efforts across multiple industries,” the SEC said.
The inclusion of carbon credits is expected to attract both local and international investors, generating essential foreign inflows.
To ensure the initiative meets global standards, the SEC conducted a cross-jurisdictional analysis, assessing regulatory and market factors. This analysis provides strategic guidance for the carbon credit exchange’s development, addressing potential risks and ensuring adherence to international best practices, the SEC added.