In a recent address, the Governor of the State Bank of Pakistan (SBP) emphasized the critical need to increase credit allocation to climate-resilient projects and environmentally sustainable growth initiatives. Speaking at the event titled “Enabling Green Financing and Green Bonds via Credit Enhancement Solutions,” organized by InfraZamin Pakistan, the Governor urged the financial sector to leverage its potential to meet global sustainability goals while addressing the pressing climate challenges faced by Pakistan.
The Governor’s speech focused on two major concerns: Pakistan’s growing vulnerability to climate change and the urgent steps required to mitigate its effects. Referring to the catastrophic floods of 2022, which caused economic losses of about $30 billion, the Governor stressed the financial and economic implications of climate change. He also reiterated Pakistan’s firm commitment to the Paris Agreement, aiming to reduce emissions by 15% by 2030, with an additional 35% reduction contingent upon external financing. Furthermore, the country plans to generate 60% of its energy from renewable sources in the near future.
The Governor also noted that despite the country’s macroeconomic challenges, Pakistan has made significant strides in addressing climate risks. SBP has introduced several initiatives to support renewable energy projects, including refinancing schemes that had disbursed Rs. 94.7 billion by June 2024. This funding has supported over 4,500 renewable energy projects, contributing a cumulative energy generation capacity of nearly 2,061 MW. These efforts highlight the growing role of the financial sector in driving the transition to a greener, more sustainable economy.
SBP has also developed comprehensive Green Banking Guidelines to help regulated financial institutions manage environmental risks effectively. As part of its ongoing efforts to promote green financing, SBP is working with the World Bank to develop a Green Taxonomy, which will provide a standardized framework for classifying green and transitional activities. This taxonomy will facilitate the flow of capital into sustainable projects by offering clear definitions and criteria for identifying green projects, making it easier for investors to fund climate-resilient initiatives.
Furthermore, the Governor outlined the key role of SBP in supporting green financing through its Strategic Plan for 2023-28. The SBP’s strategic focus includes integrating climate change risk as a key theme, alongside other priorities such as technological innovation, productivity, and competitiveness. By embedding climate considerations into its broader strategic framework, SBP aims to ensure sustainable growth and align with global trends in environmental responsibility.
The Governor also underscored the importance of collaboration between stakeholders, including policymakers, the financial services industry, and private sector entities, in developing viable solutions to climate challenges. With Pakistan being one of the most vulnerable countries to climate change, the Governor stressed that tackling this issue must be a collective effort.
In addition to the Governor’s address, the event featured speeches from notable figures such as Mr. Philip Skinner, Head of Middle East, North Africa, and Pakistan at GuarantCo & Origination Lead at Nature at PIDG; Ms. Maheen Rahman, CEO of InfraZamin Pakistan; and Mr. Muneer Kamal, CEO and Secretary General of the Pakistan Banks’ Association. These discussions highlighted the importance of collaborative efforts to promote green financing and address the challenges posed by climate change.
As the global shift towards sustainability gains momentum, Pakistan is positioning itself to play a significant role in fostering environmentally responsible growth, with the SBP leading efforts to encourage green financing and support the development of climate-resilient projects. Through strategic policies and initiatives, the SBP aims to ensure that Pakistan’s financial sector remains aligned with both national and global sustainability goals.