Amir Saeed

Pakistan’s economic future depends on a strategic shift towards green bonds and sustainable investments, with a strong focus on transforming its energy sector.

Talking to WealthPK, Afia Malik, an energy expert at Pakistan Institute of Development Economics (PIDE), highlighted that Pakistan has made significant strides in green finance, starting with Telenor Microfinance Bank’s green bond worth Rs700 million, and there have been numerous bond issuances from both the public and private sectors.

To ensure continuity, she emphasised the need to increase awareness of green finance and ESG (environmental, social, and governance) principles among businesses, investors, and the public. She also stressed the importance of strengthening the skills of financial institutions and regulators for sustainable finance and diversifying the green bond market to attract more investors.

“Reliable data is essential for making informed decisions. The country needs to improve its data collection and reporting mechanisms. Transparency and high reporting standards can build trust among local and international investors. Similarly, aligning the regulatory framework with global best practices will create a stable investment environment and attract international investors,” Afia noted.

The PIDE energy expert emphasised that public-private partnerships are vital for sustainable finance in Pakistan. “Governments can provide incentives, while the private sector brings innovation and expertise.”

“Furthermore, tax incentives can draw private sector investment and promote sustainable economic growth. The government could offer subsidies for eco-friendly projects, supporting the development of green initiatives and aiding in the transition to a low-carbon economy,” she noted.

Talking to WealthPK, Farhan Wahid, a green finance researcher at Quaid-i-Azam University, Islamabad, pointed out that Pakistan has demonstrated its ability to attract sustainable investments, highlighted by the success of its first green Eurobond in 2021, which raised $500 million.

“To meet climate adaptation and mitigation targets, Pakistan needs to leverage tools like green bonds and sustainability-linked loans to empower the private sector to take a leading role in climate action. The country requires an estimated $348 billion by 2030 for climate financing to combat vulnerabilities posed by climate change,” the energy expert underscored.

According to Wahid, localising renewable energy technologies is pivotal for developing countries like Pakistan to achieve energy security. He highlighted the necessity of adopting best practices from the Global North through technology transfer and information diffusion.

“Pakistan has overinvested in coal plants, which strains national finances, and incorporating local coal into the energy mix may create future challenges under international mechanisms,” he noted.

The green finance researcher suggested that policy reforms for green bonds should focus on creating a transparent and efficient framework to attract investment for sustainable projects. “The introduction of green bonds and concessional loans are examples of such policies. A green energy policy would help the country meet its energy requirements while reducing its dependence on imports and lowering the cost of energy.”

Credit: INP-WealthPk