Daily Times

The Governor State Bank of Pakistan (SBP) Jameel Ahmed, Friday, emphasized the need to substantially increase credit allocation to projects that enhance climate resilience and promote environmentally sustainable growth.

“It is essential that we leverage our financial sector’s potential to align with the global shift toward sustainability, thereby contributing to both our national priorities and international commitments,” he said while addressing an event titled “Enabling Green Financing and Green Bonds via Credit Enhancement Solutions,” organized by InfraZamin Pakistan.

The Governor’s address focused on two main themes i.e, Pakistan’s vulnerability to climate change and urgency of effectively tackling this challenge. He contextualized Pakistan’s vulnerability to climate change, highlighting the progress made so far and the role of stakeholders, especially policymakers and the financial services industry, in developing viable solutions.

The Governor highlighted the global urgency to address climate change, citing massive natural disasters such as the catastrophic floods in 2022, which caused economic losses of approximately $30 billion in Pakistan.

Jameel Ahmad reiterated Pakistan’s commitment to the Paris Agreement, which includes reducing emissions by 15 percent by 2030, with an additional 35 percent reduction contingent upon external financing. He also noted plans to generate 60 percent of all energy from renewable sources and elaborated on the significant strides made by Pakistan despite macroeconomic challenges, and the critical role played by SBP.

Pakistan is also transitioning away from fossil fuels at a faster rate than many regional economies and it was reflected in the global data compiled by the Energy Institute that share of fossil fuels in Pakistan’s overall energy consumption has declined by 4.8 percentage points; from 86.7% in 2019 to 81.9% in 2023.

Government has taken a number of measures y to make the country and its economy more resilient to the adverse impacts of climate change which included a comprehensive “Resilient, Recovery, Rehabilitation, and Reconstruction Framework” and National Clean Air Policy, he said adding that the government was also promoting electric and hybrid vehicles in the country.

Jameel Ahmed shared that SBP has introduced refinancing schemes for renewable energy, disbursing Rs. 94.7 billion by end of June 2024, financing more than 4,500 renewable energy projects with a cumulative energy generation capacity of almost 2,061 MW. SBP has issued comprehensive Green Banking Guidelines to enable regulated entities to recognize and manage environmental risks arising from their operations, he added.

SBP, in collaboration with the World Bank, is developing a comprehensive Green Taxonomy to establish a standardized framework for the classification of green and transitional activities, he informed and added, “This will provide a clear framework for identifying and classifying green and transitional activities, facilitating the flow of capital into sustainable projects.”

The Governor shared that SBP has included climate change risk as a key theme in its Strategic Plan 2023-28 that outlines a range of goals and policy initiatives for the next five years to ensure sustainable growth including technological innovation, diversity and inclusion, productivity and competitiveness, and strategic communications.

Referring to funding being offered for green projects and energy transition by multilateral institutions like the IMF, World Bank and ADB as well as socially responsible investors, the governor emphasized to tap some of these green compliant financing solutions and access the vast pool of available international capital not only for economic gains but also as a chance to align with global sustainability efforts. He emphasized on creating a mutually beneficial framework for financing sustainable development initiatives by pooling resources and expertise and said that successful implementation of these models and the resultant green investment will help in addressing the challenges of climate change and stimulating the sustainable economic growth and job creation.

The event also featured addresses from 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.