Building a legal foundation for climate finance in Pakistan

Pakistan's climate finance framework, grounded in constitutional rights and judicial oversight, sets a global model.

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In the face of severe climate impacts, Pakistan is at a pivotal moment. Recent devastating floods, extreme heatwaves and choking smog in Lahore reveal an urgent need for climate resilience. Addressing these challenges requires more than just funding; it calls for a robust legal framework to secure, manage and attract climate finance. As climate-vulnerable countries like Pakistan look toward a sustainable future, a comprehensive legal structure will be crucial. This isn't just policy; it's a call to transform the legal, regulatory and judicial landscape for climate action, creating an ecosystem that can respond proactively to environmental challenges.

One of the most significant steps Pakistan has taken is recognising environmental protection as a constitutional right. This commitment, formalised through the 26th Amendment, enshrines the right to a clean, healthy and sustainable environment. Embedding environmental protection directly into the legal foundation sends a powerful message: the right to a safe environment is fundamental, as essential as any civil right. This constitutional recognition creates a critical framework for climate finance, ensuring that mechanisms supporting climate initiatives are grounded in enforceable law. In a country where climate vulnerabilities are intensified by socio-economic challenges, a constitutional commitment to environmental protection enables citizens to hold the government accountable, laying the groundwork for impactful climate finance initiatives that directly serve the public interest.

Pakistan has taken strides to align its national laws with international climate commitments. The country's approach to agreements such as the UN Framework Convention on Climate Change (UNFCCC) and the Paris Agreement is more than symbolic; it has incorporated 16 multilateral environmental agreements into domestic law. This dual approach - where treaties are not only signed but integrated into national law - ensures these global standards are enforceable domestically. The Pakistan Environmental Protection Act (PEPA) of 1997 plays a key role in integrating these agreements, mandating the government to implement them through regulatory measures. This proactive stance in climate finance governance attracts international finance while ensuring funds are allocated transparently and effectively, aligning with global standards.

For climate finance to be effective, regulatory bodies must actively promote green financing practices. In Pakistan, institutions like the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP) have been instrumental in fostering a supportive environment. SBP has issued directives encouraging banks to adopt sustainable practices, facilitating funding for projects focused on resilience and green energy. SECP, as a regulator of capital markets, promotes transparency in climate finance through sustainability reporting requirements. These measures create accountability in Pakistan's financial system, giving confidence to both local and international investors. With these regulatory initiatives, Pakistan is building a finance ecosystem that effectively supports climate-related projects, from renewable energy to sustainable agriculture.

Pakistan's judiciary has long led in environmental jurisprudence, with landmark cases setting precedents for other nations. Court rulings on the right to a healthy environment and climate adaptation have established Pakistan as a pioneer in judicial climate action. Among the judiciary's leading voices is Justice Mansoor Ali Shah, whose judgments have set foundational principles in environmental justice. Justice Jawad Hassan has also advanced Pakistan's environmental agenda, demonstrating that judicial oversight is essential to ensure climate finance projects are implemented responsibly, with both public and private entities held accountable. Together, Justices Shah and Hassan highlight the judiciary's role in embedding environmental protection into Pakistan's legal framework, providing a stable foundation for climate finance.

Climate finance often involves both local and international players, making effective dispute resolution essential. Pakistan's legal system has increasingly emphasised Alternative Dispute Resolution (ADR) mechanisms, such as arbitration and mediation, which provide reassurance to international investors that their interests will be protected. These tools are not only about expediting legal processes; they are about creating a legal environment that attracts and sustains investment in climate-related projects, ensuring that disputes do not hinder progress.

As Pakistan engages with the global community on climate issues, particularly through forums like COP, it advocates for equitable finance terms, emphasising that vulnerable nations need grants, not loans. Pakistan's leadership could set a precedent for other Global South countries facing similar challenges. Pakistan's approach to climate finance - grounded in legal protections, regulatory oversight, judicial enforcement and global advocacy - offers a model of resilience and sustainability, bridging the gap between climate goals and financial security.

The progress Pakistan has made in establishing a legal framework for climate finance is both timely and essential. A strong legal structure not only attracts and secures climate funds but also ensures accountability and transparency in their use. As Pakistan navigates climate challenges, this framework is a critical tool for building a sustainable, resilient future. Embedding environmental protection within the Constitution, integrating international agreements into domestic law, and fostering dispute resolution mechanisms set a high standard for climate finance governance. This approach shows that with the right legal framework, climate finance can become more than a financial mechanism; it can be a pillar of national resilience.

Pakistan's journey in climate finance law highlights the potential for legal structures to drive sustainable progress. As the world addresses climate change, Pakistan's model of integrating constitutional rights, regulatory reforms and judicial oversight offers valuable insights. The challenge now is for Pakistan to continue building on this foundation, ensuring that its laws protect both the climate and communities for generations to come.