Green initiatives set to draw investment

Pakistan is poised to become a key destination for investment in green initiatives as the government has decided to launch the Pakistan Green Taxonomy backed by the World Bank to attract capital inflows into climate resilience and sustainable growth.

At present, the country is facing heavy downpours and the worst floods in different regions. The Ministry of Industries and Production has also attributed the reduction in sugar production to the changing weather patterns, which resulted in a lower sugarcane harvest.

The Green Taxonomy helps policymakers, banks, financial institutions and investors prioritise investments that contribute to climate risk mitigation and adaptation.

The Ministry of Climate Change and Environmental Coordination has reaffirmed Pakistan's commitment to sustainable development and climate resilience. In this context, the ministry has developed the Green Taxonomy to clearly classify green activities and investments. This classification will attract capital inflows into sectors that are critical for enhancing climate resilience and sustainable economic growth.

The Climate Change and Environmental Coordination Division informed the Economic Coordination Committee (ECC), in a recent meeting, that the Pakistan Green Taxonomy was a collaborative effort between the Ministry of Climate Change, the Ministry of Finance and the State Bank of Pakistan with technical support from the World Bank.

The taxonomy is designed to provide clarity to financial markets on identifying green economic activities, enhance transparency of green investments and financial products, mitigate climate-related financial risks and help the financial sector channel capital towards activities aligned with Pakistan's environmental and climate goals.

It offers a credible framework for recognising green projects and activities. Given the decline in available climate finance, this taxonomy helps prioritise investments that contribute to climate risk mitigation and adaptation. It is expected to unlock the potential of private finance, particularly from commercial banks, for climate-related projects in Pakistan.

The Climate Change Division added that the taxonomy had been developed through a rigorous consultative process. This included stakeholder mapping, the formation of working and technical groups and the finalisation of a road map.

Sector-specific consultations were held with technical experts and public feedback was sought on the draft taxonomy, followed by a validation session. All critical and substantive feedback was duly considered and incorporated.

A frequently-asked-questions (FAQ) document was prepared to assist in understanding and approving the Green Taxonomy by addressing key concepts, criteria and implementation considerations.

The Climate Change Division informed the ECC meeting that the final draft of the Pakistan Green Taxonomy had been circulated among stakeholders across ministries, relevant public entities and provincial departments. Feedback from the ministries and departments had been received.

These ministries and departments included the Ministry of Planning, Development and Special Initiatives, Ministry of Industries and Production, Ministry of Communications, Pakistan Civil Aviation Authority, Ministry of Railways, Prime Minister's Office/ Board of Investment, Ministry of Information Technology and Telecommunication, Ministry of Commerce, National Energy Efficiency and Conservation Authority, Private Power & Infrastructure Board, Securities and Exchange Commission of Pakistan, National Disaster Management Authority, Ministry of Housing and Works and National Electric Power Regulatory Authority.

In light of this, the Climate Change Division submitted the draft Pakistan Green Taxonomy for the consideration and approval of the ECC under Rule 17(1)(2)(a) of the Rules of Business. It requested the ECC to give the green light to the proposal.

The Economic Coordination Committee of the cabinet considered the summary submitted by the Ministry of Climate Change and Environmental Coordination titled "Approval of Pakistan's Green Taxonomy," and gave its nod to the proposal.