Governor SBP urges banks to ramp up funding for climate-resilient projects

InfraZamin Pakistan, the country’s leading credit enhancement guarantor, joined forces with the State Bank of Pakistan (SBP), Pakistan Banks’ Association (PBA), and the Private Infrastructure Development Group (PIDG) to host a seminar titled “Enabling Green Financing and Green Bonds via Credit Enhancement Solutions” on Friday.

The event spotlighted strategies to expand green financing and support Pakistan’s transition toward climate resilience. Jameel Ahmed, Governor of the SBP, expressed his commitment to advancing a sustainable finance ecosystem. “The SBP is leading from the front to provide a conducive environment to the financial industry and businesses to achieve the common objective of achieving climate resilience. For this purpose, SBP has taken both direct and indirect measures,” he said.

Highlighting SBP’s efforts, he pointed out that Rs. 94.7 billion in financing has been disbursed under renewable energy schemes by June 2024, funding over 4,500 projects that produce nearly 2,061 MW of clean energy. Ahmed further emphasized SBP’s focus on empowering financial institutions to embrace green financing through comprehensive Green Banking Guidelines, which address environmental risks in their operations.

Moreover, in partnership with the World Bank, SBP is developing a Green Taxonomy to establish a standardized system for categorizing green projects. InfraZamin’s CEO, Maheen Rahman, emphasized the critical role of private sector involvement. “For Pakistan to unlock the full potential of green financing, it is vital that we bring the private sector on board alongside government and regulatory bodies. At InfraZamin, our mission is to bridge financing gaps by providing credit enhancement solutions that reduce investment risk and make it feasible for the private sector to support green bond issuance and other sustainable projects,” she stated.

Muneer Kamal, CEO and General Secretary of the PBA, stressed the urgency of adopting sustainable finance. “As a nation on the frontlines of climate vulnerability, Pakistan needs more than just incremental changes. Sustainable finance is not merely an option—it’s a responsibility we, as an industry, must embrace. PBA stands committed to supporting green financing solutions and driving investments toward a low-carbon economy,” he said, adding that such partnerships are essential for transforming Pakistan’s financial sector.

Throughout the seminar, speakers highlighted the need to build on current regulatory advancements, such as SBP’s work on a green taxonomy to standardize the identification and support of sustainable projects. They also discussed how the SBP’s Green Banking Guidelines are setting a foundation for sustainable finance.

Reflecting on experiences from other developing economies, the participants explored methods to encourage green financing, reduce costs, and minimize risks for private investors, thereby boosting private sector participation. They also underscored the importance of building capacity within the sector to foster growth in green financing and to adapt to the shifting landscape of sustainable investment.

Practical recommendations emerged from the discussions. PIDG suggested offering grants to help companies with global certification costs, while InfraZamin advocated for credit enhancements to ease balance sheet pressures on issuers and minimize investment risks for investors. Adding a regional perspective, Philip Skinner, Head of MENA and Pakistan at GuarantCo, noted, “With the right support, the private sector can lead the way in the development of the market for certified green, social, and sustainability bonds and loans.

GuarantCo and PIDG have supported corporate green bond issuances in countries like Bangladesh, Vietnam, Cambodia, Kenya, and Zambia, and have seen first-hand that the barriers to entry are much lower than perceived.”