Islamabad Launches Innovative Sustainable Finance Products to Tackle Climate Change Challenges
Key Takeaways:
1. Pakistan has issued its first-ever Shariah-compliant Green Sukuk worth $106 million to fund water infrastructure projects.
2. The issuance reflects Pakistan’s commitment to sustainable finance amid growing climate change challenges.
3. Pakistan is restructuring its debt management and planning to launch innovative funding products to attract local and foreign investors.
Islamabad, Pakistan – Pakistan has taken a significant step toward sustainable finance by issuing its inaugural Shariah-compliant Green Sukuk bonds worth Rs30 billion (approximately $106 million). The funds raised through this issuance will be dedicated to critical water-related infrastructure projects across the country, the Finance Minister Muhammad Aurangzeb announced on Friday.
This landmark Green Sukuk issuance, now listed on the Pakistan Stock Exchange, marks a milestone in Pakistan’s efforts to align its financial instruments with environmental sustainability goals. The move also increases the share of Shariah-compliant bonds in Pakistan’s overall debt portfolio to about 14 percent.
“Climate change is an existential threat for Pakistan,” Minister Aurangzeb said during the gong ceremony at the Karachi Stock Exchange. He emphasized that the proceeds from the Green Sukuk will support projects aimed at mitigating the adverse effects of erratic weather patterns, including heatwaves, untimely rains, cyclones, and droughts, which have increasingly impacted Pakistan in recent years.
Pakistan has faced devastating climate-related disasters, including the 2022 floods that caused over 1,700 deaths, affected 33 million people, and resulted in economic losses exceeding $30 billion. These events have underscored the urgent need for climate-resilient infrastructure and financing.
To bolster its climate resilience, Pakistan has secured substantial international support, including a $500 million loan from the Asian Development Bank (ADB) for the Climate Change and Disaster Resilience Enhancement Program and a $20 billion loan framework from the World Bank focused on climate adaptation and food security. Additionally, the International Monetary Fund (IMF) recently approved $1.4 billion in climate financing for Pakistan.
Minister Aurangzeb highlighted ongoing reforms in Pakistan’s debt management office to align with global best practices. He also announced plans to introduce more innovative funding products to meet both domestic and international investor demand, signaling a proactive approach to sustainable investment.
“We will continue to engage the investor community very proactively to get your feedback,” he added. “Stay tuned. You will be hearing more from this space as we go forward.”
