KARACHI: The State Bank of Pakistan (SBP) on Wednesday directed financial institutions to align their green banking policies with the newly-notified Pakistan Green Taxonomy (PGT), a science-based classification system for identifying green economic activities and investments in the country.
The strategic objective of the Pakistan Green Taxonomy is to scale up green/climate/sustainable financing as well as mitigate climate-related financial risks. In the first phase of the PGT, Pakistan has prioritized the identification of economic activities that substantially contribute to climate change mitigation and adaptation.
The SBP, in a circular sent to heads of the banks and Development Financial Institutions (DFIs), said the move is aimed at supporting the country’s transition toward greener economic practices, adding that it will continue to provide guidance through awareness sessions and related support material, a digital navigation tool.
To promote green and sustainable economic activities, the Government of Pakistan has notified PGT, which provides a science-based framework that sets a uniform national definition for environmentally sustainable activities and investments, offering a single, common, and consistent definition of “Green” across the board.
Banks & DFIs: SBP revises DFSs of all RCOA returns
Accordingly, the SBP has advised the Banks/DFIs to use PGT as a reference guide for formulating and updating their green banking policies. SBP said that it will continue to play its due facilitative role through awareness sessions and other support measures.
A green taxonomy provides guidance for users to classify and identify green economic activities that contribute substantially to specific environmental objectives. In addition to this, the taxonomy can be used to comply with disclosure and reporting requirements, structure green financial products, identify use of proceeds for green bonds/Sukuk/loans, identify opportunities for attracting global climate finance, contribute to sustainability strategies of companies, modulate decarbonisation and transition plans, policies, etc.
According to the International Capital Markets Association (ICMA), a green taxonomy is a classification system for identifying activities or investments that will move a country toward meeting specific targets related to priority environmental objectives.
Green taxonomy aims to help financial market participants and others determine which investments can be labelled “green” or environmentally friendly for specific jurisdictions. This support for making informed decisions on environmentally friendly investments can encourage the undertaking of projects and activities that contribute to specific environmental objectives and help scale up environmentally sustainable economic development.
The environmental objectives covered in the Pakistan Green Taxonomy are climate change mitigation, climate change adaptation, sustainable use and protection of water resources, protection of healthy ecosystems & biodiversity, pollution prevention and control, promotion of circular economy and sustainable land management.
Copyright Business Recorder, 2025
Comments
Comments are closed for this article.