KARACHI: The State Bank of Pakistan (SBP) has issued a new regulatory framework for the effective management of climate-related financial risks, citing the country’s high vulnerability to climate change and the growing exposure of the financial sector to climate-related shocks.
Pakistan is among the most climate-vulnerable countries in the world, making its banks and other financial institutions increasingly exposed to physical risks such as floods and heatwaves, as well as transition risks linked to shifts toward a low-carbon economy.
Recognizing the potential impact of climate change on financial sector’s resilience and soundness, SBP is issuing the Regulatory Framework for Effective Management of Climate-related Financial Risks.
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The framework aims to ensure that Financial Institutions (FIs) effectively identify the climate risk drivers and integrate climate-related financial risk considerations into their governance, business strategy, and risk management frameworks.
The SBP has asked all the FIs to ensure the compliance to the framework by June 30, 2029. For the purpose, FIs are required to submit, board-approved, time-bound implementation plans and targets to SBP by September 30, 2026.
The implementation plans must, at a minimum, cover the establishment of appropriate governance structures, development or updating of relevant policies and procedures, integration of climate risks into existing risk management and stress testing frameworks, and capacity building of staff, including board members and senior management.
To ensure effective implementation of the framework, SBP will facilitate through trainings, awareness sessions, and other support measures, the SBP said.
Copyright Business Recorder, 2025
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