As the world clamours for unified action to combat the ever-pressing specter of climate change, Pakistan stands at a pivotal crossroads in its battle against this formidable environmental adversary. The challenge that looms is not just about grappling with the devastating impacts of climate change itself, but also about confronting an urgent and complex climate finance predicament.
While the global chorus urges a transition to clean energy, it demands no less than a massive annual investment of $4-5 trillion in clean energy initiatives worldwide by 2030—marking a threefold surge from the current investment levels. Yet, Pakistan, teetering on the brink of a climate catastrophe, lags behind in aligning its climate finance strategy with the imperatives of our time, a misstep that relegates it to the rear ranks among its regional peers.
Prominent developed nations, including members of the Organization for Economic Co-operation and Development (OECD) and the BRICS consortium, have committed billions of dollars to bolster climate efforts in developing nations.
However, Pakistan finds itself struggling to establish a robust climate finance ecosystem. This stark disparity is thrown into sharper relief when countries like Mozambique secure over $3 billion in blended finance arrangements, while even more economically advanced counterparts like India and China access over $2.4 billion each.
Despite Pakistan’s instrumental role and co-chairmanship in the Green Climate Fund, its accomplishments in climate financing have fallen disappointingly short. Of the $3.4 billion disbursed by the fund, a mere $4.5 million has been allocated to Pakistani projects, an inconsequential 0.0001% of the total fund corpus. I recall attending the Green Climate Fund’s annual conference in Incheon, South Korea, where Pakistan’s absence contrasted starkly with the presence of other nations, including senior ministers and well-prepared teams, with clearly articulated and meticulously detailed climate finance requisites. Given this alarming disconnect, Pakistan’s path ahead mandates a comprehensive and harmonious approach to climate finance—one that ensures availability, accessibility, and effective deployment.
The evolution of climate finance by the State Bank
At the heart of Pakistan’s strides in solar energy lies the strategic initiatives undertaken by the State Bank of Pakistan (SBP). The journey, spanning over a decade, has been marked by challenges and triumphs. Once availability hurdles were addressed, new challenges emerged pertaining to accessibility and deployment.
A notable insight from my journey reveals the process of educating not only industrial players but also their financial lenders about the intricacies of policy, technical viability, and commercial feasibility. Over time, this process led to a more informed banking sector, ultimately resulting in the development of a resilient ecosystem.
The establishment of an ecosystem for concessional financing catalyzed a solar revolution that invigorated the sector. However, the introduction of subsequent iterations brought unforeseen complexities. While this approach nurtured a burgeoning solar ecosystem with certified vendors, industry leaders, job creation, domestic manufacturing, and financial innovations, recent revisions have created unanticipated obstacles.
The disproportionate channelling of funding to select corporations for comprehensive refinancing left smaller projects, which were financially viable, facing delays and availability challenges. As the solar energy sector matures, a balanced approach that combines concessional financing with other capital sources might have provided a more sustainable trajectory.
A multi-pronged path forward
1- Elevating availability: To elevate Pakistan’s global prominence in climate financing, deeper collaborations between the Special Investment Facilitation Council (SIFC), Ministry of Climate Change and established development programs like the UNDP, GCF, GEF, etc, are imperative. Specially tailored programs, crafted in partnership with Gulf nations, can be a crucial linchpin.
As an opportunity looms on the horizon with less than 80 days —the COP28 conference in Abu Dhabi where climate finance has been identified as one of the 4 key pillars —Pakistan can leverage this platform to unveil meticulously devised industry- and consumer-centric initiatives that underscore its proactive stance against climate change though currently we are losing ground fast due to inaction and lack of preparedness.
2- Enhancing accessibility: Confronting the scarcity of access to concessional finance necessitates a broadened spectrum of accredited financial institutions. While the current landscape includes NRSP and JS Bank, it’s essential to encompass industry giants such as NBP, HBL, UBL, Bank of Punjab, and Askari Bank. Compelling the establishment of dedicated development capital units within these institutions can ensure that sector-specific needs are met through blended finance solutions.
3- Propelling deployment: The specter of exorbitant energy costs continues to erode Pakistan’s industrial competitiveness and overburden national entities. Innovative collaborations between development funds like the UNDP and significant consumers such as the Armed Forces can propel energy efficiency programs.
Moreover, refinancing schemes equipped with favorable terms for entities transitioning 100% to green energy can expedite this transformation. Ventures ranging from electric vehicle infrastructure development to the adoption of organic fuels in agriculture and innovative solutions like community cold storage and agricultural automation mini-grids can be instrumental in catalyzing a sustainable transformation.
Toward achievable goals
The ambition for the interim government should be to at minimum secure $400-500 million of concessionary financing through grassroots programs, strategically employing development finance to then galvanize commercial investment.
By targeting investment barriers and enhancing risk-return profiles, blended finance can catalyze market growth. Given the current scenario, these grassroots efforts could serve as the catalyst that draws much-needed climate finance to Pakistan.
In a world where climate change’s urgency demands collective action, Pakistan’s journey toward securing robust climate financing requires bringing in the right personnel to move forward with a multi-faceted approach.
The synergy of enhanced availability, accessibility, and deployment will alleviate climate finance constraints and empower Pakistan to play a pivotal role in the global fight against climate change.
Copyright Business Recorder, 2023