InfraZamin Pakistan, SBP, PBA Conference on Green Financing & Green Bonds
Issues on promoting climate financing in Pakistan were discussed along with technical information on how to promote climate financing
InfraZamin Pakistan (IZP), SBP and Pakistan Banks’ Association held an event titled ‘Enabling Green Financing and Green Bonds via Credit Enhancement Solutions’ in Karachi, Pakistan on 08-Nov-2024. The conference had high-level representation from SBP, SECP, Ministry of Finance, commercial banks, the Private Infrastructure Development Group (PIDG – sponsors of IZP) and InfraZamin Pakistan.
The presentations at the event focused on enhancing green bond issuances in Pakistan and the work done by international DFIs such as PIDG in uptake of Green Bonds and Green Financing in Low-Income Countries (LIC) in Asia, Africa and the Middle East.
Some of the high-level issues discussed at the conference are:
1. Pakistan is in dire need of climate friendly infrastructure which requires financing from donors as well as the private sector. The government alone cannot meet the huge requirement of climate financing in Pakistan.
2. Ultimately economic incentives have to align for banks, borrowers and credit guarantee institutions, so that banks can provide requisite financing, credit guarantee companies can (partially) underwrite the loans and borrowers can utilize green financing
3. The government and the regulators have a role to introduce and shape regulations which nudge financial institutions and borrowers towards enhancing green and sustainable financing.
4. All stakeholders (external, public and private) need to take a leap of faith to promote climate financing in Pakistan.
The following is some interesting technical information shared regarding green / climate financing:
1. International Capital Markets Association (ICMA) and Loan Market Association are two international bodies that provide criteria for Green and Sustainable Bonds
2. The International Sustainability Standards Board (ISSB) released its first two International Sustainability Disclosure Standards - IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2: Climate-related Disclosures for improving sustainability reporting across the globe.
3. Climate Bond Standard are issue by two international bodies Climate Bonds Initiative and International Capital Markets Association
4. Climate bonds are verified by two international bodies: DNV and Moody’s
5. We need to build local accreditation systems for green / sustainable projects in Pakistan as the cost of international accreditation is very high
6. Central banks have used the following policy toolkits to promote green / sustainable financing:
a. Taxonomy of Green Financing
b. Green Credit Guidance
c. Green Bonds Collateral Framework
d. Climate Related Disclosures
e. Research and Analytics
f. Exposure Restrictions on Fossil Fuels
g. Mandatory ESG Risk Management Standard
h. De-risking Mechanism
i. Inclusion of Climate Risk in Risk Assessment
j. Climate Stress Testing
k. Reserve Requirements and Risk Weightages
l. Tax Credits / Tax Relief / Government Support
7. The People’s Bank of China, European Central Bank, Monetary Authority of Singapore and Bank Negara Malaysia are some of the leading central banks in the areas of green / sustainable financing
8. EU has devised climate stress testing for their banks’ loan portfolio
9. Delta Blue Carbon Project on Mangrove forest reforestation in Sindh is considered a gold standard project in climate financing from Pakistan
10. Global technology companies such as Microsoft, Apple, Google etc. have pledged to become ‘Net Zero’ in terms of carbon emissions. The goal of these companies can only be achieved by buying carbon credits which is increasing the market for climate financing.