Climate change will impact every aspect of Pakistan’s society and economy, while inflation will remain high and continue to cause political instability in the short term due to the water scarcity, a report released by KTrade Securities Limited (formerly known as KASB Securities Limited) stated.
In its report ‘Climate matters — preparing for an upcoming crisis’, one of Pakistan’s leading stock brokerage firms said investment and economic planning processes need to account for climate-induced changes.
“Climate change has started to impact not just our economy but also the way we live,” it said, noting that after the damage caused by the recent rains, the prices of properties in Karachi’s Defence, parts of which were inundated, would fall while they would go up in areas like Bahria Town that had better drainage.
Pakistan has already been labelled as a water-scarce country, the report pointed out. “This, of course, means that agricultural patterns will change over the next 10 years and the supply of water-intensive crops would become limited. This will require a change in dietary habits which is not easy.”
KTrade Securities Limited said the biggest impact of climate change would be on food inflation. It noted the wildfires raging across Europe, saying that this would affect the global food supply.
“A key lesson from Covid and recently with the oil supply shock is that it hurts poor economies disproportionately more. Richer countries can outbid others for access to supply and have better systems for storage and building buffers.”
In turn, food inflation could trigger political unrest, creating a more dangerous and complex situation in emerging markets, according to the report.
Climate change would also accelerate migration patterns in the long run, it added.
KTrade said investment in agricultural infrastructure for storage and logistics could see good returns since Pakistan would need better warehouses and silos to build buffers to protect against the volatility in supplies.
It added that the Pakistan Mercantile Exchange could play an important role in this regard.
“From an investment perspective, we think companies such as Fauji Fertilizer, Engro and Millat Tractor need to invest aggressively in new areas.” It said investment in the agriculture sector had been limited to fertilisers and tractors so far but now it needed to be modernised and given access to formal capital.
These three companies, according to the report, had good balance sheets and would be able to raise green capital.