KARACHI: Finance Minister Muhammad Aurangzeb on Tuesday announced that Pakistan will have a green taxonomy framework by April.

Virtually speaking at the first day of the Pakistan Climate Conference, organised by the Overseas Investors Chamber of Commerce and Industry (OICCI), the minister said a green taxonomy framework would provide a rulebook for businesses to understand the classification system that defines and categorises economic activities or investments based on their environmental sustainability.

It will guide investors in identifying and supporting activities that contribute to environmental objectives and hence be able to earn carbon credits and access green financing. “There is no dearth of financing,” said the finance minister, talking about the $9 billion pledges secured in Geneva following the 2022 floods. However, little of that financing materialised because of a lack of investable and bankable initiatives.

Mr Aurangzeb mentioned Pakistan’s access to international funds such as the Green Climate Fund and the Adaptation Fund. “The success of Pakistan’s first green Eurobond in 2021, which raised $500 million, highlights our potential to attract sustainable investments. Scaling up such initiatives, alongside innovative financing tools like green bonds, sustainability-linked loans, and carbon credits, will empower the private sector to play a larger role in climate action,” he said.

With a green taxonomy framework, businesses will understand ‘green’ in terms of structure, funding, monitoring, and reporting, which will measure up to international scrutiny. In the upcoming review with the International Monetary Fund, the finance minister expressed the intention of a detailed discussion regarding the climate resiliency facility.

‘Blue chip’ projects

The consensus that has emerged from the third Pakistan Climate Conference was the role of the private sector in taking on ‘blue chip’ projects. The first few projects undertaken will showcase the country’s credibility and will have to withstand robust international scrutiny to make way for green financing.

Three key elements emphasised for successful green projects were: transparency — establishing systems that track how funds are collected, allocated and utilised; accountability — robust monitoring and evaluation to regularly assess the impact of funded projects; and inclusivity — ensuring that the most vulnerable and marginalised communities, who bear the brunt of climate change, are represented in decision-making and solutions.

Published in Dawn, January 29th, 2025