Islamabad: Experts and stakeholders on Wednesday called for a more enabling financial and policy ecosystem to accelerate Pakistan's industrial energy transition, particularly for small and medium-sized enterprises (SMEs) that face barriers in accessing finance, preparing viable projects, and adopting clean energy technologies.
Speaking during a consultative discussion hosted by the Sustainable Development Policy Institute (SDPI) under its Pakistan Industrial Decarbonization Program (PIDP) and Network for Clean Energy Transition (NCET) in collaboration with International Network of Energy Transition Think Tanks (INETTT), on 'Making the Industrial Energy Transition Investable: Mobilizing Capital for Renewable Energy', the experts emphasized that the challenge extends beyond the availability of capital. What is needed is an integrated ecosystem that can make clean energy investments commercially viable, financially bankable, and accessible to a broader range of industrial consumers.
Ms. Saleha Qureshi, Lead Pakistan Industrial Decarbonization Program, at SDPI, emphasized the importance of appropriate financing mechanisms, including de-risking instruments, guarantees and concessional finance, particularly for industrial sectors undertaking the transition to cleaner technologies.
She noted that Pakistan's estimated financing requirements of approximately $565 billion under its Nationally Determined Contributions (NDCs 3.0) are pitched at the level of the overall economy, and do not disaggregate what industry specifically would need, underscoring the point that climate and energy financing cannot be addressed without a sector-specific approach that reflects the realities of industrial businesses.
She stressed that uncertainty around energy costs, policies and broader economic conditions can affect industrial investment decisions. In this context, she called for consistent policy signals and financing instruments tailored to Pakistan's circumstances. Project preparation support, she added, is particularly important for smaller industries that may have viable energy transition opportunities but lack the resources to convert them into investment-ready projects. Saleha Qureshi also highlighted solar-as-a-Service and RESCO models as potential avenues for reducing the capital requirements faced by industrial consumers.
Ms. Kajol, Project Lead at Agora Industry, highlighted that businesses and industries assess clean energy investments primarily through the lens of business viability, including profitability, payback periods, policy predictability, and the ease of navigating regulatory requirements.
She noted that many SMEs and smaller businesses lack the financial and technical capacity to independently develop and pursue clean energy projects, making it difficult for them to attract developers and financiers.
She discussed the potential of demand aggregation for SMEs operating in industrial clusters. Rather than developing multiple small projects individually, aggregating the energy requirements of several small businesses could create larger, more investable projects while reducing transaction costs and making it easier for developers to provide solutions at competitive rates, she added.
She also stressed the importance of simpler approvals, single-window mechanisms and clear commercial frameworks, including arrangements for open access, power purchase agreements and other market-based mechanisms.
Mekaeel Malik, Founder, Climate Finance Pakistan, pointed to broader constraints within Pakistan's financing landscape, including limited access to private-sector credit, risk aversion within the financial sector, and challenges faced by entrepreneurs and clean technology businesses in raising capital. He emphasized that financing needs to be accompanied by stronger technical competence so that promising ideas can be developed into scalable and commercially viable ventures.
He also highlighted policy consistency as a critical factor in attracting investment. Drawing on Pakistan's experience with solar energy and electric mobility, he noted that when technologies become economically attractive and are supported by appropriate policy frameworks, consumers and businesses can respond quickly. He stressed the need for easier access to capital and greater coordination across government and financial institutions to enable such transitions to scale.
Muhammad Sheraz Aamir, Associate (Energy and Climate) at Renewables First, highlighted the challenges faced by SMEs that often operate with limited working capital, insufficient collateral and restricted access to conventional bank financing. He pointed to credit guarantees and concessional finance as important instruments for enabling smaller industrial consumers to participate in the energy transition. He also discussed the potential of asset securitization, co-lending and aggregation of distributed energy resource projects as mechanisms for overcoming the limitations of small individual project sizes.
He added that solar and battery energy storage projects could potentially be structured and combined in ways that make them more attractive to financiers and allow businesses to access clean energy without bearing the full upfront investment burden. Mr. Sheraz further stressed that Pakistan has historically demonstrated capacity to develop effective energy-sector policies, but challenges often emerge in their continuity and implementation. Predictable policy signals are therefore essential for creating confidence among both industries and investors.
Mashhood Urfi, Energy Transition Officer, at Alternate Development Services, emphasized that many of the puzzle pieces required for industrial climate finance are already present, but greater prioritization is needed to make existing instruments accessible to businesses. He raised the question of whether available financial mechanisms are effectively reaching SMEs and MSMEs, particularly in sectors such as textiles.
Mashhood further pointed to a deficit of information and trust between industrial consumers and financing institutions. Improving access to reliable information, strengthening institutional coordination and helping businesses understand available transaction structures will be important for developing a stronger pipeline of investable industrial transition projects.
The discussion also highlighted the importance of coordination among institutions already working on aspects of the financing challenge. Participants noted the role of institutions such as the State Bank of Pakistan, Securities and Exchange Commission of Pakistan, development finance institutions, government agencies, chambers and industry associations in developing a more collaborative framework for industrial transition finance.
In conclusion, Arfa Ijaz, Researcher at SDPI's Energy Unit, drew together the threads raised through the session, noting that the conversation had moved from the specific challenges facing individual SMEs to the reforms needed to support them at scale, from demand aggregation and de-risking instruments to policy predictability and stronger coordination between financing institutions. She observed that the range of perspectives shared reflected a shared recognition, that Pakistan's industrial energy transition depends less on any single intervention than on connecting the tools, institutions and policy signals that already exist. She thanked participants for a wide-ranging and constructive discussion and reiterated that translating these ideas into a coordinated pipeline of bankable projects would be the essential next step.
The discussion concluded that Pakistan does not necessarily need to create an entirely new financing architecture. Rather, existing financial instruments, institutions and policy mechanisms need to be better connected through project preparation support, demand aggregation, risk-sharing mechanisms, appropriate financing products, predictable policies and stronger institutional coordination.