Published On: Thu, Jun 23rd, 2022
Published in Category: Karachi

Experts stress need to mobilize multiple green finance options to meet NDCs by 2030

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KARACHI: It is imperative to mobilize multiple green finance options, especially in the private sector, to support Pakistan in achieving the Nationally Determined Contributions (NDCs) in terms of reduction in carbon emissions by 2030.


This was stated by the experts at a workshop on the ‘Implementation of Green Financing Mechanisms in Pakistan: A case of Green Financing Tools and SBP’s Green Banking Guidelines’ organized by Sustainable Development Policy Institute (SDPI) in collaboration with German Cooperation.


Romina Khursheed Alam, Special Assistant to the Prime Minister and Convenor of Parliamentary Task Force on SDGs, said that though the COVID-19 emerged as an unprecedented challenge for the international community, it opened a window of opportunity for green recovery and green financing besides realigning the commitment to Sustainable Development Goals. She further said that Pakistan’s progress towards clean energy transition is relatively slow especially in the context of unsustainable high fuel import prices. She called upon the think tanks to provide research support to parliamentarians so that the latter might take up informed deliberations and debates to positively influence the policy making process.


In her welcome remarks, Antonia Peters from the Germany Embassy, said Germany is keen to support Pakistan in achieving the NDCs by mobilizing resources as Pakistan has only 15% of the required financing capacity. She pointed out that the immense potential and interest in green financing investments in Pakistan, as the green bond issued by Pakistan, is oversubscribed in the global market.


Dr. Murtaza Syed, the Acting Governor of State Bank of Pakistan, said that the central bank is actively trying to explore the international financing opportunities like Sustainable Banking and Finance Network and Network for Green Financing System. At the domestic level, he added, SBP is promoting green financing by providing financing guidelines and regulatory frameworks. Moreover, SBP is also providing technical assistance and capacity building facilities to commercial banks, he said, adding that the SBP issued a clean energy financing scheme in 2019 which has financed 1,500 projects with the capacity of 50 MW power generation and the validity of this scheme has been extended till 2024.


SDPI Executive Director Dr. Abid Qaiyum Suleri, said that in the midst of the economic meltdown, green financing is a viable mid to long-term investment opportunity to support economic growth in the country. He also pointed out the challenges of capacity of carbon reporting and accounting in Pakistan, which are preventing the true potential of green financing and clean energy transition to explore.


Sebastian Jacobi, the Country Director of KfW, suggested to adopt the just transition policy in Pakistan as practiced in Germany and to tax import of fossil fuels to reduce reliance on carbon intensive energy. He pointed out that Germany is providing € 400 million to Pakistan to support the clean energy transition by GIZ and KfW.


Achim Deuchert, Green Finance Advisor at GIZ, said that Asia has become the largest economic zone with 80% of infrastructure responsible for 54% of the global carbon emissions. Highlighting the significance of private sector funds, he said that private sector has five times more funds available and the green assets will soon make up 35% of the global assets.


Earlier, speaking at the technical session, Roberto Aparicio from EU Delegation to Pakistan said that the EU is decreasing the imports from carbon intensive markets. He said that the EU delegation has earmarked € 53 million to counter the risks associated with green investment in Pakistan and provided guarantees so that foreign investments might be attracted in this sector.


Dr. Barbara Berkel, a representative from KfW Headquarters, said that they are closely collaborating with Pakistan Microfinance Investment Company to reach 200,000 clients by offering micro loans for home-based solar energy. The corporation is providing high quality products through certified vendors and is developing the capacity of the local partners as well.


Mushtaq Ahmed Memon, Project Manager of UNEP Finance Initiative said that Pakistan lacks clarity on the concept of green financing and challenges in sustainable consumption and utilization of finances as a crucial product. He was of the view that Pakistan must stabilize its human resource capacity, policy and agenda setting so as to explore this sector’s true potential.


Najia Ubaid, the Additional Director of Securities and Exchange Commission of Pakistan said that they have articulated green financing guidelines for the issuance of green bonds as a debt management tool. These bonds can be issued for any project that aims to improve the environmental performance or aims to work towards SDGs. She stressed the need for critical appraisal and evaluation of the projects for which green bonds have been applied. This will ensure effective use of financial resources to support better environmental performance, she believed


Ahmed Saeed, the Head of Social and Environmental Policy, Habib Bank Limited, said that the bank is no longer financing new coal powered projects and aims to go net zero by 2030. He further said that like SBP, HBL is also developing its financial green taxonomy.


Syed Ali Hasan, the Head of Sustainable Initiative, JS Bank, said that there are immense opportunities for commercial banks in green energy transition and the international green financing forums are keen to invest in Pakistan.


Responding to a question, Dr. Murtaza Syed, Acting Governor of State Bank of Pakistan, said that Renewable Energy Policy encourages commercial banks to provide small loans to facilitate solarization of SMEs, cottage industries and domestic consumers.


Dr. Barbara Berkel informed that KfW is currently financing small-scale green energy projects. However, they are keen on exploring bigger investment opportunities.


SDPI Deputy Executive Director Dr. Sajid Amin stressed the need to address challenges in mainstreaming green financing in Pakistan by sensitizing the policy makers about the untapped potential of this sector as an environmental and economic tool. “There is a need to rethink the packaging of green financing in terms of its scale and economic gains it can offer.” In order to make sustainable transition to green financing, the associated risks should be understood, identified, minimized and converted into incentives in the local context, he suggested.


SDPI Research Fellow Dr Shafqat Munir Ahmad suggested that the SBP should guide commercial banks to offer soft loans to domestic consumers to promote clean energy by installing solar energy system connecting to net-metering.


Waqar Ahmed, the Chief Executive Officer of Core Alliance, Head of Corporate Affairs & Sustainability, Nestle, said that the ultimate goal of the alliance is to collaborate with the government to support circular economy by encouraging the collection, segregation, and recycling of 30 million tons of plastic waste annually. He said the government must give attention to waste recycle industry through policy measures, such as low data financing, tax holidays and low tariffs on import of machinery so that the private sector might play a productive part.


Dr. Fakhara Rizwan, Company Secretary, Chief Legal & Corporate Affairs Office, Pakistan Stock Exchange, said that the Exchange has formulated ESG taskforce to help establish the standards for reporting practices and procedures.


Mr. Ghazil Jabbar, Deputy Chief of the Pakistan Private Sector Energy project (PPSE), proceeded by USAID, said that the corporations generally offer their services to SMEs with green projects and not limited to clean energy. He said there is a major potential in carbon credits and climate specific products and projects if the products are restructured and made more market competitive. He said that there is a need for the development of infrastructure and verified unified carbon registry to enable Pakistan to start with carbon credit trade.


Bilal Anwar, Chief Executive Officer of National Disaster & Risk Management Fund, highlighted the importance of role of climate risk insurances and said despite the financial resources are mobilized and made available for mobilization, the international community is struggling to meet the commitments made in the Paris Agreement. This makes green financing a very crucial need of the hour to bridge the financing gaps. In the context of Pakistan, climate change brings the factor of uncertainty in the economy and financial industry which makes it pertinent that green financing is promoted.