Recent policy developments in Pakistan to tackle the impact of climate change
In the wake of the disaster caused by the recent floods, and ahead of the 27th United Nations Climate Change Conference (COP 27) in November, the discourse on climate change has come to the fore in Pakistan. The country is responsible for less than 1% of the increase in greenhouse gas emissions causing global ecological damage; largely because of the excessive consumption of resources in countries with higher per capita incomes. However, Pakistan is among the 10 countries most affected by climate change according to the Global Climate Risk Index (published by Germanwatch). This article briefly highlights some of the recent developments in initiatives undertaken by the Government of Pakistan (G.O.P.) and other regulatory agencies across the country to mitigate the growing impact of climate change.
In 2021, the GOP updated its climate action plan, i.e. Nationally Determined Contributions (NDCs) which are subject to the United Nations Framework Convention on Climate Change ( UNFCCC) every five years, as part of an effort under the Paris Agreement to reduce the rise in global temperatures. Under the updated NDCs, Pakistan has set a target of reducing its projected emissions by 50% by 2030; 15% from its own resources and 35% subject to the availability of international climate finance in the amount of 101 billion dollars. It also intends to shift power generation towards renewables (60%) with a complete ban on imported coal as well as a shift in transport towards electric vehicles (30%) by 2030. To help To implement these goals, Parliament has already passed legislation on its way to the Pakistan Climate Change Act 2017 (the Law). While Pakistan’s provinces are responsible for developing and implementing their own environmental laws, the law was passed at the federal level to enable national actors to meet Pakistan’s international climate obligations, as part of a GOP-endorsed National Climate Change Policy.
The GOP’s National Climate Change Policy was also updated in 2021, setting future goals under projects like the Protected Areas and National Parks Initiative to increase national parks, wetlands, and wildlife reserves to at least 15% of the total land in the country by 2023; and the ‘Ten Billion Tree Tsunami Programme’ whose first phase aims to plant and regenerate 3.29 billion plants across Pakistan by 2023. The policy also emphasizes the ‘Ecosystem Restoration Initiative’ (ESRI) which was launched by the GOP in 2019 to facilitate ecologically targeted initiatives such as reforestation and the conservation of biodiversity and the marine environment.
Besides the GOP, and quite importantly, regulators in Pakistan have also incorporated sustainability and climate issues into their regulatory agendas. Among recent initiatives, the Securities and Exchange Commission of Pakistan (the SECP) published a position paper in June 2022 to encourage ESG (environmental, social and governance) practices and provide a framework to facilitate sustainable development. The SECP has already undertaken various efforts to push the private sector towards sustainable practices. For example, the General Companies (Corporate Social Responsibility) Ordinance for listed companies was issued in 2009, followed by the Voluntary Guidelines on Corporate Social Responsibility in 2013, and the inclusion of a requirement based on compliance or explanation for ESG policies and disclosure in listed companies. (Corporate Governance Code) in 2019.
The current SECP document now includes an ESG regulatory roadmap for capital markets in Pakistan, highlighting the need for ESG awareness and advocacy, as well as ESG reporting and disclosures. As part of the roadmap, the SECP intends to launch a dedicated ESG dashboard by June 2023, as a targeted communication platform to capture progress in the adoption of ESG initiatives by real time ; and guidelines for ESG disclosures by September 2023, to pave the way for ESG-based investment and financial products, and an ESG-based index on the Pakistan Stock Exchange (PSX). Separately, the PSX has also taken note and joined the Sustainable Stock Exchanges (SSE) initiative, a United Nations platform aimed at leading the ESG narrative for listed companies. An ESG working group has also been formed by PSX for the development of ESG reporting standards, advocacy, policies and strategies.
There is no doubt that climate policy initiatives and ESG objectives have become increasingly important across industries and sectors, especially also in attracting foreign investment to Pakistan. The GOP has set admirable climate goals to meet its international commitments, but how realistic they are is another matter, especially given Pakistan’s energy crises and heavy reliance on fossil fuels in the energy mix, not to mention the condition (non-negotiable) guarantees provided to coal-fired power plants under construction. Likewise, the advice on climate risks from regulators such as the SECP and PSX is commendable. However, a question mark remains as to the extent to which these guidelines are followed and companies actually engage in practice with climate issues.