In the wake of the catastrophe caused by the recent floods, and ahead of the 27th UN Climate Change Conference (COP 27) in November, the discourse on climate change has been brought to the fore in Pakistan. The country is responsible for less than 1% of the rise in greenhouse gas emissions causing global ecological damage; largely due to the excessive resource consumption of higher per capita income countries. Yet, Pakistan is one of the top 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 (GOP) and other regulatory bodies in the country to mitigate the escalating impact of climate change.
In 2021, the GOP updated its Climate Action Plan i.e., the Nationally Determined Contributions (NDCs) that are submitted 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 itself a target of a reduction in 50% of its projected emissions by 2030; 15% through its own resources and 35% subject to the provision of international climate finance amounting to USD 101 billion. It also intends to shift power generation towards renewable energy (60%) with a complete ban on imported coal along with a move of transportation towards electric vehicles (30%) by 2030. To assist in implementing these targets, Parliament has already enacted legislation by way of the Pakistan Climate Change Act 2017 (the Act). While provinces in Pakistan are responsible for making and implementing their own environmental laws, the Act has been passed at the federal level to enable domestic actors to meet Pakistan’s international climate obligations, within the framework of a national climate change policy approved by the GOP.
The National Climate Change Policy by the GOP was also updated in 2021, setting future targets under projects such as 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’ the first phase of which aims to plant and regenerate 3.29 billion plants across Pakistan by 2023. The Policy also emphasises the ‘Ecosystem Restoration Initiative’ (ESRI) which was launched by the GOP in 2019 for facilitating ecologically targeted initiatives such as afforestation and biodiversity and marine conservation.
Besides the GOP, and quite importantly, regulators in Pakistan have also made sustainability and climate issues part of their regulatory agendas. Of 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 previously undertaken various efforts to nudge the private sector towards sustainable practices. For instance, the Companies (Corporate Social Responsibility) General Order for listed companies was published in 2009, followed by the Corporate Social Responsibility Voluntary Guidelines in 2013, and the inclusion of a comply or explain based requirement for ESG policies and disclosure in the Listed Companies (Code of Corporate Governance) Regulations in 2019.
The SECP’s current paper now includes an ESG regulatory roadmap for capital markets in Pakistan, emphasising the need for ESG awareness and advocacy and ESG reporting and disclosures. As part of the roadmap, the SECP intends to launch a dedicated ESG dashboard by June 2023, as a focused communication platform to capture the progress on adoption of ESG initiatives on a real time basis; and guidelines for ESG disclosures by September 2023, to eventually pave the way for ESG based investment and financial products, and an ESG based Index at the Pakistan Stock Exchange (PSX). Separately, the PSX has also taken note and joined the Sustainable Stock Exchanges (SSE) Initiative, a UN platform aiming to lead the ESG narrative for listed companies. An ESG taskforce has also been formed by the 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, particularly also for attracting foreign investment in Pakistan. The GOP has set admirable climate targets to meet its international commitments, but whether they are realistic is another question, particularly given Pakistan’s energy shortage crises and its heavy dependence on fossil fuels in the energy mix, not to mention the (non-negotiable) state guarantees provided to the under-construction coal fired power plants. Similarly, climate risk guidance from regulators such as the SECP and PSX is commendable. However, a question mark still exists over the extent to which such guidance is being followed and companies are effectively engaging with climate issues in practice.
Source : Lexology