SBFN Member Since:

2015

Member Organisations

State Bank of Pakistan

Progress Against Pillars and Sub Pillars

This graphic can also be found within this country’s 2019 Country Progress Report. 

Framework Documents

CountryPolicies/ Principles/ GuidelinesYearIssuer
Pakistan

Green Bonds Guidelines

2021Securities and Exchange Commission of Pakistan
Pakistan

Revised Financing Scheme for Renewable Energy

2019Securities and Exchange Commission of Pakistan
Pakistan

Refinancing Facility for Modernization of SMEs

2019State Bank of Pakistan
Pakistan

Environmental and Social Risk Management Policy and Procedures

2018State Bank of Pakistan
Pakistan

Green Banking Guidelines

2017State Bank of Pakistan
Pakistan

Climate Change Financing Framework

2017Government of Pakistan
Pakistan

Nationally Determined Contributions

2017Government of Pakistan
Pakistan

Financing Scheme for Renewable Energy

2016Government of Pakistan
Pakistan

CSR Voluntary Guidelines

2016State Bank of Pakistan
Pakistan

National Climate Change Policy

2013Securities and Exchange Commission of Pakistan

Strategic Development - Alignment with global E&S standards and best market practices

S1.1 – Does the framework make reference to international E&S targets (SDGs, Paris Agreement, Global Compact)?

No

S1.2 – Does the framework make reference to established international E&S risk management standards (IFC PSs, EPs)?

No

S1.3 – Does the framework make reference to established international sustainability reporting standards (GRI, SASB)?

No

S1.4 – Does the framework make reference to established international climate finance reporting standards (TCFD)?

No

S1.5 – Does the framework ask to make E&S policies, practices and results externally verified (assurance, independent review)?

No

Strategic Development - Multi-stakeholder collaboration

S2.1 – Does the framework involve interagency collaboration between financial supervisors/regulators, industry association, and FIs?

Yes

S2.2 – Does this collaboration also include other public agencies (e.g., environmental agencies, ministries)?

No

S2.3 – Does this collaboration also include representatives of civil society (e.g., NGOs, associations, media)?

No

Strategic Development - Alignment to NDCs and with National or Regional Climate Change Targets

S3.1 – Is the framework aligned with national NDCs or other national and regional policies on climate?

Yes

(1) – Annexure 2 §3 p v(1) – Annexure 3 §1 & 2.6
The rules and regulations of Federal EPA relevant for the banks/DFIs include the following …Pakistan is signatory to the following MEAs/conventions/protocols and has ratified all of them. Consequently, it is mandatory for the state to ensure the implementation of the agreements that have been endorsed. As part of the due diligence procedure banks/DFIs are advised to get familiar with the following MEAs, relate them to activities of their clients and include the compliance with MEAs in the standard due diligence procedure. from the Paris Agreement conclusion : “Pakistan reiterates its commitment and obligations towards the United Nations Framework Convention on Climate Change and Paris Agreement,”
Pakistan Green Banking Guidelines (SBP, 2017)

S3.2 – Has the SBN member identified the main climate risks (transition/physical) for their local financial sector?

Yes

(1) – Annexure 1
Pakistan Green Banking Guidelines (SBP, 2017)

ESG Integration - Governance of E&S

Role of Governing Bodies on E & S

E1.1 – Does the country policy require one of the FI’s governing bodies (e.g., Board of Directors, Executive Committee, Supervisory Board, etc.) to approve an E&S strategy?

Yes

(1) – 2,1 §i p4
The Board of Directors (BoDs) of banks/DFIs should accept overall responsibility of green banking and develop Green Banking Policy of their respective institutions.
Pakistan Green Banking Guidelines (SBP, 2017)

E1.2 – Does the policy require management to report on E&S strategy implementation to the governing bodies?

Yes

(1) – 2,2 §ii p4
The senior management should develop strategies, administrative procedures and accountability mechanisms for implementation of Green Banking Policy approved by the Board.
Pakistan Green Banking Guidelines (SBP, 2017)

E1.3 – Does the policy require FI operational bodies to report to the governing bodies (or specific Board committee) on implementation of the E&S strategy?

No

Organization

E1.4 – Does the framework ask FIs to define E&S roles and responsibilities?

Yes

(1) – 2 p4 and 5
Chapter 2 Responsibilities, Management and Organization
Pakistan Green Banking Guidelines (SBP, 2017)

E1.5 – Does the framework highlight the E&S roles of front office staff and second lines of defense (e.g. risk officers and/or compliance officers)?

Yes

(1) – 2.2 §vi p5
Audit & Compliance: Green banking is to be incorporated in the scope of compliance and routine internal controls. Appropriate walls should be established between internal audit function and units/lines (and their management) involved in any day-to-day green banking activities to ensure its independence. Specific green banking related checklists should be developed and made part of internal audit reports for each branch and head office unit.
Pakistan Green Banking Guidelines (SBP, 2017)
E1.6 – Does the framework ask FIs to define E&S competencies for each role?

Yes

(1) – 2.3 §i p5
The Green Banking Officer should be well versed with environmental risk assessment and monitoring, green product development, and operational improvement measures to reduce resource consumption.
Pakistan Green Banking Guidelines (SBP, 2017)

E&S Risk Management

E&S Policy

E2.1 – Does the framework ask FIs to formalize an E&S or ESG policy?

Yes

(1) – 1.2 §2 p2
Fully implemented, it is expected that banks/DFIs have a system in place that includes the following features: – A policy on green banking, which informs stakeholders such as banks/DFIs’ clients, investors and employees, authorities and peers that environmental considerations are part of the overall banking activities and how this will impact the mutual business relationship.
Pakistan Green Banking Guidelines (SBP, 2017)

E2.2 – Does the framework encourage FIs to go beyond E&S requirements of local laws and regulations?

Yes

E2.3 – Does the framework ask FIs to set E&S objectives and targets?

Yes

(1) – 2.3 p5
The Office is expected to support the Board in development of Green Banking Policy and also facilitate other functions/departments in development of green banking strategies/targets and budgets.
Pakistan Green Banking Guidelines (SBP, 2017)

E2.4 -Does the framework ask FIs to publicly disclose their E&S policy and its governance?

No

Risk Assessment

E2.5 – Does the framework require FIs to carry out appropriate E&S due diligence at transaction level?

Yes

(1) – 3.3.2.1 §1&2 p9
The EnvDD is a systematic procedure carried out to assess environmental implications and their effect on the credit quality of a particular financing transaction,The checklists should reflect the different credit approval levels and standardize due diligence procedures providing uniform results for similar business transactions across the bank/DFI.
Pakistan Green Banking Guidelines (SBP, 2017)

E2.6 – Does the framework require FIs to carry out appropriate E&S due diligence at client level?

No

E2.7 – Does the framework encourage FIs to categorize projects/clients according to their level of E&S risk?

Yes

(1) – 3.3.2.2 §1 p10
Environmental Risk Characterization/ Rating Based on the environmental indicators and their interactions identified above, the banks/DFIs may assess the potential impacts and probabilities of their occurrence.The rating assessment matrices similar to the one give below may be employed for risk characterization of an environmental activity.
Pakistan Green Banking Guidelines (SBP, 2017)

E2.8 – For high-risk transactions, does the framework encourage site visits to be organized?

No

E2.9 – In case of negative E&S impacts, does the framework invite FIs to engage with clients to implement mitigation measures?

Yes

(1) – 3.3.2.3 b) p12(1) – 3.3.2.2 §1 p10
“Environmental Improvement Plan (EIP): Depending on the nature of nvironmental risk associated with a client’s operations, the bank/DFI may, as per their discretion, agree with the borrower on a time bound Environmental Improvement Plan (EIP) listing specific actions and measures for implementation by the borrower as pre-conditions for sanctioning or disbursement of financing or within a reasonable period from a predetermined date. The purpose of an EIP is to mitigate potential environmental risk of a transaction so as to bring it to the level acceptable for the financing bank/DFI.””In addition to the above rules and regulations, the Federal and Provincial EPAs have issued Sectoral Guidelines to assist the industry in identifying key environmental issues that need to be assessed as well as mitigation measures and alternatives that should be considered. “
Pakistan Green Banking Guidelines (SBP, 2017)

E&S Covenants

E2.10 – Does the framework ask FIs to incorporate E&S covenants and investment conditions into legal agreements with clients?

Yes

(1) – 3.3.2.3 c) p12
Environmental Risk Covenants: A key practice of mitigating the environmental risks is the addition of environmental risk covenants in financing contracts with the borrowers.
Pakistan Green Banking Guidelines (SBP, 2017)

Project Supervision & Portfolio Review

E2.11 – Does the framework ask FIs to develop processes to manage E&S risks during supervision?

Yes

(1) – 3.3.2.3 d) p12
Regular Monitoring and Review: The environmental risk of a borrower may change, after approval or disbursement of financing, due to modifications in business set-ups, operations or production processes or changes in requirements of applicable environmental laws or regulations. The bank/ DFI should agree on regular reviews with the borrower for a reasonable assurance of ongoing compliance with applicable environmental requirements as well managing emerging risks at transaction and portfolio levels.
Pakistan Green Banking Guidelines (SBP, 2017)

E2.12 – Does the framework encourage a periodic review of E&S risks at aggregate portfolio level?

Yes

(1) – 3.3.3 §3 p14
On an overall portfolio basis banks/DFIs are obliged to review and classify their existing portfolio to identify their current environmental risk exposure.
Pakistan Green Banking Guidelines (SBP, 2017)

Training

E2.13 – Does the framework ask FIs to develop and maintain E&S capacity through regular training?

Yes

(1) – 2.2 iv p5
Internal Capacity Building: The senior management may regularly review internal capacity and establish capacity building plans to manage the paradigm shift towards green banking.
Pakistan Green Banking Guidelines (SBP, 2017)

E2.14 – Does the framework highlight the training of (i) front office staff, (ii) second lines of defense (risk officers and/or compliance officers), and (iii) E&S experts?

No

External Communication Mechanism

E2.15 – Does the policy require FIs to establish and maintain an inquiry/complaints/grievance mechanism in relation to E&S or ESG practices?

No

E & S Reporting

E2.16 – Does the policy require FIs to report regularly on E&S or ESG performance, including publicly, to investors or to regulators?

No

E2.17 – Does the policy make E&S or ESG reporting and disclosure more consistent across financial institutions through principles, guidelines, or templates?

Yes

(1) – 3.3.2.1 §2 p9(1) – 3.3.2.2 §1 p11
Pakistan Green Banking Guidelines (SBP, 2017)

E & S Integration - Enforcement

E3.1 – Is the implementation of the framework regularly verified or is information regularly collected from FIs?

No

E3.2 – Is there any financial and/or non-financial incentive for establishing ESRM systems?

No

E3.3 – Are there sanctions/penalties/warnings in case of noncompliance with the framework?

No

Climate and Green Finance - Products and Services

Defining sustainable assets and financial products

C1.1 – Does the framework provide definitions and examples of green assets?

Yes

(1) – 4.2.3 p15-16
The Green Financing Portfolio: An indicative but not exhaustive structure of green financing portfolios of banks/DFIs may include the following sectors:
Pakistan Green Banking Guidelines (SBP, 2017)

C1.2 – Does the framework provide a comprehensive taxonomy of green assets?

No

C1.3 – Does the framework provide definitions, examples, or a taxonomy of social and/or sustainable assets?

No

C1.4 – Besides debt products (loans, bonds), does the framework provide definitions and examples of different types of sustainable finance products/services (e.g., saving accounts, means of payment, insurance, private equity, etc.)?

No

Green Finance Product Guidelines

C1.5 – Does the framework provide guidelines for green loan/green credit or other green financial assets (excluding green bonds)?

No

C1.6 – Does the framework provide guidelines for issuance of green bonds?

No

C1.7 – Does the framework refer to existing standards (e.g., ICMA’s Green Bond Principles or CBI’s Climate Bonds Standard)? 

No

C1.8 – Does the framework recommend external party verification (e.g., second party opinion, assurance, certification)?

No

Climate and Green Finance - Climate and Green Investment Reporting

Tracking and Disclosure of Climate & Green Finance

C2.1 – Does the framework ask FIs to report on climate/green finance flows (quantitatively or qualitatively)?

No

C2.2 – Does the framework ask FIs to report on climate risk exposure at portfolio level?

No

C2.3 – Does the framework encourage FIs to report publicly on their green finance activities (i.e. not only to the regulator)?

No

Climate and Green Finance - Measurement

Calculation of Environmental Benefits

C3.1 – Does the framework ask FIs to calculate the environmental benefits of their investments? (e.g., CO2 emission reduction, water saving, etc.)

Yes
(1) – 4.1 3 p15
Green Advisory Service: As the banks/DFIs integrate evaluation of environmental implications/costs in their credit appraisals, they should also develop a mechanism of suggesting green and resource efficient alternatives to their clients. The clients may not always accept the advice/recommendation of banks/DFIs (for example, due to higher initial outlay). Nonetheless, this mechanism of highlighting potential benefits of green alternatives to clients will educate them and also sensitize field staff of banks/DFIs on the strategic importance of green investments.
Pakistan Green Banking Guidelines (SBP, 2017)

C3.2 – Does the framework provide a taxonomy of potential environmental impacts?

No

C3.3 – Does the framework provide methodologies, tools, and/or templates to measure and report these impacts?

No

Climate Risk Exposure Assessment

C3.4 – Does the framework ask FIs to monitor climate risk exposure at portfolio level?

Yes

(1) – §3 p14
On an overall portfolio basis banks/DFIs are obliged to review and classify their existing portfolio to identify their current environmental risk exposure. Banks/DFIs may as part of their routine monitoring procedure ask clients, on a voluntary basis, to provide relevant information. The standard EnvDD may be used as the basis of the assessment leading to an ERR. The review is undertaken by the front office in cooperation with credit administration.
Pakistan Green Banking Guidelines (SBP, 2017)

C3.5 – Does the framework refer to specific climate risk exposure methodologies (e.g., climate scenario analysis, climate risk stress testing, calculation of carbon risk exposure, tracking of energy efficiency for real estate portfolio)?

No

C3.6 – Does the framework encourage FIs to take mitigating steps on these risks?

Yes

(1) – §3 p14
On an overall portfolio basis banks/DFIs are obliged to review and classify their existing portfolio to identify their current environmental risk exposure. Banks/DFIs may as part of their routine monitoring procedure ask clients, on a voluntary basis, to provide relevant information. The standard EnvDD may be used as the basis of the assessment leading to an ERR. The review is undertaken by the front office in cooperation with credit administration.
Pakistan Green Banking Guidelines (SBP, 2017)

Climate and Green Finance - Incentives

Financial and Non-Financial Incentives

C4.1 – Does the framework provide any type of incentives for green financial products and services?

No

C4.2 – More specifically, does the framework introduce financial incentives on green products and services?

No