Pakistan, a country located in South Asia is among the most vulnerable country to the climate crisis. Despite contributing only 0.8% of global carbon emissions, Pakistan is bearing the brunt of the world’s total burden of atmospheric changes. However, rather than moaning about unjust environmental disasters, and begging for humanitarian aid, it is time for Pakistan to rise with stewardship and become the architect of change through concessional finance and spread a message of social justice. This article will harness some of the recommendations for addressing and adapting to changing climate.
Concessional finance is an initiative toward sustainable development models, carbon pricing, construction of a business portfolio toward climate risk and opportunities. Pakistan may accomplish its climate action targets through concessional finance, which is supplied by big financial bodies such as development banks and multilateral corporations at below-market rates. Concessional financing, for example, can be used to provide technical assistance in developing strategies for decarbonization within the affected nation.
Access to concessional climate funding, however, remains a difficulty for Pakistan. In the Kyoto Protocol and Paris Agreement, the United Nations called for financial assistance for those who are more vulnerable and less responsible. It involves the mobilization of funds from businesspersons, stakeholders, and non-governmental organizations towards environment-friendly projects. The United Nations calls the assistance under the charter of humanitarian aid rather than social justice. Nevertheless, such discourse failed to compel the countries for financial assistance, who were by far the most responsible for Green House Gas Emission, due to which weak economies do not resiliently cope with the damages of climate change.
This can be evident, in the case of Pakistan. According to a World Bank report on climate and development, Pakistan is experiencing a severe economic crisis with a depreciating currency, low foreign reserves, and a high rate of inflation. This stagnant situation occurs due to many reasons, but the immediate one was floods of 2022. It is estimated that Pakistan needs a staggering $348 billion to cope with recent climate catastrophes and move towards resilient, and sustainable growth. Nevertheless, the World’s leading economies, pledge to fund Pakistan only $10 billion at the Geneva Conference 2023 and has given only $131 million so far.
Pakistan does not have the capital to finance the climate projects in this need of the hour. However, empty pockets teach life lessons, and Pakistan should learn from its past and invest its mandate towards initiating projects that can raise funds as well as help the macroeconomic indicators in the end.
Primarily Pakistan’s Ministry of Climate Change should incline itself to transparency and frequent reporting of the data. Under the Public Sector Development Program, the Ministry should showcase on its website the financial needs, and funds used and add a detailed description of the climate-resilient settlement. These reports should be publicly open for scrutinization and recommendations. This will produce opacity in climate projects of Pakistan and can drive the impact-based planning and financing system.
Secondly, one of the clichés among the country’s stakeholders is that only tree plantation drives are essential for climate resilience. Tree plantation can increase carbon sequestration, but such drives are not realistic for Pakistan in the current political crisis. The ten-billion tree tsunami project by Imran Khan seems promising, but it is now part of political debates. In such a debacle, the estimated cost of $800 million per year for the plantation is not continuing at the required pace. Therefore, for attracting climate funds, Pakistan now needs to initiate innovative climate projects with non-governmental organizations based on small-scale measurable green businesses and action-based smart indicators.
Thirdly, Green bonds can also help in financing resilient climate projects, with their increased use and issuance. Green bonds are a type of debt issued by public or private institutions to finance themselves and, unlike other credit instruments, they commit the use of the funds obtained to an environmental project or one related to climate change. Green Bonds were established to support initiatives with profitable ecological advantages or that can help to mitigate the effects of climate change. The vast majority are green ‘use-of-proceeds’ or asset-linked bonds. This means the earnings from the bonds are designated for green initiatives, but they are protected by the whole balance sheet of the issuer. These bonds adhere to the International Capital Market Association’s (ICMA) Green Bond Principles.
This might greatly assist Pakistan in carrying out its promises to respond to climate change in a timely manner. If the ‘Ten Billion Tree Tsunami Programme’ is selected as an acceptable green initiative in Pakistan, the whole earnings of the green bond will be directed toward ensuring the effective completion of this project. The revenues will also not be spent for any other financial objective by the Government of Pakistan.
Fourthly, the glaciers in the Karakoram and the Himalayas in the north of Pakistan are melting quickly. In the current emission patterns and rising temperatures, the consequences are already disastrous, resulting in landslides, major flooding, dam breaches, and erosion of soil. In the case of such disasters, the government of Pakistan could think about introducing catastrophe bonds to handle the risks connected with such incidents.
Catastrophe bonds (CAT) bonds enable insurance firms to charge investors a fee to transfer the danger of natural catastrophes. The proceeds from these bonds are placed aside to offset any losses. If the contracts’ triggers are fulfilled, the insurer can use the funds to compensate for what it has handed out to policyholders. In such an event, it no longer needs to repay the bondholders, who may lose their investment despite having received interest repayments along the way. If the natural catastrophe does not occur within the time span of three to five years in which the bond matures, then the investor gets its money back.
Finally, Pakistan should formulate a sustainable framework for finance and provide legal support to the national development plan without exposing it to political mantras. It would allow Pakistan to move towards sustainability guidelines, identification of expenditures for climate projects, and implementation of provisions. With a strong will and commitment to achieving sustainable development goals by 2030, it is high time for the government of Pakistan to explore policy options and accelerate climate-resilient partnerships through concessional finance.
Opinions expressed in this article are those of the author.