Introduction
Pakistan is at a critical juncture in its climate resilience efforts, with climate finance playing a pivotal role in its sustainable development strategy. The introduction of the National Green Taxonomy Draft by the State Bank of Pakistan (SBP), developed in collaboration of Ministry of Climate Change with technical assistance from the World Bank, marks a significant step in aligning financial investments with climate goals.[1] Furthermore, Pakistan’s engagement with international financial institutions, such as the International Monetary Fund (IMF) and the World Bank, underscores the importance of structured climate financing mechanisms. Additionally, the country’s entry into the global carbon markets offers new opportunities and challenges in leveraging carbon trading for economic and environmental sustainability.
Understanding Green Taxonomy
A green taxonomy is a classification system that defines which investments are environmentally sustainable. It provides a structured approach to assessing financial activities based on environmental, social, and governance (ESG) considerations. By aligning investments with sustainability goals, green taxonomies help direct capital flows toward environmentally friendly projects while reducing climate-related financial risks.
