Pakistan okays Green Sukuk Framework to fund climate, social projects

Pakistan’s federal cabinet has approved the framework to issue Sustainable Investment Sukuk, paving the way for climate-resilient investments through green, social, and sustainability-linked Islamic bonds, sources told Nukta on Friday.

The framework, presented by the ministry of finance, aims to mobilize capital from domestic markets to finance or refinance environmentally and socially beneficial projects.

These include renewable energy, water management, climate adaptation, and sustainable infrastructure.

Officials said the move will help align Pakistan’s financing strategy with the United Nations Sustainable Development Goals (SDGs), the country’s Nationally Determined Contributions (NDCs) 2021 under the Paris Agreement, and its National Adaptation Plan (NAP) 2023.

The framework was developed in consultation with Meezan Bank, Bank Islami, Dubai Islamic Bank, and Bank Alfalah Islamic along with the ministry of planning, development and special initiatives.

Under this initiative, the government plans to issue Green Sukuk, Social Sukuk, and Sustainability Sukuk, collectively referred to as Sustainable Investment (SI) Sukuk.

According to the Ministry of Finance, funds raised through the SI Sukuk will only be allocated to eligible green, social, or sustainable projects under strict conditions.

The framework allows Pakistan to diversify its borrowing instruments and tap into environmentally conscious investors, reducing reliance on conventional debt.

While there is no set cap on the amount to be raised, officials noted that funding will depend on the scale and viability of approved projects, and the process will be continuous.

The SI Sukuk framework is expected to channel resources into projects that address climate change, environmental sustainability, and social development.

According to the framework document, a transparent project evaluation and selection process will be adopted, along with periodic reporting to ensure effective monitoring and utilization of funds.

The framework is expected to be implemented in the coming months, with the ministry of finance and the State Bank of Pakistan overseeing operational details and compliance monitoring.