Page 50 - CMA Journal (Nov-Dec 2025)

Focus Section
ESG & Green Economic Reforms

through Climate Blended Finance

Pakistan stands amongst the topmost countries that are projects may be
vulnerable to the adverse effects of climate change. Even perceived as low-return
though Pakistan contributes less than 1% to the global or high-risk invest-
Greenhouse Gases (GHGs) emissions, it is still bearing the ments by various finan-
effects of climate change in the form of floods, smog, and cial institutions. There-
water scarcity. In the absence of any remedial action, the fore, blended financing
calamities resulting from climate change are predicted to funds are used for
increase with the passage of time. Research predicts an catalyzing private
increase in the number of people exposed to extreme sector investments for
river floods and coastal flooding, with a likely increase of
various environmental-
around 5 million people exposed to extreme river floods ly and socially sustain-
by 2035-2044, and a potential increase of around 1 able projects. This
million annually exposed to coastal flooding by
financing ideology is
2070-2100. According to the World Bank, climate change
based on certain princi-
combined with environmental degradation and resource ples that improve the Dr. Syed Asim Ali Bukhari
depletion is projected to reduce Pakistan’s GDP by 18 to
risk-return ratio of such Senior Vice President &
20% by the year 2050 (scp, 2024).
projects. In case of a Unit Head (ESG, Policy, and
Pakistan’s banking industry can play a pivotal role in this project utilizing blend- Risk Analytics Division),
situation by financing the just green transition of Pakistan’s ed finance, the public The Bank of Punjab
economic sector. Under the Green Banking ideology, the funds absorb any initial
banking sector can provide low-interest green and losses thereby protecting the private investors from
sustainable financing for various eco-friendly projects. The economic vulnerabilities. Public sector sources also provide
World Bank has predicted a green and sustainable certain guarantees and technical assistance to reduce risks
financing need of approximately USD 348 billion to and improve the project’s viability.
combat the various challenges of climate change. Climate Blended Finance is a form of blended finance
According to the report, USD 152 billion is required for that focuses on generating green investments for
climate adaptation and resilience and USD 196 billion for adaptation and mitigation projects. Globally, the
de-carbonization. This is a substantial opportunity for volume of climate-focused blended finance amounted
financial institutions and other market players. Data to approximately USD 77.3 billion (Convergence, 2025).
reveals a skewness in terms of public-private financing Climate Blended Finance is one of the most viable
trends in Pakistan, with the share of public climate options for bridging the significant gap between
financing amounting to 69% as compared to 31% from the Pakistan’s green financing needs and its existing green
private sector. Furthermore, the share of international financing portfolio. Using various climate blended
financing was 84% in comparison to the domestic sources finance instruments such as grants, guarantees,
providing 16% of the climate financing (Akhtar & Khawaja, first-loss equity, or low-cost debt, commercial private
2025). The Government of Pakistan has defined a 50% investment can be mobilized into climate mitigation
reduction in the country’s projected emissions by the year and adaptation projects.
2030. This has been planned with a 60% shift of the Pakistan's first Sustainable Aviation Fuel (SAF) facility is a
country’s national energy generation mix to alternative
waste-to-fuel project developed through climate
energy sources and 30% of all new vehicles being Electric
blended financing of USD 121 million from the Asian
Vehicles (EVs) by 2030 (Finance Division, 2025).
Development Bank and the International Finance
To be effective and long-term, climate financing requires a Corporation. The facility converts cooking and waste oil
synergistic blend in terms of sourcing that can be achieved into aviation fuel. The SAF facility reduces CO2 emissions
through the use of Blended Finance. It is a combination of while creating 300 direct jobs and 20,000 indirect jobs.
public sector organizations, philanthropic entities, or This project is based on the circular economy concept
private sector companies coming together to fund green and is financed through concessional financing from
and sustainable projects. Various green and sustainable multiple partners (IFC, 2024).

48 ICMA’s Chartered Management Accountant, Nov-Dec 2025