Page 80 - CMA Journal (Nov-Dec 2025)

Focus Section

The government’s carbon market policy guidelines responsibility into decision-making and disclosure
provide a regulatory backbone for these systems, aiming practices. A transparent carbon market enhances this by
for credible measurement, reporting, verification (MRV), providing quantifiable environmental metrics businesses
and equitable benefit sharing among stakeholders. can incorporate into ESG frameworks, demonstrating
Reports highlight Pakistan’s potential to produce 40–75 measurable climate action rather than broad
million tradable carbon credits annually if a share of commitments. Governance enhancements — including
national emissions is channeled into well-governed standardized reporting, third-party verification, and
carbon projects, generating potentially hundreds of inclusive stakeholder engagement — further reinforce
millions of dollars in climate finance. However, structural the “G” in ESG by building oversight, accountability, and
challenges remain. Institutional capacity for consistent trust in carbon finance instruments.
emissions data, coordinated baselines, and clear legal
For a country highly vulnerable to climate impacts, carbon
frameworks for carbon rights still need strengthening to
markets can serve as a strategic climate finance tool,
avoid replicating governance weaknesses seen in
channeling investment into renewable energy, forestry,
low-integrity markets elsewhere. Addressing these gaps
waste, and other mitigation sectors while supporting
is essential for climate outcomes and ESG reform, as
national climate targets. The integration of strong
environmental credibility, social safeguards, and
governance and ESG-aligned practices will determine
governance transparency are core pillars of sustainable
whether this market can deliver real emission-reductions,
investment and corporate reporting.
catalyze sustainable investment, and enhance Pakistan’s
ESG reforms increasingly require firms and institutions to climate resilience to meet both international expectations
integrate climate risk, emissions performance, and social and domestic development goals.
Pakistan’s Key Gaps in Climate Finance, Carbon Markets & ESG Reforms

Area Pakistan Status Key Gap
Lesson
Carbon Pricing & China, Japan, Singapore, No carbon tax or Absence of Introduce carbon
Demand Switzerland, Denmark price signal and pricing to anchor
apply carbon taxes or market mainly voluntary compliance carbon markets in
and export-oriented demand real economic
demand for credits demand
Carbon Market Singapore and Japan use Fragmented Weak Establish a single
Governance centralized, inter-agency legally empowered
governance with legal federal and provincial and unclear
mandates authority authority
Market Integrity ICVCM CCPs, strict Early-stage market with Risk of low- Adopt integrity-
baselines, third-party weak baselines and MRV credibility or first standards and
systems “phantom” strict eligibility
safeguards credits rules
MRV & Data China and Singapore Data dispersed; limited Inability to
deploy centralized digital digital MRV capacity verify outcomes digital MRV
MRV using satellites and at scale infrastructure as
sensors public climate data
backbone
ESG & Finance Mandatory ESG ESG not linked Make ESG
to capital
financial supervision mandatory and
(EU, Nordics) financially binding
Climate Finance Large-scale One PKR 1 billion green Instruments too Instruments too
bond issued small to meet small to meet NDC
(China, Japan) NDC financing financing needs
needs
Blended Finance Crowds-in private capital Reliant on donors/IFIs Limited private Create blended
(Singapore) finance vehicles
Regional China and India combined Pakistan has very few Improve project
have a combined 1,600+ registered projects pipelines with
registered carbon projects integrity and scale

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