SBP for using the Green Taxonomy to support sustainable economic practices and climate resilience

The State Bank of Pakistan (SBP) on Wednesday advised financial institutions to use the Pakistan Green Taxonomy (PGT) as a framework for developing and revising their green banking policies in an effort to encourage climate resilient and sustainable economic activity.

According to a circular released here by the central bank’s SME, Housing, and Sustainable Finance Department, the PGT was recently implemented by the government to encourage environmentally friendly and sustainable economic activity.

The SBP noted and recommended that all banks and Development Finance Institutions (DFIs) “use PGT as a reference guide for formulating and updating their green banking policies.” The Taxonomy offers a science-based classification system for identifying green economic activities and investments nationwide and specifies a single, common, and consistent definition of “green.”

To assist financial institutions with implementation, SBP has released the PGT document, a list of frequently asked questions (FAQs), and a web-based navigation tool.

Through awareness campaigns and other assistance initiatives, the central bank also guaranteed its proper facilitative function.

The Pakistan Green Taxonomy makes it easier to identify green economic activity, improves the transparency of green financial products and investments, reduces financial risks associated with climate change, and assists the financial sector in allocating capital flows to initiatives that help the nation meet its environmental and climate goals.

The framework is anticipated to improve Pakistan’s sustainable finance environment and integrate climate considerations into the nation’s financial sector by empowering financial institutions, regulators, and investors to more effectively evaluate, support, and scale sustainable finance initiatives.