The initiative aims to motivate companies to enhance their environmental, social, and governance performance.
ISLAMABAD:
Pakistan has taken a significant stride toward sustainable finance, with the Securities and Exchange Commission of Pakistan (SECP) unveiling the nation’s inaugural ESG Mutual Funds Framework.
The framework empowers asset management firms to launch ESG‑focused mutual funds, aligning Pakistan’s capital market with global sustainable investment practices, the SECP said in a Wednesday statement.
Globally, sustainable investing has surged, now exceeding $16 trillion in assets. As investors increasingly look for products that deliver financial returns alongside responsible business conduct, regulators worldwide are rolling out frameworks to foster ESG investment.
For Pakistan, this move is especially vital given its status as one of the world’s most climate‑vulnerable countries. The framework creates a transparent regulatory environment for ESG‑aligned collective investment schemes and opens the door to the expanding global sustainable‑investment ecosystem.
Under the framework, equity‑focused ESG mutual funds will mainly invest in companies listed on the Pakistan Stock Exchange’s Sustainability Index and those that comply with the SECP’s ESG Disclosure Guidelines.
Debt‑oriented ESG mutual funds will allocate capital to green, social, and sustainability‑linked debt instruments consistent with Pakistan’s Green Taxonomy and Sustainable Finance Framework.
“The framework is expected to encourage Pakistani companies to improve their environmental, social and governance practices, boosting their access to sustainable investment capital and promoting responsible corporate behaviour,” the SECP said.
To safeguard investors and preserve market integrity, the framework mandates that ESG mutual funds devote at least 50 % of their net assets to ESG‑aligned holdings. It also introduces governance, disclosure, and independent‑assurance rules designed to curb greenwashing and bolster transparency and accountability.
