Moving The Needle From Red To Green

FACING the fallout from abrupt climate change has forced Pakistan to carefully assess the challenges versus the opportunities as a key pivot to securing its future. It is a vital journey accompanied by the pressure upon a variety of stakeholders to help the country achieve the Sustainable Development Goal (SDG) target.

Public and private banks are among those who have come together to build new structures in the fight against the adverse fallout from climate change.

In the words of Zafar Masud, the chairman of Pakistan Banks’ Association (PBA), global climate “is not confined to any boundaries”, noting the interdependence of the international community facing a collective fallout from this threat.

The response to the challenge from the banks has included a range of initiatives focused on energy conservation, and support for renewable energy, and a general push to lift Pakistan’s green economy.

Internally within banks, there has been a fast-paced conversion towards online solutions for fulfilling the needs of customers, in a step towards eliminating the use of paper-based processes. Similarly, the fast-paced expansion of the use of information technology across banks has laid a strong foundation for electronic networking in the workplace for times to come.

Other timely changes, such as the introduction of ‘green practices’ among criteria for loans to new ventures, have forced prospective new borrowers to reshape their projects. This is in sharp contrast to the days when prospective customers negotiating loans from banks for new ventures, exclusively focused on their balance sheets as a basis for negotiations.

The changed focus by Pakistani banks from yesteryear is broadly in sync with climate change-driven new national initiatives. It is also worth noting that the tilt of banks increasingly towards going green ultimately contributes to promoting Pakistan’s international commitments.

With Pakistan’s interest rates now almost halved from almost two years ago, there are growing opportunities for fresh lending initiatives to help individual consumers affordably face the fallout from climate change.

Interventions in agriculture and related areas are set to lay the ground for lifting Pakistan’s food security — a key element in the nation’s march toward progress. To this goal, Pakistani banks have begun integrating green finance practices in their lending portfolios to attract fresh large-sized investments in the critical field of agriculture. By turning towards climate-resilient farming practices, banks are increasingly venturing in an area that offers vast opportunities for corporate investors and small farmers alike.

One example that stands out in this area for corporate customers is the Green Corporate Initiative (GCI), a collaborative venture between banks and the Special Investment Facilitation Cell (SIFC) that is set to attract corporate investments in farming projects across at least 50,000 acres of prospective farmland in the Cholistan region. The eventual target aims at turning uncultivated barren land into fertile and productive farmland, marking a unique event in Pakistan’s history.

A significant benefit from this initiative will come in the shape of the introduction of modern technologies, such as state-of-the-art and efficient irrigation systems, cultivation with the use of modern, high-yielding seeds, and the use of solar power for energy generation purposes. Once in place, the project will stand out as an example for others to emulate in different regions of Pakistan. The push to expand corporate investments in agriculture also carries the potential benefit of generating larger financial commitments for research at agricultural research institutions, in areas like the development of new climate-resilient seeds and additional key inputs.

Financial institutions and corporate investors are being encouraged by the build, operate and transfer (BOT) model that suits investors and banks alike as their risk is mitigated and returns are carefully structured. Other banks have started green office initiatives, integrating environmental and social factors in their operations.

Additionally, in a move to reach out to small farmers, banks have joined hands with the Prime Minister’s Youth Business and Agriculture Loan Scheme, which is designed to convert 1.2 million tube wells across Pakistan to run on solar power. In the first phase, the programme aims at converting 100,000 tube wells that currently run on fossil fuels.

The reduction in running costs of these tube wells will allow farmers to utilize their savings for other agricultural inputs. The plan will reduce the existing carbon footprint across Pakistan, as the conversion of these tube wells will cut down carbon emissions by at least five million metric tons annually.

The financing terms facilitated through banks under this initiative include a subsidized interest rate of zero per cent annually for end users among farmers, with repayments made over periods of up to five years. Through this and other initiatives, Pakistan hopes to eventually succeed in reducing its rural poverty and consolidate its future economic growth.

Meanwhile, the journey to tackle climate change has turned the attention of banks towards a larger involvement with the promotion of EV financing aimed at making two-wheelers and three-wheelers more affordable for the public.

This is a critical area for the future as its expansion will improve Pakistan’s overall atmospheric conditions, and help meet the country’s national goals as defined in the first draft of the national electric vehicle policy, which targets zero emission by 2060.

It is a journey whose first step has been taken, with banks stepping ahead to finance two-wheelers and three-wheelers. The subsequent journey of targeting for the future assembly and eventual manufacturing of four-wheel EVs in Pakistan will receive a strong impetus from the current focus on smaller vehicles.

More importantly, this initiative has marked an important step towards the creation of sustainable businesses that will help improve climatic conditions. At the same time, the expansion of EV production in Pakistan also creates investment opportunities for entrepreneurs while creating employment opportunities for young, qualified professionals, trained in areas ranging from related technologies to the business aspects of such ventures.

Though the journey ahead will be challenging at the very least, it is always the first step towards a larger goal that must be appreciated for its ground-breaking magnitude. Pakistan’s banks have already taken more than just the first step in the right direction.

These initiatives are instrumental in laying the groundwork for similar efforts by other stakeholders across Pakistan’s private sector. Opportunities to successfully meet the challenge of climate change can be created through financially profitable and sustainable models. Banks in Pakistan are doing just that.

The writer is an Islamabad-based writer currently associated with Pakistan Banks’ Association (PBA). He writes regularly on economic and developmental issues.