PAKISTAN’S battle against climate change cannot be fought without support from the private sector. The private sector and the government in Pakistan have dramatically different ways of working. Yet, they, like two sides of the same coin, coexist and can create an ecosystem for each other’s climate action.

Pakistan’s financial needs for climate action are very high. Projected climate disasters, environmental degradation, and air pollution can cause GDP to fall by at least seven per cent.

For this, Pakistan will need $152 billion for adaptation and $196bn for decarbonisation by 2030, as projected by the Climate Change and Development Report of the World Bank. None of the growth rate projections can promise this. The new $7bn Extended Fund Facility with the IMF aims to support Pakistan’s efforts in achieving macroeconomic stability. It does not set any targets for economic growth rate nor for investments in climate resilience.

Realising that the financial gap cannot be filled with additional borrowing, various government ministries have frantically moved to augment their capacity to access international climate finance (IFC). To achieve scale, the government sector will need to learn how to leverage private sector financing as equity. While the policy documents often mention private sector engagement, they fail in operationalising the ways and means of working.

A cursory look at the Rules of Business that govern the mandates and functions of all government divisions, reveals that engagement with the private sector is not mentioned for the ministries of climate, economic affairs, finance, and planning, the key ministries dealing with the climate economy. The only reference to the private sector in the Rules of Business for these ministries is related to the Public-Private Partnership Authority (P3A), housed at the Planning Commission.

Since there is no explicit bar, each ministry could have pursued its own focus and terms of engagement with the private sector for climate-related interventions. This void has persisted in their recent initiatives that include setting up climate finance-specific units. This is a practice that is broadly followed by those provincial governments that have approved climate policies and are setting up climate units aimed at accessing IFC.

The P3A sits in a remarkable position to help climate-proof development projects.

The Board of Investment is perhaps the only institution that is specifically charged to attract both local and foreign investment by providing a conducive environment for business operations. It has undergone several reforms since 2013, a year after the climate change policy was first approved. The BoI is mandated to improve the business environment and ease of doing business. Housed at the Prime Minister’s Office, none of its initiatives were aimed at climate-smart investments or engaging them to leverage international climate finance. Clearly, the highest level of political support is desperately needed.

Likewise, the P3A was established to provide an enabling legal and regulatory framework for developing and implementing public-private partnership transactions. According to the Planning Commission’s Manual for Development Projects 2024, neither the legislation nor the subsequent procedures for P3A’s functioning have embedded climate priorities. In India, its counterpart is located in the economic affairs department, supporting the integration of climate considerations by prioritising infrastructural resilience, and strengthening national infrastructure and monetisation pipelines, both aimed at leveraging private sector investments. As an arm of the Planning Commission, the P3A Pakistan sits in a remarkable position to help climate-proof public sector development programmes.

The commerce ministry does not feature in Pakistan’s climate change parlance, even if it is grappling with Carbon Border Adjustment Mechanisms that will potentially affect the country’s three foremost formal private sector forums: the Federation of Pakistan Chamber of Commerce and Industries (FPCCI), Overseas Investors Chamber of Commerce and Industry (OICCI), and Pakistan Business Council (PBC). The ministry is the focal agency for all.

Pakistan’s private sector broadly falls in three categories. First, large business houses, including the approximately 200-member-strong OICCI, representing the interests of foreign investors, and the 96-member PBC. Both have undertaken preliminary studies on SDGs, climate change, and gender participation. Because of their size, and alignment with international standards, they attract IFC and similar investors. In the government’s lexicon, however, they are often approached for CSR resources, instead of long-term partnership for climate action.

Second, the FPCCI is an association of 277 trade bodies, 72 chambers, 28 women’s chambers, 15 chambers of small traders, and 156 all-Pakistan trade associations, apparently including some SMEs. The FPCCI’s governance, a relic of the Ayub era of backdoor permits and concessions, impairs its ability to play a significant role in promoting climate resilience through initiatives and advocacy efforts, particularly for transparently informing climate-related policies. It can potentially spearhead collaboration with national and international organisations to promote climate resilience and for adopting the Environmental, Social, and Governance framework. Already, several members are pursuing ESG; some are striving for energy or water conservation, and a few are aspiring to net-zero emissions targets.

Third, SMEs account for about 90pc of all enterprises and employ 78pc of non-agricultural labour. It is estimated that they collectively contribute 40pc to GDP and 25pc to total exports of manufactured goods. They are most frequently and directly exposed to climate-triggered disasters, yet no action reaches this bottom of the pyramid to protect them and their assets from climate risks and disasters.

There is no national-level platform serving them. The Small and Medium Enterprise Development Authority, the focal point for SME development, is also in the grip of a governance crisis. Some uncoordinated training programmes notwithstanding, SMEDA seems to have lost the desire to strengthen the sector’s climate resilience. It is affiliated with the industries ministry, which, like the commerce ministry, is far removed from national climate goals.

There are indeed countless innovative initiatives in several sectors. But it’s clear that addressing climate challenges in Pakistan will need concerted and synergistic efforts from both the government and the private sector. By shedding a business-as-usual approach, the government can adopt many ways of working and engaging with the private sector to mobilise domestic skills and finances for climate resilience.

The writer is an Islamabad-based climate change and sustainable development expert.

Published in Dawn, September 12th, 2024