Businesses looking for private sector investment should tread this landscape, as it will enhance their reputation, making them more attractive to investors who are increasingly prioritising ESG considerations in their investment decisions. To effectively integrate ESG practices, Pakistan’s private sector must adopt sector-specific strategies that address the unique challenges and opportunities within their industries.
Transitioning to Renewable Energy
As per the finance division, as of March 2024, Pakistan’s total installed electricity capacity stands at 42,131 MW, with thermal power dominating at 59.4%, while hydel, nuclear, and renewable sources contribute 25.4% and 8.4%, respectively – a stark reminder of Pakistan’s heavy dependency on fossil fuels. The World Bank is of the view that apart from the GHG emissions stemming from fossil fuels, the energy sector’s reliance on these sources exacerbates inefficiencies due to structural issues, poor planning and subsidies, leading to unreliable supply, significant fiscal deficits (circular debt), and a gas sector where heavily subsidised prices benefit a few manufacturers rather than farmers.
To achieve energy sustainability, the World Bank has suggested a five-pronged approach, which, if followed through the lens of private sector participation, can generate significant synergies. First, enhancing the efficiency of state-owned distribution companies can reduce losses, improve service quality and enforce financial discipline. This can be done through private sector participation – via privatisation or concession contracts. Second, on the demand side, private sector investment in energy-efficient technologies and services, such as upgrading appliances and retrofitting buildings, can significantly reduce reliance on imported fuels and lower consumer costs. Third, in the gas sector, allowing private entities to access LNG terminals and participate in tariff reforms can optimise resource allocation and drive decarbonisation. Fourth, industrial decarbonisation relies heavily on private sector innovation and investment in energy-efficient processes, fuel switching and the adoption of green technologies, with climate finance facilitating these transitions. Finally, a successful energy transition will require private sector involvement in developing off-grid solutions, clean cooking technologies and targeted retraining programmes to ensure equitable access to modern energy services, particularly for vulnerable communities.
Coal power plants can also be repurposed for renewable energy. To do so, Pakistan needs to identify one coal power plant, develop a case study for repurposing the coal and, if successful, replicate it to other coal power plants. In Ontario, electricity production was totally decarbonised by replacing coal with nuclear energy, and with impressive results. Electricity generation in Ontario now produces about 25 grams of CO2 per kWh, which is “well under levels consistent with the objectives of the Paris Agreement (50 grams), compared to 230 grams of CO2 per kWh previously.” This experiment generated 22,000 job opportunities, with another 5,000 expected to be created when the operating lifetime of the existing reactors is extended. Global examples are there, and we don’t have to reinvent the wheel to decarbonise Pakistan’s electricity sector.
Sustainable Agri Practices and Climate Resilience
Agriculture, when strategically leveraged by the private sector, can be a pivotal force in transforming Pakistan’s economic and environmental trajectory, particularly through the adoption of climate-smart agriculture (CSA). The agriculture sector contributes 24% to GDP and employs over a third of the population, making the sector’s impact on the economy undeniable. However, agriculture also accounts for 41% of Pakistan’s GHG emissions, largely from livestock and cropland. In this respect, the private sector holds the key in terms of effecting a paradigm shift towards sustainability by investing in CSA practices that mitigate these emissions.
Drawing from European examples, such as the precision agriculture technologies pioneered by companies in the Netherlands, the collaborative CSA platforms such as Agrisource in France and the Climate Smart Beef Genetics project led by Genus Plc in the UK (it focuses on reducing the environmental impact of beef production by employing genetic solutions to breed cattle), Pakistan’s private sector can lead the way in introducing advanced farming technologies, developing climate-resilient crop varieties and facilitating carbon sequestration initiatives. These efforts would not only align with global sustainability trends but also open new markets and increase profitability by meeting the growing demand for sustainable agricultural products. The investments and innovations the private sector can bring are critical and will ensure that agriculture sustains the economy and contributes to Pakistan’s climate resilience and long-term economic growth.
Resource Efficiency in a Circular Economy
Emissions from Pakistan’s industrial sector have increased exponentially and are projected to increase 230% between 2012 and 2030, rising from approximately 59 million metric tons of CO2 equivalent (MtCO2e) to nearly 196 MtCO2e. This increase reflects the acceleration of industrial growth as well as the intensification of resource-intensive processes, which call for the thorough incorporation of ESG concepts into industrial processes. Reducing the industry’s environmental impact requires shifting the focus towards resource efficiency by implementing sophisticated waste recycling systems, energy-efficient technology and innovative water conservation measures.
Similarly, the principles of the circular economy in terms of product design, reparability and recyclability need to become common denominators when drafting manufacturing policies and should be incorporated into Pakistan’s soon-to-be-drafted industrial strategy. Turning waste into secondary resources will reduce emissions as well as build resilient value chains that promote environmental and economic sustainability. Collaborative initiatives with international organisations, such as the Ellen MacArthur Foundation, can furnish Pakistani manufacturers with frameworks and best practices that comply with international standards, thereby augmenting the industry’s potential to substantially contribute to the worldwide shift to a low-carbon economy. Pakistan has to combine technical innovation, international cooperation and ESG integration to position itself as a regional leader in sustainability.
Technology and Data in Advancing ESG Goals
Technology is pivotal in advancing ESG goals as it can instill efficiency and transparency in the three sectors mentioned above. In the energy sector, advanced grid management systems, combined with predictive analytics and next-generation energy storage technologies, can facilitate the seamless integration of renewable energy sources, optimise load balancing and minimise dependence on fossil fuels. Precision agriculture technologies, including IoT-enabled sensors and AI-driven analytics, can enhance resource efficiency and climate resilience by enabling real-time monitoring and data-driven decision-making, thereby reducing input waste and improving yield predictability. In industries, AI-powered process optimisation and blockchain can enhance supply chain transparency, drive resource efficiency and support circular economy models by ensuring traceability, minimising material wastage and maximising resource recovery.
The real impact of change, as evident from Mohibullah’s story, lies not in abstract policies but in the hands of people facing extraordinary challenges. In this respect, the intersection of climate resilience and ESG is a unique opportunity to harness this grassroots strength and transform it into a national movement that unites businesses, communities and individuals. The only viable way to create a resilient future where every flood, drought and natural disaster becomes a catalyst for innovation and collective action is by placing climate change at the centre of our socio-economic strategies.
The debate is not only about mitigating the risks. It is about redefining the narrative – where a crane driver’s courage is as crucial as a CEO’s commitment to green finance, and where the people of Balochistan and Sindh are not just victims of climate injustice but active participants in building a sustainable future. The road ahead demands that the government and the regulators bridge the gaps between policy and practice while taking into account local realities. The fight against climate change is a shared journey that will ultimately empower every citizen, strengthen every community, and transform Pakistan into a beacon of resilience in an increasingly fragile world.
Faraz Khan MBE is CEO & Partner, Spectreco and Founder, SEED Ventures. He can be reached at faraz@spectreco.com
