Pakistan Green Taxonomy (2025)

A science-based classification system establishing a single, consistent definition of “green” for Pakistan’s financial sector.

Confronting an estimated financing gap of US$348 billion to meet its 2030 climate commitments (National Climate Finance Strategy 2024), Pakistan faces an acute imperative to channel capital toward sustainable, climate-aligned activity. Yet in the absence of a common definition of what qualifies as “green,” financial institutions have lacked the shared reference needed to scale credible climate finance and to guard against greenwashing. To close this gap, the Government of Pakistan — led by the State Bank of Pakistan (SBP) in concert with the Ministry of Climate Change & Environmental Coordination — notified the Pakistan Green Taxonomy (PGT) in 2025, the country’s first science-based classification system for green economic activities and investments.

Conceived as a phased instrument, the 2025 edition identifies economic activities that contribute substantially to climate change. For each eligible activity it sets technical screening criteria for substantial contribution, and embeds the principles of Do No Significant Harm (DNSH) and Minimum Social Safeguards — mirroring the architecture of the EU Taxonomy while adapting priority sectors such as agriculture and tourism to national circumstances. Conceived in phases, the 2025 edition concentrates on substantial contribution to climate objectives, with later editions expected to broaden coverage as methodologies mature. The Taxonomy is organised around seven environmental objectives:

• Climate change mitigation
• Climate change adaptation
• Sustainable use and protection of water resources
• Protection of healthy ecosystems and biodiversity
• Pollution prevention and control
• Promotion of a circular economy
• Sustainable land management

Partners in development

The PGT was developed with technical assistance from the World Bank Group, funded by the United Kingdom’s Foreign, Commonwealth & Development Office (FCDO), with research and stakeholder engagement led by Ambire Global, and following the methodology of the World Bank’s “Developing a National Green Taxonomy.” The Ministry of Climate Change & Environmental Coordination co-led the initiative alongside the SBP, supported by a multi-stakeholder Working Group. This builds on the broader institutional scaffolding of Pakistan’s green-banking agenda, in which the International Finance Corporation (IFC) has been a sustained partner since the SBP joined its Sustainable Banking and Finance Network in 2015.

What the Taxonomy asks of financial institutions

• Use the PGT as the reference framework when formulating and updating their green banking policies, as directed by the SBP.
• Apply the technical screening criteria to determine whether an activity makes a substantial contribution to an environmental objective.
• Verify that financed activities Do No Significant Harm (DNSH) to other environmental objectives.
• Ensure compliance with Minimum Social Safeguards covering labour rights, community impacts, and human-rights considerations.
• Adhere to monitoring, reporting, and verification (MRV) standards and international integrity benchmarks for credit quality.
• Enhance transparency and disclosure of the green share of lending and investment portfolios, supporting climate-risk reporting.

Status

The PGT is a guidance framework rather than a binding regulation: the taxonomy document itself states that it does not create, confer, or impose legal rights or obligations. Through SH&SFD Circular No. 06 of 2025 the SBP advised all banks and DFIs to use the PGT as a reference for their green banking policies. The SBP has set out a phased, facilitative implementation strategy — committing to "hand-holding" so institutions can adopt the framework smoothly — built on three sequential steps:

• Capacity building across the banking sector;
• Portfolio mapping against the green / amber / red traffic-light system, drawing on the ASEAN and EU taxonomies;
• Sectoral pilots to address data availability, due-diligence practice, and proxy indicators.