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Pakistan is among the top 10 countries worst affected by climate change, experiencing unprecedented torrential rains, glacial melt, river flooding, and sudden heatwaves. These events have caused extensive losses to livelihoods, crops, infrastructure, and communication networks, while also undermining energy and food security. In response to the growing economic and social impacts of climate change, SBP has identified “Climate Change” as one of the four cross-cutting themes under SBP Vision 2028 and is strengthening its focus on climate-vulnerable segments of the financial sector. Through enhanced access to finance, improved infrastructure, and the promotion of sustainable finance, SBP aims to support resilience—particularly in addressing food and water security challenges. SBP also plans to pursue proactive policy measures to help financial sector stakeholders manage climate-related requirements and challenges, strengthen regulatory and supervisory frameworks to reduce climate risks, and channel resources toward a more sustainable, dynamic, and green economy.
This section consolidates key SBP circulars and implementation resources to support regulated institutions in strengthening internal frameworks, building implementation capacity, and adopting a phased approach to environment and social risk management.
To reduce the vulnerability of banks to environmental & climatic risks and encourage financing for transitioning into a sustainable and climate resilient economy, SBP issued Green Banking Guidelines (GBGs) in 2017. These are voluntary guidelines focusing on three (03) key areas:
In November 2022, SBP issued Environmental and Social Risk Management (ESRM) Implementation Manual for the financial institutions. The manual is developed with a view to ensure compliance of minimum standards for environmental, social & climatic risk management in the financial sector under GBGs. The manual provides comprehensive tools & checklists to facilitate the banking industry in establishing their environmental & social risk management frameworks.
To advance the green transition of Pakistan’s financial sector, in December 2025, SBP circulated the GOP-issued Pakistan Green Taxonomy (PGT) for its implementation by SBP regulated entities. The taxonomy aims to classify green projects aligned with national and international sustainability standards, and to enhance the financial system’s resilience to climate-related financial risks. It will guide the flow of capital towards environmentally sustainable initiatives, ensuring that FIs are investing in projects that contribute to a green and inclusive economy.
Recognizing the potential impact of climate change on financial sector's resilience and soundness, SBP, in December 2025, issued the Regulatory Framework for Effective Management of Climate-related Financial Risks. The framework aims to ensure that Financial Institutions (FIs) effectively identify the climate risk drivers and integrate climate-related financial risk considerations into their governance, business strategy, and risk management frameworks.
In December 2025, SBP issued Guidelines on Climate Stress Testing to further strengthen the risk management capacity of banks, DFIs, and MFBs. The guidelines introduce climate-related single factor shock scenarios covering both physical and transition risks, enabling financial institutions to better assess the impact of climate change on their lending portfolios and financial position