Green Finance for Sustainable Development in Pakistan

Abstract

Over the past few decades, technological advancements have caused various environmental issues. To contend with them, the concept of Green Finance was introduced which envisages that both public and private sectors should establish linkages between technological development, innovation, and the greening of the economy to explore untapped opportunities for economic growth. Subsequently, every country has focused on establishing green finance policies. However, the processes associated with following the new methods of financing in developed countries are easier to follow when compared with developing countries. The State Bank of Pakistan has recently introduced green banking policies with an aim to reduce the vulnerability of banks from risks arising from the environment, fulfill their responsibility for protecting the environment, and to provide financing to transform the economy. This article analyses the green finance mechanism for sustainable development in Pakistan by exploring the supply side of the green banking approach, which includes various issues faced by banks/DFIs, and the demand side, which refers to the compliance of green banking practices by the borrowers. It also reviews the policies that developing countries have implemented to initiate Green Finance and report that China and India are far better at formulating and implementing green banking practices. However, Pakistan is in the early stages of developing and formulating its Green Banking Strategy and this study provides suggestions for the implementation of such practices.

Impediments of Green Finance Adoption System: Linking Economy and Environment

“…The prior literature also supports the current findings. Mumtaz & Smith (2019) [53] believe that the people of developing countries do not have sufficient knowledge of the green concept. Lack of information and acceptability is one of the main hurdles in adopting a green finance system.…”

“…The private sector is not interested in green projects because they consider them as a high-risky and low-profitable projects [33]. At the country level, no proper regulatory system is developed to monitor green practices, so no green finance system is established [53]. The government support system is weak due to political and economic instability, which is also a hurdle in implementing a green finance system [43,56].…”

“…[5,14,36] Green Finance is a crucial component to attain green growth related to healthy economic development is essential in achieving sustainable development goals [37]. The researchers suggest that the rolling force and objective of green development is to increase the capacity of a nation to produce products in a manner that overrides environmental degradation, utilizes green products and expertise, and spreads assets [38]. Therefore, any integrated investment decision of a financial instrument applies to green finance, which involves the transaction of debt, grant, equity, selling, and green products acquisition [39].…”

“…New technologies and finances are essential for green technologies, and small and medium-sized businesses are limited mainly by resources [46]. Handling environmental impacts generated by economic growth is easier in developed nations, as the guidelines to be practiced by corporations are defined and require compliance [38]. Developing economies are a wide and varied community.…”

“…Fourth, greenhouse gas emissions are the primary reason for global warming and climate change [5]. The introduction of technological developments has influenced the world with carbon emissions, rising temperatures, ozone depletion, destruction of natural wealth, erosion and lack of diversity [38]. The creation and usage of resources within safe guidelines is a matter of immediate need.…”