Bridge the climate-debt divide

At the recent UN-sponsored roundtable organised by TabadLab on ‘Bridging Pakistan’s Financing Gap at the Intersection of Debt and Climate’, convened after the FFD4 conference in Seville, I had the opportunity to reflect on one of the most pressing questions facing Pakistan today: How do we mobilise not just more finance, but smarter, fairer and faster finance to navigate a world wracked by climate volatility and rising debt?

The topic is of strategic importance and a growing concern in a rapidly evolving global scenario, set against the backdrop of broader trends in sustainable development finance.

With 240 million people — over 107 million of them children under the age of 18 – Pakistan stands at the frontlines of a global polycrisis. Unchecked population growth and intensifying climate shocks are existential threats converging to threaten our national security through food, water, and energy insecurity.

In a world where the top four global risks in terms of severity over the next decade are climate-related, starting with extreme weather events leading to biodiversity loss and ecosystems collapsing, to critical changes in Earth systems, which shall accentuate natural resource shortages, all these environmental risks may potentially lead to social risks of inequity, societal polarisation and further displacement of population and involuntary migration which again roll-up into the non-traditional, asymmetric domains of integrated national security.

Pakistan is neither alone nor immune. But our vulnerability is unique. And our response must be equally exceptional.

The debt-climate nexus is no longer theoretical; it is a lived reality for countries like Pakistan. Our fiscal space is narrowing, while capital is being reallocated globally to non-development paradigms. The echoes of the 1980s 'lost decade' of development are resounding again. Only this time, we cannot afford to ignore climate risks. As we prepare to present bankable projects at COP30 in Brazil later this year, Pakistan must pivot decisively.

The Seville conference laid the groundwork. Now, we must move from dialogue to design. Let’s be clear: investing in climate resilience is not charity — it’s smart, future-proof development. And this shift requires a fundamental reorientation of how capital is mobilised, structured and deployed by hardwiring climate-focused outcomes into the DNA of industrial and infrastructure projects as well.

From my experience in financing Emerging Markets and Developing Economies (EMDEs) across three continents, one principle stands out: solutions must begin and be anchored in First Principles. The Ministry of Finance has already taken a key step forward by drafting a Sustainable Finance Framework, underpinned by a Social Impact Financing (SIF) Framework that embeds climate as a cross-cutting priority. 

But frameworks must live, breathe, and deliver results. This could include time-bound, outcome-linked metrics such as increasing forest cover and survival rates, expanding the area under climate-resilient agriculture, scaling up household adoption of clean energy sources such as biogas, wind and solar mini-grids, and achieving measurable reductions in climate-induced displacement. 

These indicators are instruments to unlock capital.

The private sector needs to work in tandem with the government to build a toolkit of climate-linked financial instruments, including debt-for-climate swaps, social impact bonds, and credit guarantees. These tools must be embedded within our national investment plans and SDG strategies. 

These aren’t theoretical ideas; they are already being implemented globally. What’s missing in Pakistan is rigorous localisation, outcome linkage, and sustained implementation.

At the global level, we urgently need reform in how credit rating agencies assess ESG performance. Current methodologies fail to reward efforts by emerging economies to meet climate and SDG targets and the profound impact of inherited vulnerabilities on the fiscal space.

Nationally, we must align fiscal and financial policies with SDG priorities, target high-impact sectors such as water, waste, clean energy and electric vehicle transition, and actively mobilise the private sector through enabling policy and regulatory frameworks.

Development partners, especially the UN system and multilateral banks, have a critical role to play in providing blended finance, guarantees, and technical assistance. Their cross-country experience is an asset Pakistan must tap into — not to copy-paste solutions, but to co-design instruments that are relevant, resilient and results-driven.

As we set our sights on COP30, Pakistan’s challenge is not a lack of will but a need for coherence, coordination and conviction. Let’s not repeat the mistakes of replicating fragmented initiatives without local buy-in or clear metrics. 

We must anchor our projects in the realities of our communities, especially the most vulnerable, and build a bankable project pipeline that speaks the language of global capital but reflects local priorities.

Climate finance is about restoring trust, enabling dignity and investing in futures that matter. From Seville to Belem, the baton is now in our hands. Let’s run this relay not to compete with others, but to complete this marathon race – with partnerships that are ambitious, outcomes-driven and grounded in sustainable impact.

Disclaimer: The viewpoints expressed in this piece are the writer's own and don't necessarily reflect Geo.tv's editorial policy.

The writer is a seasoned banker with 30 years of international expertise in global markets and development finance. He can be reached at: [email protected]

Originally published in The News