Saba Yousafzai, Student, University of Gujrat

What is Green Finance?

Green financing is the framework in which public private partnership collaborate for the increase in the investment for green technologies and sustainable natural resource based economies. Green Finance plays important role in sustainable environmental friendly practices and process improvements in terms of large investments. It helps to reduce the harmful effects of activities on the environment and mitigate the climate change.

The role of Green loan or Green budgeting is related to the Clean Technologies and use of renewable resources as energy which ensure the environmental protection, compliance with environmental regulations, pollution control and prevention, waste reduction and less emission of pollutants.

What is Green Finance Initiative (GFI)?

Green Finance Initiative (GFI) was launched in London (2016) to create awareness regarding Green Finance and advocate the specific regulatory and policy plans for protection of environment. The world is already experiencing the unpredictable consequences climate change like flash flood, cyclones, wildfires, outbreak of diseases, extreme weather, increasing heat waves and other disasters.  The participation   of   Asian   financial   institutions   in   sustainable   finance initiatives is still relatively low. Pakistan has been declared among the top ten countries which is most influenced by climate change. Climate change has negative effects on economic, social and political sector.

This diagram shows the timeline for Green Finance Initiative till 2025

What are the opportunities of Green financing in developing countries? 

Necessary investments in all developing countries for mitigation are estimated to be between $140 billion to $175 billion per year by 2030. However, adaptation cost estimates for Asia and the Pacific are in the order of $40 billion per year between now and 2050.

Asian Development Bank seeks to help its member countries become more resilient to the effects of disasters, while it continues to provide assistance to support post-disaster recovery needs. Between August 1987 and December 2018, ADB approved $10.3 billion for 222 disaster risk management projects that directly reduced disaster risks, strengthened financial preparedness, and supported post-disaster recovery; while a further 442 projects incorporated measures to strengthen disaster resilience in their design. These have included flood control and integrated water resource management projects, as well as programs supporting financial preparedness for disasters in ADB’s developing member countries. ADB’s quick response was also seen in the aftermath of disasters such as the Sulawesi earthquake and tsunami in Indonesia, a tropical cyclone in Tonga, an earthquake in Papua New Guinea, and increased volcanic activity of Mt. Manaro in Vanuatu, which all happened in 2018.

The Climate Transparency Report 2020 shows the Greenness of stimulus Index of different countries along with per capita stimulus (USD/Capital) by European Foundation Center.

Through mechanisms such as the Climate Investment Funds, multilateral development banks have mobilized $6.5 billion for climate action in developing countries, with $2.5 billion earmarked for Asia and the Pacific. For the massive financing required to combat climate change, the key will be using limited public sector funds to leverage significant amounts of private capital, and to get the right technologies into the hands of as many partners and quickly as possible.

On climate adaptation, Pakistan remains a vulnerable country without a choice. Our climate adaptation needs range from $7 billion to $14 billion per annum, as we are compelled to undertake adaptation measures in response to climate triggered disasters. The State Bank of Pakistan has recently introduced green banking policies with an aim to reduce the vulnerability and risks arising from the climate change, and provide the financing to transform the economy to reduce the environmental damage.

Green building standards should be incorporated in the Naya Pakistan Housing Scheme which could be expanded to cities like Gwadar. The Rs11.44 trillion ML-1 Project of Pakistan Railways is an example of potential investment opportunities in Pakistan.

Pakistan signed a $188 million agreement with the World Bank for environmental protection through forest regeneration and biodiversity conservation programmes and boosting the country’s climate-resilience through enhanced disaster risk management.

What are the project categories for Green Financing?

Examples of climate change mitigation projects would typically include, but not limited to the following sectors:

·         Renewable Energy Sector

·         Sustainable Transport (excluding roads)

·         Urban public transport

·         Non-urban railway projects

·         Non-motorized transport Adaptation

·         Water and other Urban Infrastructure and Services


What are the goals of Asian Development Bank for Green Financing?

Asia’s overall national infrastructure needs are estimated to be around $26 trillion over 2016-2030 or approximately $1.7 trillion per year.

§ Of the total investment needs over 2016-2030, $14.7 trillion will be for power and $8.4 trillion for transport.

§ ADB recognizes the importance of sustainable investments in the region and have been investing over $2 billion in clean energy projects each year since 2011.

§ In 2019, ADB reached its climate financing target of $6 billion by 2020 with $6.3 billion in approvals, of which $4.9 billion is for mitigation and $1.4 billion for adaptation.

 § ADB will ensure that 75% of the number of its committed operations will be supporting climate change mitigation and adaptation by 2030. Climate finance from ADB’s own resources will reach $80 billion cumulatively from 2019 to 2030.

Green Financing provide funding and technical support for disaster resilience and ecosystem restoration initiatives through more reliable and timely weather forecasting. It will also help in improved disaster risk management services as well as overall environmental sustainability and achieving green growth targets of the country.

About the Author: Saba Yousafzai is doing MPhil from University of Gujrat in Environmental Science. She is passionate to write articles related to Environment and explore the different dimensions of Environment.