Key Points
- SECP proposes launch of ESG-based green mutual funds framework
- Funds to invest primarily in environmentally and socially responsible assets
- Minimum 70 per cent allocation required for ESG-aligned investments
- Initiative aims to curb greenwashing and improve market transparency
ISLAMABAD: Pakistan’s corporate watchdog, the Securities and Exchange Commission of Pakistan (SECP), has proposed the launch of Environmental, Social and Governance (ESG) Mutual Funds to promote new sustainable investment opportunities.
The proposed funds are designed to allow investors to earn returns while supporting businesses and projects that meet environmental, social, and governance standards.
The initiative is expected to channel savings into responsible investments, promote sustainable development, and strengthen Pakistan’s capital markets in line with global trends.
The proposal is part of the SECP’s broader ESG Regulatory Roadmap, which focuses on improving transparency, encouraging responsible business practices, and aligning Pakistan’s financial sector with international standards.
In recent years, the SECP has taken several steps to build an ESG ecosystem. These include issuing ESG Disclosure Guidelines, adopting international financial reporting standards (IFRS) such as IFRS S1 and IFRS S2, strengthening corporate governance frameworks, and developing ESG data platforms such as ESG Sustain.
To address the lack of structured, sustainable investment products, the SECP has proposed a clear and regulated framework for ESG mutual funds.
The framework is principle-based and flexible, requiring at least 70 per cent of investments to be allocated to ESG-aligned assets, while allowing asset managers to adopt different investment strategies, the regulatory officials stated.
The framework also introduces enhanced disclosure requirements, governance standards, and assurance mechanisms aimed at ensuring transparency and preventing “greenwashing,” where investments are misleadingly presented as environmentally friendly.
These measures are intended to strengthen investor confidence and ensure the credibility of ESG-linked financial products.
For equity-based ESG funds, investments will be aligned with the Pakistan Stock Exchange’s upcoming Sustainability Index.
Until its launch, asset management companies will rely on internal ESG assessment methods. Debt-based funds will invest in green, social, and sustainability-linked instruments under Pakistan’s Green Taxonomy and SECP guidelines.
The Commission has circulated the consultation paper, which is available on the SECP’s website, and has invited the stakeholders to submit feedback by April 21, 2026.
