Pakistan releases first ESG mutual funds framework

Pakistan has made significant progress in the global market for sustainable investment, under which the Securities and Exchange Commission of Pakistan (SECP) has released the country’s first ESG Mutual Funds Framework.

Under this new framework, asset management companies will be able to introduce ESG mutual funds. According to the SECP, the framework will encourage Pakistani companies to adopt better ESG standards.

ESG mutual funds will invest in companies that practice environmental, social responsibility, good governance, while equity ESG funds will invest in companies included in the PSX Sustainability Index.

According to the SECP, debt ESG funds will invest in green, social and sustainability-linked debt instruments. Under the new regulations, at least 50% of ESG funds’ assets will be required to be invested in ESG investments.

The framework will help prevent greenwashing and promote investor confidence. The ESG Mutual Funds Framework is a key milestone in the SECP’s sustainable financial reform agenda.

The ESG Disclosure Guidelines, IFRS Sustainability Standards, ESG Sustainability Platform and Pakistan Green Taxonomy have already been introduced.