SBP issues climate-related financial risk framework

December 27, 2025 (MLN):  The State Bank of Pakistan (SBP) has issued a new regulatory framework requiring all banks, development finance institutions (DFIs) and microfinance banks (MFBs) to effectively manage climate-related financial risks, while citing Pakistan’s high vulnerability to climate change.

According to the SBP circular issued, financial institutions must integrate climate-related risks into their governance, business strategy and risk management systems to address rising physical and transition risks linked to climate change.

Under the framework, all financial institutions are required to submit board-approved, time-bound implementation plans and targets to SBP by September 30, 2026, while full compliance must be achieved by June 30, 2029.

The implementation plans must, at a minimum, cover the establishment of appropriate governance structures, development or updating of relevant policies and procedures, integration of climate risks into existing risk management and stress-testing frameworks, and capacity building of staff, including board members and senior management.

SBP said it will support the effective implementation of the framework through trainings, awareness sessions and other facilitation measures.

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