SECP introduces ESG funds to drive green investments

April 6, 2026 (MLN): The Securities and Exchange Commission of Pakistan (SECP) has released a concept paper proposing ESG (Environmental, Social, and Governance) mutual funds to encourage environmentally friendly investments across the country.

This initiative aims to promote sustainable finance, enhance corporate governance and align Pakistan with global standards of responsible investing.

Under the proposed framework, ESG mutual funds will primarily invest in companies that prioritize environmentally friendly operations.

At least 70% of the fund’s capital will be allocated to sustainable and eco-friendly projects, ensuring that the majority of investments directly support environmental goals.

The framework also focuses on improving corporate governance, encouraging transparency, and fostering responsible business practices within companies participating in ESG initiatives.

To prevent misleading claims about environmental compliance, commonly known as greenwashing, SECP has provided clear guidelines for fund managers.

Additionally, ESG mutual funds will be aligned with the Pakistan Stock Exchange’s proposed Sustainability Index, ensuring consistency with broader market standards for sustainable and responsible investment.

Debt funds will also be allowed to participate by investing in green, social, and sustainability-focused financial products.

The SECP has opened the ESG mutual fund concept paper for public consultation, allowing investors, stakeholders, and financial institutions to provide feedback on the proposed framework.

Experts believe that ESG funds will not only support environmental sustainability but also offer investors an opportunity to earn returns while promoting socially responsible business practices.

With global demand for sustainable finance growing rapidly, SECP’s initiative marks a significant step toward establishing Pakistan as a hub for green investments and responsible corporate governance, supporting both environmental and social development objectives.

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