SECP unveils framework for ESG mutual funds

July 01, 2026 (MLN): SECP issues Pakistan's first ESG mutual funds framework, which marks a significant step in the country's push toward sustainable investment.

The framework will allow asset management companies to introduce ESG mutual funds, which will channel investments into companies that adhere to environmental, social responsibility and governance standards, the SECP said, according to a press release issued.

Under the new structure, equity ESG funds will invest in companies included in the PSX Sustainability Index, while debt ESG funds will direct investments toward green, social and sustainability-linked debt instruments.

The regulations require ESG funds to hold at least 50% of their assets in ESG-compliant investments.

The SECP said the framework is designed to encourage Pakistani companies to adopt stronger ESG standards, while also helping prevent greenwashing and strengthen investor confidence in sustainability-labelled products.

The ESG Mutual Funds Framework represents a key milestone in the SECP's broader sustainable finance reform agenda, which has already seen the introduction of ESG disclosure guidelines, IFRS Sustainability Standards, the ESG Sustain Platform, and the Pakistan Green Taxonomy.

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