KARACHI: Pakistan’s major commercial banks have made limited progress in incorporating climate change and biodiversity considerations into their lending policies, raising concerns about the environmental and social impacts of financed projects, according to a new assessment by Fair Finance Pakistan (FFP).
The 2025 Benchmark of Bank Sustainability Policies in Pakistan, conducted in collaboration with Lahore University of Management Sciences (LUMS) and Profundo, found that positive policy coverage for borrowers and financed projects stood at just 13.8 per cent for climate change and 26.8pc for biodiversity.
The assessment reviewed seven banks: Habib Bank Limited (HBL), United Bank Limited (UBL), MCB Bank, National Bank of Pakistan (NBP), Meezan Bank, Allied Bank and Standard Chartered Pakistan.
The findings revealed a significant gap between banks’ internal sustainability policies and the standards applied to their financing activities. While 75.4pc of policy elements relating to banks’ own operations received a positive basic score, the figure dropped to 23.1pc for the companies and projects they financed.
Standard Chartered Pakistan recorded a climate policy score of 3.63 out of 10, followed by Allied Bank at 1.45 and HBL at 1.37. The remaining banks scored below 0.50. In biodiversity, Standard Chartered Pakistan scored 5.31, followed by Allied Bank at 3.05, while MCB Bank and NBP scored zero.
Across the eight themes assessed, governance policies covering anti-corruption, tax transparency and accountability recorded an average score of 3.39. Social policies averaged 3.14, while environmental policies scored 1.40.
Presenting the findings, LUMS Professor Emeritus of Economics Dr Abid Aman Burki said environmental policies remained the weakest area, with climate change and biodiversity scores barely exceeding one out of 10 in the broader assessment.
Allied Bank scored 41.05pc of the maximum attainable score in the overall assessment, followed by Standard Chartered Pakistan at 34.28pc and HBL at 32.90pc. Meezan Bank scored 28.96pc, MCB Bank 22.95pc, UBL 18.88pc and NBP 16.94pc. No bank achieved an overall score above 42pc.
FFP Country Programme Lead Asim Jaffry said lending decisions played a crucial role in determining which industries and projects received financing, directly influencing air quality, human rights and the protection of natural habitats.
The assessment comes as the State Bank of Pakistan advances its Green Taxonomy and climate-related financial risk framework, alongside existing Green Banking Guidelines and environmental and social risk management requirements.
Bushra Shafique, head of the SBP’s Banking Policy and Regulations Department, said banks were being encouraged to move beyond voluntary commitments towards implementation, with climate risks expected to be integrated into governance, business strategies and lending decisions over the next three years.
The report recommends stronger environmental and social obligations for borrowers, independent monitoring, greater disclosure of portfolio-level risks and consistent safeguards in credit appraisal processes.
It also clarifies that the assessment measures the quality and scope of publicly disclosed policies rather than actual environmental or social outcomes.
Nevertheless, the findings highlight the need for Pakistan’s banking sector to strengthen climate risk assessments and incorporate environmental considerations more effectively into financing decisions, particularly as the country faces growing exposure to floods, extreme heat and air pollution.
