Global investment trends are shifting dramatically around ESG. ESG assets are projected to soar to $50 trillion by 2025 and will represent a third of all assets under management globally. As international investors prioritize sustainability, transparency, and accountability, businesses in Pakistan must dance in sync to the realities of these new expectations. But beyond attracting foreign investment, ESG frameworks offer companies tangible benefits, including risk management, operational efficiencies, and improved corporate reputation. Recent initiatives by the Pakistan Stock Exchange (PSX) and the Securities and Exchange Commission of Pakistan (SECP) have also provided an essential roadmap for companies to follow.
The PSX ESG Primer, launched in April 2024, is now a clear call for Pakistan’s listed companies to work towards ESG reporting. The primer seeks to educate corporates to navigate the complexities of ESG reporting by introducing international standards and highlights the risks and opportunities that lie in ESG adoption. It emphasizes transparency for attracting capital and creating trust with customers, regulators, and global stakeholders. PSX’s efforts are subsequently supported by the SECP, which has set out guidelines for ESG disclosure that has largely focused on creating an ecosystem that encourages voluntary adoption of ESG practices. The guidelines emphasize the importance of integrating ESG into corporate governance structures to recognize material ESG risks and align their reporting with global frameworks such as the Global Reporting Initiative (GRI) and the International Sustainability Standards Board (ISSB). Overall key themes under SECP guidelines and PSX ESG primer are summarised as below.
Key Themes from SECP Guidelines and PSX ESG Primer
| Key Theme | SECP Guidelines | PSX ESG Primer |
| Reporting and Disclosure | Voluntary disclosure of ESG risks and opportunities. Alignment with global standards like GRI, ISSB. | Emphasizes transparency and consistency in reporting. Use of international frameworks. |
| Governance | Mandates at least one-third independent directors and one female director on boards. | Encourages strong governance to enhance transparency and trust. |
| Environmental Considerations | Requires companies to address climate-related risks, aligned with Pakistan’s NDC roadmap. | Focuses on environmental risks like climate change and resource management. |
| Social Responsibility | Stresses labor rights, gender equality, and community engagement. | Encourages businesses to prioritize social issues for long-term sustainability. |
| Risk Management | Highlights managing ESG risks for corporate resilience. | Emphasizes identifying and mitigating environmental and social risks. |
| Access to Capital | ESG-compliant firms are better positioned to attract global investors. | Stresses that good ESG reporting can enhance access to capital. |
| Innovation and Opportunity | Encourages companies to innovate through sustainable practices. | Recognizes ESG as a driver for growth and innovation. |
For Pakistan, the challenges are both significant and urgent. The country is facing rising temperatures, increasing water scarcity, and recurring natural disasters, all of which threaten corporate supply chains, agricultural productivity, and community livelihoods. For businesses, these environmental risks translate into operational vulnerabilities that must be managed. ESG reporting will become a tool to assess these risks and will provide them a path forward for mitigation.
Also, ESG will be more than climate. Governance issues, including corporate transparency, anti-corruption measures, and board diversity, will become central. The SECP’s guidelines (similar to the SOE Act) has stressed the importance of strong governance and has mandated a minimum of one-third independent directors and at least one female director on company boards. Further, social responsibility will also remain a key pillar of ESG. For Pakistani companies, this means engaging with local communities to ensure fair labor practices, and to promote gender equality.
Overall, the PSX ESG Primer and SECP guidelines have offered Pakistani companies practical steps for embedding ESG into their strategies, starting first from materiality assessments to reporting on key performance indicators. Organizations that will lead the charge will find themselves more resilient to the risks of climate change and global instability but will carve out sustainable practices from day one. Capacity building across organizations will remain the key. At Resources Future, we work with clients on delivering company wide ESG trainings, from director level to general management and even junior employees. Our aim is to work with your organizations, carve out important discussions around ESG and make sure that every employee is congnizant of their responsibility when it comes to the enviornment, social and governance aspects. If you are looking for corporate packages on ESG, reach out to one of our colleagues today for a customized discussion and we would be happy to help you lead the way.
As we have always said, ESG will be more than just compliance and reporting; it will be rethinking what it means to do business in the 21st century.
