ESG in Pakistan: Why Partnerships Can Help Businesses Meet Emerging Requirements

Environmental, Social and Governance (ESG) is no longer a choice for companies in Pakistan. It is becoming a part of regulation, finance and business strategy. The question is no longer if companies should focus on sustainability. The real question is how they can build systems, collect proof, and form partnerships that allow them to show their ESG performance in a way.

The ESG landscape in Pakistan is changing fast. At the heart of this change is the Securities and Exchange Commission of Pakistan (SECP). In December 2025, the SECP released updated ESG Disclosure Guidelines for listed companies. These new guidelines are linked to the Pakistan Green Taxonomy. This alignment helps companies understand which activities are environmentally sustainable. It also gives them a path to report climate risks, climate opportunities, and related economic activities in a more consistent way.

These ESG disclosure guidelines are currently voluntary. They will remain so until June 2029. After that, full implementation is expected to start in three phases. This timeline gives companies time to prepare. It allows them to build the capacity they need before reporting becomes mandatory.

It's important to understand that these voluntary guidelines are not the whole story. Pakistan is also moving toward sustainability reporting rules. The SECP has announced a phased rollout of the IFRS Sustainability Disclosure Standards i.e. IFRS S1 and IFRS S2. These standards focus on sustainability risks and opportunities that can affect a company’s health, its access to funding, or the cost of capital. The first phase started with reporting periods beginning on or after July 2025. More phases will follow in 2026 and 2027.

So Pakistan’s ESG system is developing along two linked paths. One path is the ESG guidance that promotes transparency across social and governance matters. The other is the standards that tie sustainability issues directly to financial reporting. Both are shaping a more connected approach to ESG in the country.

Where does the PSX ESG Index fit into this?

The Pakistan Stock Exchange (PSX) is working toward ESG-based market products. One of the goals is to create an ESG Index. The PSX has partnered with the London Stock Exchange Group (LSEG). This partnership helps improve the availability and consistency of ESG data. It also increases the visibility of Pakistani companies listed on the exchange. The PSX sees this effort as laying the foundation for an ESG Index.
If this index is launched it will serve a purpose than the SECP’s disclosure rules. The SECP sets the rules for what companies must report and how they should report it. The ESG Index would use the data that's available to pick out or track companies with better ESG performance. It would help identify firms that are doing well in sustainability.

The two systems can work together. Better disclosures lead to data. Better data allows for indices. An ESG Index can also create a business incentive. Companies may want to improve their ESG scores to be included in the index. Investors, fund managers and ESG-focused investment products could use the index to find companies that meet sustainability criteria.

ESG is also becoming sector-specific

Listed companies are not the ones facing ESG demands. Banks, development finance institutions and microfinance banks are also under pressure to act.

The State Bank of Pakistan (SBP) has already created a sustainable-finance framework. The Green Banking Guidelines cover environmental risk management, green financing and the environmental impact of institutions. The Environmental and Social Risk Management Implementation Manual includes tools and procedures to assess social and climate risks in lending activities.

Recently, the SBP released the Pakistan Green Taxonomy for regulated financial institutions. It also issued a Regulatory Framework for Managing Climate-related Financial Risks. Financial institutions must now include climate risks in their governance, strategy and risk systems. Compliance is expected by June 2029. Board-approved implementation plans must be in place by September 30 2026.

The telecom sector is also seeing growing expectations. Pakistan’s telecommunications policy already includes responsibilities for the industry. Recent actions by the Pakistan Telecommunication Authority (PTA) and the Ministry of Climate Change have focused on Green ICT. These include handling of e-waste energy-efficient networks and climate-resilient digital systems. While there isn’t yet an ESG reporting regime like the one from SECP, these efforts show that environmental and social accountability are becoming important across sectors.

Why partnerships matter

This is where partnerships become an advantage.

Many companies have social responsibility (CSR) programmes. ESG needs more than goodwill. ESG requires data, measurable results, risk management and proof that environmental and social actions are tied to business goals.

Partnerships with trusted development agencies, technical institutions, civil society groups and sustainability experts can help companies turn promises into real outcomes. For example, a company may support education, health, women’s empowerment or climate resilience. If it works with a partner who has deep expertise, monitoring systems, and proven impact, the results are more credible.

Such partnerships help businesses in ways:

• They generate reliable ESG data and evidence of impact
• They provide access to skills and knowledge that may not be inside the company
• They improve how programs are monitored, evaluated and governed
• They help align investments with national and global sustainability goals
• They reduce the risk of reputational damage from unsubstantiated ESG claims
• They support programs that can be clearly reported to regulators, investors and other stakeholders

For Pakistani businesses, the chance is bigger than just following rules. Companies that start building ESG systems early and form real partnerships may be better prepared for regulatory changes. They may also find it easier to access finance. Investors are watching closely. New market tools like an ESG Index could give them an edge.

The direction is clear. ESG, in Pakistan is becoming more structured. It is becoming more measurable. It is increasingly tied to finance and corporate governance. Companies that see ESG as a reporting task may struggle to show real progress. Those that build strong partnerships and focus on measurable outcomes may turn ESG into a source of strength. They may build resilience, boost their reputation, and create long-term business value.