Overview
Pakistan, as a signatory to the Paris Agreement, has pledged to reduce projected carbon emissions by 50% by 2030, relying heavily on international financial support. However, despite its potential, climate tech attracted only 2-3% of total startup venture funding between 2018 and 2023.
- Investments have primarily focused on low-carbon mitigation projects, with limited funding for adaptation and resilience.
- Private-sector climate financing remains relatively small compared to other countries.
Industry Updates
Policy Developments
- Pakistan’s Carbon Policy 2024 has been notified; carbon market regulations are expected by Q1 2025.
- The government is encouraging investments in compliance and voluntary carbon markets.
Key Initiatives
- Climaventures Programme – A $50 million GCF-backed project supporting local climate solutions.
- Venture Accelerator – A $10 million fund to support up to 100 early-stage climate-focused startups.
- Climaventures Fund – A $40 million fund managed by Sarmayacar, with a $15 million first-loss equity commitment from the GCF.
- UK Climate Finance Accelerator Pakistan – Open for low-carbon projects requiring at least $4 million, with a £40 million UK government commitment until 2029.
- Acumen Climate Action Pakistan Fund – Targets an $80 million adaptation-focused investment fund, supported by a $3 million GCF grant and $25 million equity.
Challenges
- Low Private Sector Engagement – Only 5% of total climate finance tracked in 2021 came from Pakistan’s private sector.
- Limited Investment Focus – Climate tech received just 2-3% of total startup funding, mostly in e-mobility and agritech.
- Financial Constraints – Many startups face funding shortages, with donor programs prioritizing short-term metrics.
- Lack of Attention – Limited government and international focus on financing for social, environmental, and economic development.
Opportunities
- Untapped Sectors – Potential in carbon capture, sustainable foods, low-carbon mobility, and clean energy.
- International Support – The UK’s CFA offers technical support to low-carbon innovators.
- Blended Finance – Can help attract more adaptation and resilience-focused investments.
- Government Policies – Incentives in AgriTech, digital infrastructure, and climate-focused financial support.
- Disaster Risk Financing – Can reduce government budget strain and encourage private sector involvement.
The GCF will fund a venture accelerator to offer grants and expert guidance to 100 startups at the ideation stage. It will also invest $15 million as first-loss equity into the $40 million Climaventures Fund, targeting ready-for-investment climate ventures.
Future Outlook
Pakistan’s climate tech sector is at a pivotal stage. Increasing private-sector participation, strategic investments, and blended finance solutions can drive long-term growth.
As climate disasters intensify, adaptation and resilience investments will be critical in shaping Pakistan’s climate response.