Karachi, December 26, 2025 – The State Bank of Pakistan (SBP) has issued a comprehensive regulatory framework aimed at strengthening the financial sector’s ability to manage climate-related financial risks, reflecting the country’s growing exposure to climate change impacts.
In an official statement released on Friday, the central bank highlighted that Pakistan ranks among the most climate-vulnerable countries in the world. As a result, banks and other financial institutions are increasingly exposed to both physical risks—such as floods, heatwaves, and extreme weather events—and transition risks arising from the shift toward a low-carbon and climate-resilient economy.
Recognizing the potential threat climate change poses to the stability, resilience, and soundness of the financial system, SBP has introduced the “Regulatory Framework for Effective Management of Climate-related Financial Risks.” The framework is designed to ensure that financial institutions (FIs) systematically identify climate risk drivers and incorporate climate-related considerations into their governance structures, business strategies, and overall risk management practices.
Under the new regulations, all financial institutions are required to achieve full compliance with the framework by June 30, 2029. As an interim step, FIs must submit board-approved, time-bound implementation plans and measurable targets to the SBP by September 30, 2026.
At a minimum, these implementation plans must outline the establishment of dedicated governance structures for climate risk oversight, the development or revision of relevant policies and procedures, and the integration of climate-related risks into existing risk management and stress testing frameworks. In addition, institutions are expected to focus on capacity building by training board members, senior management, and relevant staff on climate risk awareness and assessment.
To support effective implementation, SBP has committed to facilitating training programs, awareness sessions, and other capacity-building initiatives. The move underscores the central bank’s broader commitment to promoting sustainable finance and enhancing the long-term resilience of Pakistan’s financial sector in the face of climate change.