SECP Proposes ESG Roadmap to Attract International Investors in Capital Markets

The Securities and Exchange Commission of Pakistan (SECP) has proposed a sustainable Environmental, Social and Governance (ESG) roadmap to attract the international investors in the country’s capital markets within next two years.

The ESG is an approach of assessing companies on Environmental, Social and Governance performance factors. The environmental criteria addresses the environmental impact of a company’s operations and environmental stewardship, social criteria refers to how a company manages relationships with and creates value for stakeholders while governance criteria refers to a company’s leadership and management philosophy, practices, policies, internal controls and shareholder rights.

According to the consultative position paper of the SECP, in order to capture the growing interest of institutional investors in ESG based investing, encourage ESG practices and reporting in Pakistan, SECP has proposed a sustainable ESG roadmap for capital markets which comprises of extensive awareness and advocacy sessions to synergize with all relevant stakeholders. The SECP will increase advocacy awareness of ESG consideration in the country up to September 2022.

In June 2023, the Commission will launch a dedicated ESG dashboard to serve as a focused communication platform and capture the progress on adaption of ESG initiatives on real time basis.

According to the SECP, up to Sept 2023 the Commission intends to undertake feasibility for introducing ESG guidelines aimed at harmonizing the disclosures related to ESG indicators and metrics. This will pave way for launch of ESG based mutual funds & other financial products and ESG based Index at PSX up to June 2024.

In a bid to gauge progress of industry in ESG ecosystem, impact assessment of financial implication of ESG risks can be undertaken as a follow-up exercise up to Dec 2024.

Around $120 billion was directed towards sustainable investments in year 2021. In 2022, it is expected that ESG considerations will continue to remain a priority in the corporate sphere.

Investor engagement, regulation, and societal expectations are driving focus on ESG matters. Different jurisdictions including US, UK, EU, Japan, Thailand, and South Korea are adopting different approaches to address ESG risks, opportunities and disclosures.

In order to collaborate further, SECP intends to hold consultative sessions with key stakeholders.