The Securities and Exchange Commission of Pakistan (SECP) has launched the country’s first Environmental, Social, and Governance (ESG) Mutual Funds Framework, allowing asset management companies to introduce ESG-focused mutual funds for investors.
According to the SECP, the new framework is aimed at promoting sustainable investment and encouraging capital to flow toward companies that demonstrate strong environmental practices, social responsibility, and corporate governance standards.
Under the framework, equity ESG funds will primarily invest in companies included in the Pakistan Stock Exchange Sustainability Index, while debt ESG funds will invest in green, social, sustainability, and sustainability linked debt instruments.
The regulations require ESG mutual funds to invest at least 50 percent of their assets in ESG compliant investments.
The SECP said the requirement is intended to ensure the integrity of ESG funds while reducing the risk of greenwashing and strengthening investor confidence.
The regulator said the framework is expected to encourage Pakistani companies to improve their ESG standards and attract greater interest in sustainable finance from both domestic and international investors.
The ESG Mutual Funds Framework is the latest step in the SECP’s sustainable finance reform agenda.
It follows the introduction of ESG Disclosure Guidelines, the adoption of IFRS Sustainability Standards, the ESG Sustain Platform, and the Pakistan Green Taxonomy to support the development of sustainable financial markets in the country.
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