Major Pakistani Banks Fail Environmental Policy Test Due to Inadequate Financing Guarantees

Major Pakistani Banks' Underperformance in Climate Policy Assessment

In a recent evaluation, seven prominent commercial banks in Pakistan demonstrated stark deficiencies in their climate and biodiversity policies. The assessment, conducted by Fair Finance Pakistan and published on October 13, 2026, revealed that these banks achieved an average score of only 1.12 out of 10 for climate policies and 1.69 for biodiversity. This startlingly low performance highlights a significant disconnect between the banks' sustainability commitments and the effective policies governing their financing operations.

The analysis shows that while banks have a positive policy coverage of approximately 75.4% for their internal operations, the coverage drops drastically to only 23.1% for the companies and projects they finance. This points to a troubling gap where banks’ commitments to environmental stewardship fall short where it matters most. According to Dr. Abid Aman Burki, who led the study, the banks assessed include Allied Bank, HBL, MCB, Meezan Bank, National Bank of Pakistan, Standard Chartered Pakistan, and UBL, none of which reached even 42% of the total possible score.

Particularly alarming is that MCB and the National Bank of Pakistan scored zero in terms of biodiversity. UBL managed a score of 0.94, while HBL and Meezan Bank scored 1.25 each. Standard Chartered Pakistan fared better with 5.31, and Allied Bank scored 3.05, revealing that stronger commitments are, in fact, achievable within Pakistan's financial landscape.

Asim Jaffry, Country Program Lead at Fair Finance Pakistan, emphasized, "Banks demand accountability from borrowers. Their boards should apply the same discipline regarding the environmental and social impacts of financing." With communities in need of clean air and served ecosystems, he stressed the importance of enforceable requirements placed on banking clients. Investors require evidence that the banks' policies (or lack thereof) directly influence how funds are allocated and managed.

Pakistan's Nationally Determined Contributions (NDC) 3.0 outlines a climate action agenda reliant on adequate financing. However, the low policy scores revealed by this assessment offer scant assurance that bank funding will consistently support these environmental goals. Moreover, international biodiversity agreements stipulate that governments must ensure large corporations and financial institutions evaluate and disclose their risks, dependencies, and impacts on nature.

The findings from this benchmark do not quantify the environmental damage caused by individual loans but highlight weaknesses in the standards by which banks can be evaluated. The climate risk framework established by the State Bank of Pakistan in December 2025 mandated that banks must have implementation plans approved by their boards by September 2026, with full compliance anticipated by June 2029.

Fair Finance Pakistan is calling on bank directors to publicly share milestones concerning implementation, strengthen biodiversity safeguards, and disclose financed emissions along with the transition requirements imposed on their customers. They urge regulators, international investors, and correspondent banks to demand demonstrable progress.

Huma Iqbal, a Policy Analyst at Fair Finance Pakistan, stated, "The test is whether stronger policies influence financing decisions and ensure banks are held publicly accountable for implementation, through clear, verifiable timelines." This ongoing challenge underscores the need for Pakistani banks to prioritize environmental accountability and align their financing practices with broader climate goals, ensuring that they fulfill their roles as agents of sustainable development in the region.