Pakistan Launches Inaugural Green sukuk, Tapping Islamic Finance

Updated May⁤ 28, 2025

Pakistan⁤ has entered the green finance arena with the launch of its first Green Sukuk, valued at Rs30 billion. The Pakistan Stock⁢ Exchange (PSX) marked the occasion with a ceremony on May 19, 2025, heralding a new era of Islamic climate finance for the nation.

Federal finance Minister Muhammad Aurangzeb, PSX Chairperson Dr. Shamshad Akhtar, and Meezan Bank’s Founding ⁢CEO & President‍ Irfan Siddiqui emphasized the importance of this ⁢move. Their remarks underscored a commitment to ethical ⁤values and environmental sustainability through Islamic financial instruments.

The market’s ⁤response was eager. Within two hours, the inaugural issue was oversubscribed by 5.4 times,‍ with bids exceeding Rs161 billion. This strong interest highlights⁤ investor confidence in Pakistan’s commitment to enduring development and the potential of the Green Sukuk market.

The Debt⁢ Office at the ministry of Finance, along with meezan Bank and ‍the PSX, played a crucial ⁣role in‍ navigating the ⁢challenges of this initial offering. Their efforts ⁢included developing Pakistan’s first sovereign sustainable Investment Sukuk Framework, securing federal cabinet approval, and raising awareness among investors.

By tapping⁤ into the green Islamic finance market, the government not only diversifies its funding sources but also aligns with its⁤ international climate commitments

This Green Sukuk issuance ⁢aligns Pakistan‍ with ⁤a global trend toward climate-sensitive finance. The global green bond⁤ market exceeded ⁣$3.4 trillion as of September 2024. Projections estimate green bond issuance ‍will ⁣reach $622 billion in 2024. The outstanding ESG Sukuk market has surpassed $50‍ billion this year, according to the London stock Exchange Group.

The Green Sukuk, compliant with Shariah principles, offers a mechanism for generating liquidity without interest. Proceeds will fund environmentally and socially sustainable ‍projects, such as renewable energy and infrastructure development.

Pakistan’s entry into the Green Sukuk market positions the nation as a player in ⁤sustainability and environmental protection. This initiative is expected to facilitate solutions to climate-related challenges and generate needed funds.

The Sukuk, launched under the government’s Sustainable Investment Sukuk Framework, aims ⁤to promote projects aligned with Maqasid-e-Shariah and the United nations Sustainable Development Goals (SDG). It was issued through the Pakistan‍ Domestic Sukuk company limited (PDSCL) via a competitive auction on the PSX.

The three-year instrument offers a variable rental rate based‍ on the ownership of underlying assets by Sukuk investors, with⁣ semi-annual rental income. The minimum investment was set at Rs5,000 to attract retail investors.

The auction drew interest⁤ from individuals, corporations, financial institutions, and⁤ roshan Digital Account⁢ (RDA) holders. Due to high demand, the issue size was increased to Rs31.98 billion. The Sukuk is fully tradable ⁢on the PSX and structured in accordance with Shariah principles approved by financial and Shariah advisors.

Proceeds will support pre-identified green projects focused on clean energy and water conservation,including the ‍Garuk Storage Dam,the Naigaj Dam Project,and the 26MW Shagarthang hydropower project.

These projects aim to improve water resource management,increase renewable energy ⁢generation,and enhance climate resilience in underdeveloped regions,aligning with five UN SDG Goals.

The Ministry of Finance will publish an annual Green Sukuk Report to ensure openness, tracking allocated proceeds, project performance,⁤ and environmental impacts.

What’s next

Pakistan’s Green Sukuk represents a fusion of Islamic finance and sustainable development. With strong investor participation and a clear focus on environmental impact,this issuance marks a new chapter in Pakistan’s⁤ capital markets,paving the way for future green initiatives and solidifying its commitment to a sustainable future.