The Securities and Exchange Commission of Pakistan (SECP) has put forward a proposal to launch Environmental, Social, and Governance (ESG) Mutual Funds, aiming to provide investors with structured, credible opportunities for sustainable investment while introducing robust measures to prevent “greenwashing.
According to SECP information today, the proposed ESG funds are designed to allow individuals to earn returns while supporting businesses and projects that adhere to specific environmental, social, and governance standards. The initiative is anticipated to channel savings into responsible ventures, foster sustainable development, and align Pakistan’s capital markets with global trends.
This move is a key component of the SECP”s broader ESG Regulatory Roadmap, an agenda focused on improving transparency, encouraging responsible business practices, and bringing Pakistan’s financial sector in line with international standards.
In recent years, the commission has taken several steps to cultivate an ESG ecosystem. These actions include issuing ESG Disclosure Guidelines, adopting international sustainability reporting standards such as IFRS S1 and S2, strengthening corporate governance frameworks, and developing ESG data platforms like ESG Sustain.
To address the current absence of structured sustainable investment products, the SECP has proposed a clear and regulated framework for the new mutual funds. The structure is principle-based and flexible, mandating that at least 70 per cent of investments are made in ESG-aligned assets, while permitting asset managers to adopt different investment strategies.
The framework also introduces stringent disclosure requirements, governance standards, and assurance mechanisms to ensure transparency and build investor confidence. These measures are specifically intended to establish the credibility of ESG products and guard against misleading claims.
Under the proposal, equity-based ESG funds will align their investments with the Pakistan Stock Exchange’s upcoming Sustainability Index. Until its launch, asset management companies will rely on internal ESG assessment methodologies. Meanwhile, debt-based funds will invest in green, social, and sustainability-linked instruments under the guidance of Pakistan’s Green Taxonomy and existing SECP rules.
The consultation paper detailing the proposal is now available on the SECP’s website, with the commission inviting stakeholders to submit their feedback by April 21, 2026.