The Securities and Exchange Commission of Pakistan (SECP) has introduced the country’s first Environmental, Social, and Governance (ESG) Mutual Funds Framework, enabling asset management companies to launch ESG-focused mutual funds for investors.
According to the regulator, the framework aims to promote sustainable investment by directing capital toward companies that demonstrate strong environmental practices, social responsibility, and corporate governance standards.
Under the new framework, equity ESG funds will primarily invest in companies listed on 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 allocate at least 50 percent of their assets to ESG-compliant investments. The SECP said the requirement is designed to preserve the integrity of ESG funds, reduce the risk of greenwashing, and strengthen investor confidence in sustainable investment products.
The commission believes the framework will encourage Pakistani companies to enhance their ESG practices while attracting greater domestic and international investment in sustainable finance.
The ESG Mutual Funds Framework marks the latest milestone in the SECP’s broader sustainable finance agenda. It follows several key initiatives, including the introduction of ESG Disclosure Guidelines, the adoption of IFRS Sustainability Standards, the launch of the ESG Sustain Platform, and the Pakistan Green Taxonomy, all aimed at supporting the development of sustainable financial markets in Pakistan.
