Three years ago, at the 2022 United Nations climate conference (COP27) held in Sharm el-Sheikh, Egypt, Sherry Rehman—then the Pakistani minister for climate change—appealed for an emergency fund so that rich countries could compensate poorer countries for climate damage.
Months earlier, Pakistan had experienced one of the worst flooding events in its history. The floods had turned much of the lower half of the country into a milky brown swamp, stranding farmers on the rooftops of submerged houses and drowning their half-grown crops.
Rehman’s message, echoed by other developing countries, stuck—and the delegates to the COP27 summit agreed to establish a loss and damage fund to help vulnerable nations cope with climate disasters. During a conference in Geneva in January 2023, global funders pledged billions of dollars as an initial and separate step toward Pakistan’s recovery from the floods. The U.N. promoted these pledges as a collective effort to combat climate change, and Pakistan became a poster child for climate justice.
The fund announced at COP27—now officially known as the Fund for Responding to Loss and Damage (FRLD)—opened its first $250 million call for funding requests last month at COP30 in Belém, Brazil, with initial disbursements expected to begin next year.
The creation of the FRLD was a significant moment for Pakistan on the global stage, uniting climate underdogs in a call for accountability from unchecked greenhouse gas emitters. It was also an important inflection point for the country domestically, pushing climate further up the hierarchy of diplomatic importance and flagging climate finance within Pakistan’s bureaucracy as a funding stream to better understand and put to use.
But since its push for climate justice at COP27, Pakistan has faced a persistent challenge: unlocking the funding it needs, beyond what was pledged in Geneva, and designing timely solutions that satisfy the requirements of the global climate finance system. Meanwhile, in August and September, Pakistan was hit by another round of deadly flooding that wiped out around 2.5 million acres of farmland in its agricultural heartland in the province of Punjab..
This has prompted reform efforts from within Pakistan’s government alongside calls to diversify funding streams, providing some insight into the legwork required from developing countries to protect themselves against climate change.
The 2022 floods were a wake-up call for what is needed for Pakistan to deal with major climate disasters, said Adnan Pasha Siddiqui, an advisor to the federal finance minister. “Everything started happening in 2023 as a reaction. It was not proactive,” he said, adding that the floods highlighted the need for a pipeline of projects that integrate technology to mitigate climate risks, with a level of rigor that he said some earlier projects lacked. “We’ve done a lot of injustice to ourselves,” he added.
Since 2010, sectors affected by climate extremes—including energy, transport, housing, and agriculture—have come under the authority of provincial governments. This means that multiple arms of the government at both the provincial and federal level are involved in planning climate-related projects.
Abid Qaiyum Suleri, the executive director of the Sustainable Development Policy Institute, a think tank in Islamabad, said the challenge starts with coordinating between ministries at various levels within the country’s siloed bureaucracy. “It’s just like a mismatch of jigsaw puzzle pieces,” he said. “They will have their own projects. They will have their own priorities.”
Pakistan needs between $40 billion and $50 billion every year to meet its climate adaptation challenges, according to its Overseas Investors Chamber of Commerce. Funding is available through multilateral banks and bilateral lenders, as well as specialized climate finance funds including the Green Climate Fund, Global Environment Facility, and the FRLD—which all together make up a global climate market that surpassed $2 trillion last year.
Although this climate-related funding exists, Pakistan’s leadership has realized the amount of effort required to access it. Much of the money for climate-related projects in Pakistan that was received in Geneva and afterward came in the form of loans, not grants. Competing for additional money from specialized climate funds requires accreditation, followed by the fulfillment of criteria to prove that projects will have the required impact.
Kashmala Kakakhel, an independent climate finance specialist, said that Pakistan has faced a steep learning curve. “The language is different,” she said, comparing it to the development finance that Pakistan has also used for climate-related projects. “The way you curate the entire proposal is very different. The climate rationale is very different.” The FRLD has hinted at a grant-based alternative—but Kakakhel said a prevailing takeaway is that there is still “no free money.”
Pakistan’s search for climate finance comes as its domestic funding landscape changes. The erasure of climate issues from the U.S. policy agenda under President Donald Trump is one factor in this shift. The dismantlement of the U.S. Agency for International Development halted tens of millions of dollars that were intended for climate-related projects in Pakistan, including one 2023 initiative that focused specifically on helping better equip climate projects to absorb funding.
Pakistan needs to overcome a trust deficit from global financiers, which have different requirements for transparency and delivery. The country has also faced criticism domestically regarding project effectiveness, with complaints often resurfacing during climate disasters. In 2022, local communities blamed some of the damage from the flooding on externally funded infrastructure, primarily a drainage canal in the southern province of Sindh that was funded by the World Bank and others.
Ahmad Rafay Alam, an environmental lawyer in Lahore, said that for Pakistan to be seen as a trustworthy borrower of global climate funds, being able to show that its projects are working on the ground is crucial. “Countries like Pakistan receiving climate finance need to make sure that the money that they’re spending is going to the communities, into the areas that are truly affected,” he said. “You can’t have climate finance money being ruined by things like corruption or lack of transparency.”
Pakistan has found piecemeal ways to address these concerns. After the 2022 floods, one urgent and politically persuasive proposal—a massive housing reconstruction project in Sindh—garnered support from multiple financiers, including the World Bank and the Asian Development Bank.
Khalid Mehmood Shaikh, the project’s CEO, attributes this interest to the project’s structure. It was set up by the provincial government as a company that could be audited by globally recognized firms while bypassing some governmental red tape. “It’s very tedious in the public sector,” Shaikh said.
Pakistan put new climate policies into motion in the wake of the 2022 floods, including the National Adaptation Plan launched in 2023 and a National Climate Finance Strategy published last year. The country has taken steps to strengthen its process for screening and climate-proofing projects, according to its planning commission, by using geographic information system data for catastrophe modeling. This can prevent infrastructure from being built in flood plains and help with project planning in areas that are likely to face drought.
The government is also promoting tools to mitigate the financial strain of repeated climate catastrophes, such as parametric insurance, which pays out automatically when certain climate events occur—and would help bring Pakistan up to speed with other parts of the world. There is now a national policy to classify green investment and another to guide the carbon market.
All of this reflects a growing understanding that more targeted, long-term solutions are needed for climate adaptation.
“Pakistan is getting disasters every year,” said Bilal Khalid, a disaster risk management analyst for Pakistan at the World Bank. Khalid said the cycle of destruction has made resilience a greater focus in climate projects for areas getting hit repeatedly: “There is very strong realization on the government side … that that is something that they really need.”
Whether Pakistan can complete these climate projects in time for the next big disaster remains an open question. Some projects funded by money pledged in Geneva in 2023 weren’t launched until this year; around half of the $5.3 billion allocated to climate projects within the country is awaiting dispersal, according to Pakistan’s Finance Ministry.
At COP30, Pakistani Finance Minister Muhammad Aurangzeb called for some changes to the process for climate finance, particularly the Green Climate Fund, to make it easier for countries in its position to access the adaptation money that they need. After this year’s floods, Pakistan’s government vowed publicly to finance recovery through domestic funds instead of seeking help from the international community.
This aligns with the country’s push for alternate forms of finance, including through the private sector. The government has been promoting green sukuk, or Islamic bonds, through which funds could be borrowed in Pakistani rupees; it recently launched a program for “panda bonds,” or those denominated in Chinese yuan. These instruments aim to help raise funding for climate projects, reducing dependence on loans from other sources.
“Now, we need to diversify,” said Nadia Rehman, a member of Pakistan’s planning commission on climate change. The routes that the government is looking for include public-private partnerships that incentivize corporations to get involved in climate projects. Rehman said this push stems from the realization that international climate funds will only become more competitive, while climate needs in Pakistan continue to grow. “We have to do more with the funds that we have,” she said.
Pakistan’s ability to crack the code on different funding streams will prove crucial as the country tries to fill the $348 billion climate finance gap estimated by 2030. But for tens of millions of Pakistanis living through climate extremes every year, the bigger question may be whether the money spent will make any difference.
