Unlocking Compliance: How New Regulations on Sustainability and Climate Risk Disclosures Impact Your Business

KARACHI: Ayhan Mustafa Bhutto, the Special Secretary for Climate Change and Coastal Development in Sindh, recently urged businesses and banks in Pakistan to enhance their Environmental, Social, and Governance (ESG) reporting. This advice came during a workshop focused on aligning with the IFRS S1 and S2 standards.

Bhutto highlighted that many Pakistani institutions are missing out on significant financial opportunities available to foreign companies. The workshop, organized by the Indus Consortium, gathered key players from the banking and financial sectors to discuss how to effectively integrate ESG frameworks.

He pointed out that meeting international ESG standards is crucial for sustainable economic growth and mitigating financial risks tied to climate change. Sindh is particularly vulnerable to climate impacts, so collaboration between public and private sectors is essential for building resilience.

“Viewing the transition to sustainability merely as a regulatory requirement overlooks its importance as a strategic economic necessity,” he stated. By adopting the IFRS S1 and S2 standards, Bhutto believes that companies can increase transparency and attract investments aligned with climate objectives.

In her presentation, Zohra Sarwar Khan from the Securities and Exchange Commission of Pakistan (SECP) stressed the importance of ESG reporting in promoting corporate responsibility and drawing sustainable investment into the country. She noted that global demand for transparency regarding sustainability practices is growing, with investors and stakeholders seeking clear information on companies’ environmental and social impacts.

The IFRS Foundation developed S1 and S2 to serve as global benchmarks for sustainability disclosures. According to Hussain Jarwar, CEO of the Indus Consortium, financing can have either positive or negative effects on the environment and communities. He emphasized that banks must improve their ESG disclosures to ensure a more sustainable future.

Recent studies show that companies adopting ESG practices are witnessing better financial performance and investor interest. A 2022 survey by McKinsey revealed that 70% of executives believe ESG initiatives will positively impact their company’s bottom line within the next five years.

This evolving landscape highlights a significant shift in how financial markets assess risk and opportunity. The increasing influence of ESG factors on investment decisions suggests that sustainable practices are not just good for the planet, but also good for business.

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