Pakistan is the proverbial canary in the coal mine as the world descends into global climate crisis. It has recently ranked as the most climate-vulnerable country on the Climate Risk Index 2025, and it still reeling from the devastating 2022 floods, which caused over $30 billion in damages. The country faces worsening heatwaves, glacial melting, floods (including Karachi’s annual urban flooding), droughts, and rising coastal threats. Unpredictable monsoons, desertification, and groundwater depletion further deepen food and water insecurity. Health crises, including vector-borne diseases (such as dengue and malaria), heat strokes, and malnutrition, are escalating. With a fragile economy and repeated IMF bailouts, Pakistan’s climate crisis carries catastrophic financial burdens. As extreme weather intensifies, urgent climate investment in adaptation, mitigation and resilience are critical to combat future disasters. Facing billions in climate and resiliency costs, Pakistan’s negligible fiscal capacity, acute environmental and socio-economic vulnerability, and minimal contribution to global emissions, demand a resolute push to position itself as a prime destination for climate finance. $1bn climate finance talks next week Climate finance will enable Pakistan to attract green investment into multi-sectoral climate-friendly projects through investors or sponsors such as multilateral development banks (MDBs) funds, governments or corporations. Carbon finance, a subset of climate finance, when functioning properly will allow Pakistan to develop emission-reduction projects and generate carbon credits that can be sold to companies, governments and funds looking to buy either in the compliance or voluntary carbon market. For instance, Sindh, a frontline province in the fight against climate change, has planted over two billion mangroves in various areas for coastal protection and mangrove restoration. This initiative under the Delta Blue Carbon Project will help to protect coastal communities from storm surges and floods, enhance biodiversity, and sequester significant amounts of CO2. According to Chief Minister Murad Ali Shah, it has generated about $50 million in carbon credits. While it may not be a friction-free and seamless undertaking, it showcases the potential of such solutions. Hence, climate finance is broad enough to encompass adaptation, mitigation and other resiliency building projects through market-driven and investment-based approaches, while also offering a crucial avenue to attract private capital. It can fund reforestation and afforestation, biodiversity protection, flood defenses, coastal protection, water management and conservation, climate smart agriculture, and resilient infrastructure, among several others. For a country whose economic budget is predominantly consumed by debt repayment, climate finance is a green lifeline within our reach. The Paris Climate Agreement is a key driver of climate finance growth. The Agreement aims to limit global warming to 1.5°C above pre-industrial levels, which requires about a 45 percent reduction in GHG emissions by 2030, and net-zero by 2050. Resultantly, annual climate finance has more than doubled between 2018 and 2023 (from $674 billion to surpassing $1.5 trillion). However, countries lag behind their Nationally Determined Contributions (NDCs). Climate finance, currently at about 1 percent of global GDP, requires at least a five-fold increase annually to prevent severe climate impacts. Multilateral climate action faced a recent setback with the Trump administration’s rollback of US climate commitments, including initiating the withdrawal from the Paris Agreement. This change in posture has raised concerns over reduced climate financing, emissions cuts (with the US being among the top emitters), and research and technology development support. Climate adaptation, mitigation: Country needs $348bn by 2030: Aurangzeb The US contributed up to 8 percent to international climate finance in 2024 with the Biden administration significantly scaling up commitments. The renewed uncertainty under an emboldened Trump administration in a world facing mounting conflicts and economic constraints, might cause a slowdown in climate action and potentially push investments back into fossil fuels. This shift casts a long shadow over global climate ambitions at a critical time. Nevertheless, the heat is on. Relentlessly. With or without the political chest-thumping reverberating across the globe, we are careening towards a future that is hotter and harsher – one that spares no nationality, ethnicity, religion, creed or culture. The cost of inaction grows exponentially larger. The 2024 Global Landscape for Climate Finance forecasts that by 2100, the avoidable economic losses could be five times greater than the climate finance needed by 2050 to limit warming to 1.5°C. With exponentially rising costs of inaction, the U.S. stepping back may simply create a vacuum that others will fill. Countries are advancing policies to leverage climate finance and carbon markets, with stricter emissions regulations, growing institutional and private commitments, and rising adaptation, mitigation and resiliency needs. At COP29, at least 200 nations set a goal to triple climate finance for developing countries, targeting $1.3 trillion annually by 2035. Funding from private capital, multilateral banks, donor nations, and domestic “country platforms” is increasing but still remains insufficient for emerging markets and developing economies. On the international carbon markets front, China’s carbon market is expanding to industries like steel and cement, strengthening enforcement as it becomes the world’s largest Emissions Trading System (ETS). The EU is tightening its Emissions Trading System, raising carbon prices and expanding to new sectors. Additionally, the EU’s Carbon Border Adjustment Mechanism will soon tax carbon-intensive imports to curb “carbon leakage.” Indonesia’s ETS is currently set to enter its second phase of expansion as well, while countries such as Brazil and India are among those exploring, or in the process of, establishing ETSs. For Pakistan to position itself as a climate finance hub, a systemic reorientation is needed to foster a vibrant green investment channel. This requires a multi-pronged approach, including a supportive regulatory framework, restoration of investor confidence, and a robust pipeline of viable and investable projects. Lack of a sustainable and feasible project pipeline is a key reason why several funding pledges by friendly countries or MDBs do not translate to disbursed funds. This underscores a major capacity constraint, particularly in the public sector. An effective means of addressing this is leveraging public-private partnerships (PPPs) to harness the innovativeness, technical expertise, and efficiency of the private sector, both domestic and international. PPPs play a pivotal role in mobilizing alternative finance for climate-resilient infrastructure and services, ensuring balanced risk allocation. Moreover, climate finance must become a cornerstone of Pakistan’s foreign policy, with a strategic focus on building partnerships and expanding its multi-stakeholder ecosystem to attract sustainable investment and drive long-term resilience. While there are some recent milestones of note, including the development of the National Climate Finance Strategy 2024 and the Policy Guidelines for Trading in Carbon Markets, key challenges continue to revolve around policy fragmentation, lack of investor confidence, severe capacity limitations (particularly project development), limited public-private partnerships, and implementation failures. Climate finance is not just a necessity but a lifeline for Pakistan as it grapples with the growing threats of climate change. Investing in sustainable solutions today will not only protect vulnerable communities but also pave the way for a resilient and sustainable economic development. The article does not necessarily reflect the opinion of Business Recorder or its owners