Pakistan is taking a major step toward sustainable development by launching its first Green Sukuk—a Sharia-compliant bond designed to fund environmentally friendly projects. The government aims to raise Rs52 billion to complete three key clean energy initiatives:
- Garuk Storage Dam (Balochistan)
- Nai Gaj Dam (Sindh)
- Shagarthang Hydropower Project (Skardu)
This move is part of Pakistan’s push to meet climate goals and boost renewable energy under its Sustainable Investment Sukuk Framework. But what exactly is a Green Sukuk, and how will it help Pakistan? Let’s break it down.
What Is a Green Sukuk?
A Sukuk is an Islamic financial certificate similar to a bond, but it complies with Sharia law (which prohibits interest). Instead of earning interest, investors receive profits from asset-backed projects.
A Green Sukuk is a special type of Sukuk where the money raised is used only for eco-friendly projects, such as:
- Renewable energy (solar, wind, hydropower)
- Clean water and sanitation
- Sustainable infrastructure
This makes it different from regular bonds because it has a direct environmental benefit.
What Are Green Sukuk Bonds?
Sukuk bonds are a type of Islamic financial tool. Unlike regular bonds, they follow Islamic rules, which avoid interest and focus on sharing profits from real assets, like dams or power plants. Green Sukuk bonds are special because they fund projects that help the environment, like renewable energy or clean water systems.
Pakistan’s Green Sukuk will raise money for projects that support Sustainable Development Goals (SDGs) and Environmental, Social, and Governance (ESG) standards. This means they aim to reduce pollution, create jobs, and improve lives.
Why Is Pakistan Issuing Green Sukuk Bonds?
Pakistan faces big challenges with climate change, including floods and energy shortages. To tackle these issues, the government needs funds to complete clean energy projects. The Green Sukuk bonds are part of a new Sustainable Investment Sukuk Framework, approved in April 2025, to raise money for eco-friendly and social projects.
The first bond issue could be worth Rs30 billion. It will help finish three ongoing projects that need an extra Rs52 billion to be completed.
Pakistan faces two major challenges:
- Energy Shortages – Many areas still lack reliable electricity.
- Climate Change Risks – Floods, droughts, and rising temperatures threaten water and food security.
By issuing a Green Sukuk, the government can:
- Fund stalled projects (like the three dams needing Rs52 billion).
- Attract ethical investors who want to support green initiatives.
- Meet global climate pledges under the Paris Agreement.
Which Projects Will Benefit?
The Green Sukuk bonds will fund three clean energy projects already under construction. Here’s a quick look:
- Garuk Dam (Balochistan): A storage dam in Kharan district. Its cost has risen to Rs28 billion due to delays. It needs Rs5 billion more to finish.
- Nai Gaj Dam (Sindh): Started in 2005, this dam in Khairpur Nathan Shah needs Rs22 billion to complete due to cost overruns.
- Shagarthang Hydropower Project (Skardu): This project will generate 26 megawatts of electricity for Skardu city. It requires Rs25 billion.
These projects will provide clean water, electricity, and jobs, helping Pakistan meet its climate goals.
Project Funding Breakdown
| Project | Location | Total Cost | Funds Needed |
| Garuk Dam | Balochistan | Rs28 billion | Rs5 billion |
| Nai Gaj Dam | Sindh | Not specified | Rs22 billion |
| Shagarthang Hydropower | Skardu | Rs25 billion | Rs25 billion |
The Projects: Building a Sustainable Future
Garuk Dam, Balochistan
- Location: District Kharan, Balochistan
- Purpose: Water storage and irrigation
- Current Status: Under construction
- Funding Needed: Approximately Rs5 billion
- Total Cost: Around Rs28 billion
The Garuk Dam aims to enhance water storage capacity, support agriculture, and provide flood control in the region. Delays and an expanded scope have increased the project’s cost, necessitating additional funding.
Nai Gaj Dam, Sindh
- Location: Dadu District, Sindh
- Purpose: Irrigation, flood control, and power generation
- Current Status: Under construction since 2012
- Funding Needed: Approximately Rs22 billion
- Total Cost: Revised to Rs47.7 billion
- Power Capacity: 4.2 MW
The Nai Gaj Dam is designed to irrigate thousands of acres of land and supply water to Lake Manchar, improving water quality and agricultural productivity. Prolonged delays have significantly escalated the project’s cost.
Shagarthang Hydropower Project, Skardu
- Location: Skardu, Gilgit-Baltistan
- Purpose: Electricity generation
- Current Status: Approved; construction pending
- Funding Needed: Approximately Rs25 billion
- Power Capacity: 26 MW
This project aims to provide reliable electricity to Skardu and surrounding areas, which currently experience significant power shortages. The hydropower plant will harness the region’s water resources to generate clean energy.
How Will Green Sukuk Bonds Help Pakistan?
These bonds are a game-changer for Pakistan. Here’s why:
- Climate Action: Projects like hydropower and dams reduce carbon emissions, supporting Pakistan’s National Climate Change Policy.
- Jobs and Growth: Building dams and power plants creates jobs and boosts local economies.
- Global Appeal: Green Sukuk bonds attract both local and international investors who want to support sustainable projects.
- Islamic Finance: The bonds follow Islamic principles, making them appealing to investors in Muslim-majority countries.
The government plans to issue more bonds, like Social Sukuk and Sustainability Sukuk, to fund solar energy, low-cost housing, and electric vehicles.
How Will the Green Sukuk Work?
- First Issue: Around Rs30 billion (out of Rs52 billion needed).
- Investors: Banks, funds, and individuals (both local and international).
- Returns: Profits from project revenues (not interest).
- Oversight: A government committee (including Finance Ministry, State Bank, and Climate Change Ministry) will ensure funds are used correctly.
Who Decides Which Projects Get Funded?
A special committee will pick the projects. It includes experts from:
- Ministry of Finance
- Ministry of Planning
- Ministry of Climate Change
- Ministry of Economic Affairs
- State Bank of Pakistan
The committee will ensure projects align with Pakistan’s climate and development goals. They’ll also check if the projects can be completed within the bond’s timeline.
Broader Implications and Future Prospects
The successful implementation of the Green Sukuk initiative could pave the way for future issuances aimed at financing a variety of sustainable projects, including:
- Renewable energy ventures (solar, wind, biomass)
- Energy-efficient infrastructure upgrades
- Clean transportation systems
- Affordable housing developments
- Educational and healthcare facilities in underserved areas
By tapping into both domestic and international capital markets, Pakistan seeks to attract investors interested in ethical and sustainable investment opportunities.
FAQs About Pakistan’s Green Sukuk Bonds
What is the difference between a Sukuk and a regular bond?
A Sukuk is Islamic-compliant (no interest) and is asset-backed, while a regular bond pays interest.
Who can invest in Pakistan’s Green Sukuk?
Local and foreign investors, including banks, funds, and individuals.
How much money will Pakistan raise with Green Sukuk bonds?
The government plans to raise Rs52 billion to fund three clean energy projects, with the first bond worth Rs30 billion.
Which projects will the Green Sukuk bonds fund?
The bonds will support the Garuk Dam, Nai Gaj Dam, and Shagarthang hydropower project, which need Rs52 billion to finish.
Why is Pakistan using Green Sukuk bonds for clean energy?
These bonds help fund sustainable projects that fight climate change, create jobs, and follow Islamic finance rules.
How do Green Sukuk bonds support Pakistan’s climate goals?
They fund projects that reduce carbon emissions and align with Pakistan’s National Climate Change Policy and global sustainability targets.
When will the first Green Sukuk be issued?
Expected soon, with the first tranche around Rs30 billion.
Are Green Sukuk investments safe?
They are backed by government projects, but like all investments, they carry some risk.
How does this help fight climate change?
Funds go to renewable energy and water projects, reducing fossil fuel dependence.
Can a middle-class person afford Sukuk bonds?
Yes! They are expected to be available in small amounts (possibly Rs. 10,000+).
Conclusion: A Step Towards a Greener Pakistan
Pakistan’s introduction of the Green Sukuk marks a significant milestone in the country’s journey towards sustainable development. By leveraging Islamic finance principles to fund environmentally beneficial projects, the government demonstrates its commitment to addressing climate change and promoting economic resilience. The success of this initiative could serve as a model for other nations seeking to align financial practices with sustainable development goals.