In 2023, global clean energy investment soared to an unprecedented $1.8 trillion. However, this figure masks a deep imbalance. Advanced economies continue to dominate with private capital and policy coherence. The emerging markets remain stagnant, drawing a meager ~ $260 billion annually. Over the past 14 years, Pakistan secured $4.6 billion renewable investments. Economic instability, high interest rates and foreign exchange volatility have derailed momentum, stalling projects worth $911 million. For countries like Pakistan, where climate vulnerability is high and fiscal headroom is thin, this is not just a funding gap; it is a development trap.
Ranking as the 3rd most polluted and 8th most climate-vulnerable country with rising poverty and projected climate-related losses of $1.2 trillion by 2050, Pakistan is critically under-resourced. According to Renewable First’s latest report, climate technology investment is still nascent: venture capital funding totaled just $42.5 million in 2024. Climate investment needs are estimated at $348 billion by 2030. Only 14 percent of that is likely to be met through current financing channels, leaving a fivefold gap in adaptation finance and a sixteen-fold shortfall for mitigation.
Amid institutional paralysis, the citizens have begun writing their own energy script. The import of 21 GW worth of solar panels between mid-2023 and early 2025 signals a grassroots transition under way. Unlike other Global South economies, this solar surge is not state-led or donor-financed. It is a result of soaring tariffs and erratic power supply.
The bottom-up transition is also visible on the roads. With 30 million motorcycles nationwide, startups like Zyp Technologies are catalysing an electric two-wheeler revolution. Their battery-swappable bikes drastically cut costs for urban riders, offering a lifeline amid inflationary fuel prices. But these trends are not supported by the financial ecosystem.
Climate technology globally has faced a correction. Investment fell by 40 percent in 2024 to around $51 billion, down from its 2023 peak of $84 billion. The decline reflects waning investor interest amid economic uncertainty and slower returns in the sector. Rising interest rates, fewer exits and investor fatigue around “green-washed” products have led to more selective funding. In Pakistan, the impact is magnified. Climate ventures attracted just 2-3 percent of start-up funding between 2019 and 2023, compared to 6-10 percent globally. Even now, the country’s first dedicated climate technology venture fund (Climaventures) has raised just $15 million of its targeted $40 million, albeit with GCF support.
A dearth of tailored support further complicates the matters. Nearly 80 percent of the incubated climate ventures are housed in national incubation centres that lack sector-specific programming. With no homegrown success stories and few technical experts, the start-up pipeline is thin. Moreover, capital-intensive verticals like distributed solar, EV manufacturing and waste-to-energy systems require patient capital that the current venture market, geared towards quick exits, is ill-equipped to provide.
Pakistan’s youth bulge (two out of three Pakistanis are below the age of 30) and its 100+ million mobile broadband users make for fertile ground for digital innovation. This potential materialised when start-up funding jumped from $10 million annually in 2016-2018 to over $350 million in 2021-2022. Much of that capital, however, went to e-commerce and fin-tech, not climate technology.
Amid institutional paralysis, the citizens have begun writing their own energy script. The import of 21 GW worth of solar panels between mid-2023 and early 2025 signals a grassroots transition under way.
The reasons are manifold. Climate ventures have longer gestation periods due to tech-heavy solutions, import dependencies and dynamic regulatory hurdles. Licensing delays and limited local manufacturing mean that even promising ideas can take 2-3 years to reach market readiness. Add to this the absence of consumer financing for products like EV. 90 percent of the banks abstain from such lending and there is a vicious cycle of low demand and low supply.
Even where consumer demand exists, most business models require market creation from scratch. Founders are flying blind in terms of market sizing due to insufficient data. Lack of precedents forces them to expend energy on both product development and consumer education. In other words, they’re not just entrepreneurs, they’re ecosystem architects as well.
On paper, the government has not been idle. It has developed strong climate policies—including the National Climate Change Policy (2021), National Adaptation Plan (2023) and updated NDCs (1.0 & 2.0 have been submitted in 2016 and 2021)—supported by institutions such as the MoCC&EC, PCCA and the Climate Finance Wing in the MoCC&EC. The government has mobilised over $300 million from the GCF, secured a $1.4 billion IMF climate loan and committed to a $20 billion World Bank programme under a new 10-year country partnership framework. However, fragmented ownership across ministries, poor fund utilisation and a lack of coordination and execution mechanisms hinder effective implementation, in addition to leaving the private sector navigating a maze of incentives, approvals and misaligned priorities.
There is also a significant breakdown in communication. Public-private dialogue on climate issues remains minimal and startups are rarely consulted during policy design. This disconnect isolates innovation from implementation, hindering progress on both fronts. In the absence of clear frameworks, international partners find it difficult to align their support effectively. Notably, to meet Pakistan’s climate finance requirements approximately 84 percent of the necessary funding will need to come from international sources, primarily development institutions, rather than the domestic private sector.
To unlock climate technology in Pakistan, four things must happen:
First, the financing architecture must evolve. Blended finance (combining concessional capital with private equity) can de-risk climate investments. Green credit guarantees, public co-investments and patient capital are crucial to scale innovation. With LCOEs doubling without concessional lending, tools like securitisation and currency hedging are vital. Tapping into Pakistan’s Rs 4 trillion non-bank finance sector and scaling GCF-backed first-loss structures can reignite investor confidence and support the clean energy transition.
Second, policy must catch up with ambition. A central climate task force linking federal, provincial, private and financial stakeholders can improve coordination and investment tracking. Clear regulations, especially for EVs, solar rooftops and carbon markets, are urgently needed.
Third, Pakistan must invest in education and start-up infrastructure. Over 25 million children are out of school, constraining the future talent pipeline. Integrating STEM, bridging gender gaps and improving school infrastructure are essential. Start-ups also need better support: domain-specific mentorship, technical guidance and targeted market access. Government partnerships with multilaterals can scale these efforts and align diplomacy with innovation.
Fourth, private sector climate investment must rise from its current 0.5 percent of GDP. Achieving Pakistan’s 2030 climate targets will require robust PPP frameworks. Expanding renewables could generate 327,000 jobs; meanwhile, climate-smart agriculture is vital for 40 percent of the workforce. Instruments like carbon markets, the National Climate Finance Strategy and GCF funding can drive innovation.
The world is going green, but capital and technology remain concentrated in advanced economies. Pakistan, with its grassroots solar surge and emerging EV market, has the ingredients for climate innovation, but it needs an enabling environment where policy, finance and innovation converge.
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