Against the backdrop of Pakistan’s climate advocacy on the global stage, from its vocal stance at COP27 to its efforts towards securing commitments from the Loss and Damage Fund and the recently approved IMF’s Resilience and Sustainability Facility, a quieter revolution unfolds at ground level. The country’s climate tech ecosystem, despite capturing increasing attention, struggles to evolve beyond merely “promising” status.
Tangible signs of climate innovation are taking root as electric two-wheelers now zip through Pakistani streets and rooftop solar panels increasingly dot the urban landscape. Meanwhile, regulatory developments like the recent green sukuk issuance and the State Bank’s forthcoming Green Taxonomy signal growing institutional support for sustainable enterprise.
Yet this nascent sector faces critical challenges. Despite its potential to rival established verticals like fintech and e-commerce, climate tech in Pakistan confronts substantial hurdles, primary among them is a significant financing gap.
Profit examines the current state of Pakistan’s climate tech ecosystem, mapping both the opportunities that beckon and the challenges that must be overcome for this emerging vertical to truly flourish.
The climate tech landscape
Climate solutions operate across three interconnected domains to combat global warming and its consequences. The first category, mitigation technologies, tackles emissions at their source, employing renewable energy systems like photovoltaics and wind turbines, innovative carbon capture methods that lock away industrial emissions, and breakthroughs in energy conservation that reduce overall consumption.
The second domain focuses on resilience through adaptation technologies. These innovations help societies withstand climate impacts by developing drought-resistant farming techniques, constructing protective barriers for vulnerable coastlines, implementing sophisticated water conservation systems, and reimagining urban spaces with climate hazards in mind.
Complementing these approaches are assessment and monitoring technologies, the intelligence-gathering infrastructure of climate action. These systems deploy advanced computational models, earth-observing satellites, and networked sensors to capture climate data, enabling policymakers to craft responses grounded in scientific evidence.
Globally, governments have integrated these innovations into climate commitments under Paris Agreement frameworks, while businesses increasingly view climate technology as both an ethical imperative and economic opportunity. The past decade has witnessed a remarkable proliferation of startups dedicated to developing novel climate solutions, entrepreneurs driven by both market potential and environmental urgency to create transformative technologies for a warming world.
Pakistan’s climate tech ecosystem
The country’s climate tech landscape has transformed dramatically since 2021, with two sectors leading the charge. The rapid expansion of distributed renewable energy solutions has generated excitement around energy access, while e-mobility ventures have brought sustainable transportation from concept to a concrete reality, elevating climate tech from specialist conversations to mainstream discourse.
In the adaptation sphere, agricultural technology has emerged as a critical focus area, with innovators developing solutions that address both climate resilience and the country’s pressing food security challenges.
The ecosystem reached a significant milestone in 2024 with the launch of Pakistan’s first dedicated climate tech investment vehicle. Climaventures Fund, targeting $40 million in total capital, secured a substantial $15 million anchor commitment from the Green Climate Fund (GCF). Another GCF-backed initiative managed by Acumen has allocated $80 million specifically toward agricultural climate innovations.
Among the sector’s success stories, e-mobility startup Zyp demonstrated impressive fundraising momentum, securing $1.5 million in pre-Series A capital in July 2024, following its $1.2 million seed round just ten months earlier. These funds are fueling the company’s expansion of electric bike deployments across urban centres.
Despite these promising developments, climate technologies remain significantly underfunded in Pakistan’s venture landscape. Between 2019 and 2023, climate-focused startups attracted only 2-3% of Pakistan’s venture capital with deal sizes constantly falling below ecosystem averages. This funding gap appears particularly stark when compared to global trends, where climate tech captured between 6-10% of worldwide private equity and venture investments during the same period.
Private sector credit flows towards major climate tech verticals also remains critically low, for instance, renewables financing as a percentage of private sector credit remains below one percent and the figure again is not representative of the true situation as most of this financing was channeled towards utility scale projects under the State Bank’s concessional financing scheme.
This massive financing gap also remains pertinent at a macro level with the World Bank estimating around $348 billion in Pakistan’s climate financing needs between 2023 to 2030 but the country can only meet 14% of this requirement given its existing resources.
Source: World Bank
This funding gap coincides with a global downturn in climate venture investing. As per an analyst note from the global private equity research and data platform Pitchbook, “The total amount of VC funding for climate-tech startups fell more than 17% year-over-year in 2024, marking the third annual decline in a row.”
“Climate-tech deals are falling, even as overall dealmaking is up. Almost 30% more VC dollars (across sectors) were invested in startups in 2024 than the previous year, and the AI industry accounted for a huge share of that,” it added.
The reason for the investment deficit
The substantial upfront capital requirements of climate technologies present a significant barrier to widespread adoption, despite potential long-term cost benefits. This financial hurdle is particularly pronounced in developing economies like Pakistan where capital access remains constrained.
Climate technologies also face complex risk-return dynamics due to their developmental stage, creating uncertainty around performance metrics and profit potential. This ambiguity discourages investment and impedes large-scale consumer adoption.
The disconnect between the recognized importance of startups in advancing climate solutions and their declining funding streams may stem from multiple factors. Climate ventures may remain undervalued within broader environmental action frameworks, or investors may distinguish between technology development and scaling processes.
According to PwC analysis, investment reductions don’t necessarily indicate waning interest in climate innovation. Rather, certain clean technology sectors have matured beyond venture investment stages, while others such as renewable generation infrastructure and energy storage typically attract capital from governmental sources and institutional investors rather than venture firms.
The climate technology investment landscape has faced additional headwinds over the 2023-2024 period as investors navigate geopolitical uncertainties, valuation corrections, inflationary pressures, and rising interest rates across private markets.
Challenges beyond investments
Many climate technologies remain in developmental stages, lacking the maturity needed for widespread deployment. While some solutions like carbon capture require fundamental research breakthroughs, others such as renewables face practical integration challenges.
The extended innovation cycles of climate technologies are further complicated by competitive research environments that inhibit collaborative development without appropriate regulatory frameworks or incentives.
These technical challenges are directly amplified by policy inconsistency, which creates significant barriers to climate technology adoption. Despite renewable energy’s economic progress, policy distortions persist. For instance in Pakistan, electricity subsidies, which form the majority of the country’s subsidy outlay, subsidizes power mostly generated from thermal sources, undermining fair competition.
Similarly, fragmented intellectual property regimes across jurisdictions further hamper essential technology transfer, slowing the progression of promising innovations through their development cycles.
Beyond technical and policy barriers, social acceptance represents another critical factor that shapes implementation timelines. Public resistance can emerge from value conflicts, technology perceptions, or change aversion that directly impact both market adoption and policy formation. Case in point: electric vehicle adoption still faces psychological barriers like range anxiety despite practical benefits.
The opportunity in Pakistan
Despite the challenges, multiple bankable and investable opportunities still exist within the climate tech domain.
Pakistan is experiencing an unprecedented solar energy boom. Between July 2023 and January 2025, the country imported a staggering 21 GW of solar panels, sufficient capacity to power half the nation and eclipsing existing utility-scale solar installations by 23 times. This dramatic surge reflects widespread adoption across commercial, industrial, and residential sectors as consumers increasingly embrace renewable solutions to meet their energy needs.
The financial case for solar has become compelling, with conventional business models delivering exceptional returns. Projects structured through power purchase agreements or equipment leasing arrangements consistently generate returns exceeding 25%, establishing distributed solar as an attractive investment proposition. Even more promising, these projects typically require capital investments as low as $1 million, creating accessible entry points for a broader range of investors.
This explosive growth has catalyzed an entire ecosystem of supporting businesses and services. Installation specialists, maintenance providers, and suppliers of critical components, from mounting hardware and inverters to battery storage systems, are experiencing robust demand.
Further strengthening the investment landscape is the recent introduction of a publicly traded clean energy modarabah that now provides a clear exit pathway for investors, allowing them to monetize their clean energy assets through established market mechanisms.
Beyond that, Electric two wheelers, if able to achieve the required scale, have a massive upside in terms of investment case and generating venture level returns.
The two-wheeler landscape offers a foundation for the EV market with 30 million motorcycles already traversing the country’s roads and annual sales of 1.5 million units establishing a mature market infrastructure. Within this established ecosystem, electric mobility is gaining traction, evidenced by the 50,000 e-bikes currently navigating Pakistani streets and monthly sales accelerating to 3,000 units.
Government policy has aligned decisively with this transition, setting ambitious targets for electric two-wheelers to capture 30% market share, approximately 500,000 units annually by 2028. These regulatory tailwinds complement the overwhelmingly favorable economics driving consumer adoption: cost of ownership for traditional motorcycles is around Rs. 6.51/km over a five-year period, while their electric counterparts operate at just Rs. 3.52/km, a nearly 46% reduction in lifetime costs.
As per analysis, an EV 2-wheeler charging station equipped with 12 batteries performing 40 daily swaps requires an initial investment of Rs. 2.18 million (covering equipment and batteries), plus monthly operational costs of Rs. 80,000 for rent and maintenance (calculated at 2% of revenue). With the government’s reduced electricity tariff of Rs. 34 significantly improving unit economics, operators charging Rs. 150 per battery swap can achieve full investment recovery in approximately three years, establishing a compelling business case for scaling this critical EV support infrastructure.
Source: Renewables First
Further, the potential of agritech cannot be overlooked, given agriculture accounts for 24% of Pakistan’s GDP and employs over one-third of the workforce. This creates substantial opportunities for agritech innovation across three key growth segments. Farmer platforms that connect producers with financing and quality inputs, smart farming technologies that enhance productivity through mechanization and climate-resilient practices and post-Harvest solutions that reduce food loss while improving distribution efficiency by connecting smallholders to premium markets.
Addressing the opportunity
The climate investment landscape continues to evolve as investors increasingly pursue dual objectives: financial returns alongside measurable emissions reductions within specific timeframes. This fundamental shift is reshaping investment patterns and directly affecting funding availability for innovative startups.
With traditional venture capital becoming more selective, climate entrepreneurs should explore alternative funding pathways like government grants, corporate venture initiatives, community crowdfunding, specialized accelerators, and impact investment vehicles that value environmental outcomes alongside financial performance.
Recently, Parwaaz Financial Services Limited (“PFSL”) demonstrated this trend by launching Pakistan’s first Rupee-denominated, rated, secured medium-term Green Bond of Rs. 1 billion to finance and refinance renewable energy projects, clean agriculture initiatives, and clean transportation efforts. Industry experts remain optimistic about the sector’s future.
“Pakistan is still experiencing a funding drought, but post-2025 could usher in a period of micro-recovery for the startup space with climate tech being a promising sector,” remarked Shehryar Hyderi, Managing Director of Endeavor Pakistan, during a panel discussion at NIC Islamabad
Ultimately, addressing these interconnected challenges requires robust ecosystems supporting climate innovators through comprehensive approaches. Research incentives can accelerate technical development while dedicated incubation programs help bridge commercialization gaps.
Well-designed green taxonomy and frameworks can align market behaviors with environmental goals, helping overcome resistance by normalizing sustainable practices. Government commitments play a crucial role in establishing stable, forward-looking market conditions that address technical, policy, and social barriers through coordinated strategies, creating a foundation for climate innovation to thrive in the coming decades.
