In 2023, Pakistan was in the spotlight. At the COP 28 conference in Dubai, the entire world was looking towards Pakistan both as an example and an opportunity. The year before in 2022 historic monsoon rains had devastated Pakistan, causing over $30 billion in losses and damages.
The entire episode was a stark reminder of Pakistan’s vulnerability to climate change. At the COP28 conference, mostly because of the situation in Pakistan, one of the topics that was front and centre was loss and damage reparations from first world countries to vulnerable third world economies. Despite all the talk, international climate funding is a complicated business, particularly coming from international organisations.
In the midst of this traditional reliance on international aid, a new initiative is emerging that could transform how Pakistan tackles its climate challenges. The National Rural Support Programme (NRSP) alongside Sarmayacar has just secured Green Climate Fund (GCF) support for a $50 million Climaventures Programme, marking a decisive shift from Pakistan’s toward nurturing home-grown solutions through its burgeoning startup ecosystem.
The Deepening Crisis
The numbers tell a sobering story. According to the Post-Disaster Needs Assessment report, Pakistan needs at least $16.3 billion just for post-flood rehabilitation and reconstruction. The 2022 floods alone inflicted $14.9 billion in damages and $15.2 billion in losses. But these figures represent only a fraction of the climate challenge facing the world’s eighth most vulnerable nation to climate change.
Standing at the crossroads of melting glaciers and persistent droughts, Pakistan faces a monumental task. The World Bank estimates that the country needs approximately $348 billion by 2030 – a staggering 10% of its cumulative GDP – to implement comprehensive climate solutions. Of this, $152 billion is earmarked for adaptation and resilience, while $196 billion is needed for decarbonization efforts.
The challenge is further complicated by Pakistan’s international commitments. As a signatory to the Paris Agreement, the nation has pledged to reduce its projected carbon emissions by 50% between 2015 and 2030. While 15% of this reduction will come from domestic resources, the remaining 35% depends on international financial support, demanding sweeping changes across energy, transportation, waste, and agriculture sectors.
A New Approach to Climate Action
Enter the Climaventures Programme, a novel approach to addressing Pakistan’s climate funding crisis. Rather than depending solely on public sector funding – already strained by high indebtedness – the initiative aims to catalyze a private capital for innovative climate solutions through a two-pronged strategy.
At its foundation lies a $10 million Venture Accelerator, backed by a reimbursable grant and a technical assistance facility from the GCF. This component will serve as an incubator for climate-focused businesses at their earliest stages, providing both financial support and technical expertise to help entrepreneurs transform their ideas into viable products ready for market.
The second component, the $40 million Climaventures Fund, represents an even more ambitious step. Managed by Sarmayacar, Pakistan’s first formal venture capital institution, the fund will invest in climate ventures ready to scale.
What makes this fund particularly innovative is the GCF’s $15 million first-loss equity commitment as an anchor investor – a structure that effectively creates a safety net for other investors, making the fund more attractive to Development Finance Institutions and International Financial Institutions.
| GCF’s Total Financing | Amount ($M) |
| Technical Assistance Facility for Venture Accelerator | 5 |
| Grant for Accelerator Inducted Startups | 5 |
| Equity Investment in the Fund | 15 |
| Total | 25 |
“We are targeting both DFIs and commercial investors in addition to the commitment from GCF. The latter’s commitment also comes with first-loss cover for commercial investors so their risk-return profile will look even better. We will be targeting commercial returns with impact for all investors, but this first-loss cover offers some downside protection to incentivise private sector participation in the fund,” remarked Rabeel Warraich, Founder and CEO at Sarmayacar.
The State of Climate Innovation
The landscape of climate technology in Pakistan is as vast as it is underexplored. From carbon capture solutions to sustainable foods, from low-carbon mobility to clean energy, the potential for innovation spans every sector of the economy. Yet, climate tech has only managed to attract merely 2-3% of total startup venture funding between 2018-2023 in Pakistan, with most investments concentrated in e-mobility and agritech ventures. Even more telling is the average deal size – less than half that of the broader startup ecosystem.
This tepid investment climate stems from multiple challenges. The domestic private sector’s engagement in climate action remains notably low, with Pakistan’s private sector accounting for just 5% of total climate finance tracked in 2021 – significantly behind peers like Nigeria at 10% and Kenya at 14%. Current donor-funded climate programs often prioritize short-term metrics over sustainable impact, while policy implementation lacks clear operational frameworks.
For entrepreneurs, the barriers are even more immediate. Beyond the usual startup challenges, climate tech ventures require substantial capital expenditure and face heightened risk perception in nascent green sectors. Many struggle to access even basic support services – market feasibility studies alone can cost between thousands of dollars, putting them out of reach for most early-stage ventures.
Seeds of Change
Despite these challenges, NRSP, in its proposal to GCF, claims to have identified over 100 ideation-stage climate ventures operating within Pakistan’s climate sector, with more emerging as awareness grows.
In parallel, Sarmayacar steps in as an investor, having previously invested in climate tech startups, including Orko – a platform tailored for Electric Vehicle (EV) diagnostics and after-sales service management and Aabshar – a water conservation venture, through their initial $25 million fund in 2018. For the new Climaventures Fund, they’ve already identified ventures ready for investments totaling approximately $22 million as per documents submitted with GCF.
“There is an existing pipeline that could use up to half of the fund we have targeted. We made a couple of climate-related investments from the first fund as well. Once there is a dedicated fund, we expect a number of new startups to emerge in the space so over the investment period of the fund, we hope to be able to find 15-20 companies to invest in,” Warraich adds.
| Anticipated Equity Structure – Climaventures Fund | ||
| Investors | Amount ($M) | Seniority |
| GCF | 15 | As per estimated by the GP based on market conditions and the performance of invested companies, the fund will target a gross return of 3x |
| Development Financial Institutions (DFIs) | 10 | Class A Interests will be allocated to investors with mission orientation and no requirements for downside protection, such as development finance institutions and institutional foundations |
| Non-DFIs/Private Investors | 14.6 | Class B Interests will be allocated to investors with a commercial mission orientation, such as private individuals, corporations and pooled funds. |
| Key Persons/GP | 0.4 | Class D Junior Interests allocated to the Carry Vehicle |
The financial projections for the fund also look promising, even in the face of challenging macroeconomic conditions. As per the submissions to GCF, the projected gross returns for the fund are between 2.9x and 4.1x, translating to net returns of 2.5x to 3.5x and a seven-year IRR of 14% to 20%. But perhaps more importantly, the fund’s biggest impact lies in its ability to demonstrate that early-stage climate ventures can be a viable asset class while delivering meaningful environmental impact.
A Blueprint for the Future
The Climaventures Programme targets both immediate climate impact – aiming to mitigate 3.5 million metric tons of carbon dioxide equivalent – and long-term market development, potentially benefiting nearly 6 million people in Pakistan’s climate-vulnerable population. As Pakistan continues to grapple with increasing climate vulnerability and limited public resources, similar initiatives are likely to pop up in an attempt to experiment in leveraging private sector innovation for climate action.
Yet, unlike other funds the stakes here are higher. Alongside Acumen’s $80 million Climate Action Fund (also backed by GCF), this $50 million bet on home-grown innovation might just be the catalyst Pakistan needs to build a more resilient future.
Success could transform Pakistan’s approach to climate challenges, shifting from dependency on international aid to fostering sustainable, locally-driven solutions.
