DISASTER FINANCE
Today, we are in October 2025. A second monsoon of historic proportions has brought unimaginable devastation to Pakistan. In the span of just a few weeks, flash floods have ripped through the valleys, drowning entire villages. More than 40 million people are affected. Once again, homes, harvests, health systems and hard-won infrastructure have been swept away. Bridges have buckled, roads have vanished and livelihoods have collapsed. In some districts, entire local economies have been set back by a generation.
For Pakistanis, the memory of 2022 is still fresh. Just three years ago, the country was submerged under a monsoon of record-breaking intensity that caused over $30 billion in damage and losses. This time, early estimates place the economic toll closer to similar figures. And yet, the institutional response has changed little. Familiar scenes of emergency declarations, international appeals and scattered aid repeat themselves. Some support trickles in, but it is far too little and far too late to meet the scale of need. Recovery remains reactive. Planning remains fragmented.
Despite decades of increasingly dire climate warnings, Pakistan’s financial system continues to be designed for the past, not for the climate future it now inhabits. It is structured to respond to disaster, not to prevent it. The country spends more each year servicing its mounting debt than it does building resilience against floods, droughts or the cascading health and food crises they unleash. The core issue is not a lack of ambition. It is a lack of financial foresight.
There is a historical parallel worth recalling. In 1624, a devastating flood struck the town of Utrecht in the Netherlands. Faced with institutional collapse and economic ruin, a small Dutch water board issued a bond to protect people. The funds were used to rebuild dikes and safeguard the future. That bond, astonishingly, still pays interest today. A radical financial instrument for its time, it was rooted in a simple truth: resilience is an investment, not a cost.
Pakistan in 2025 faces a crisis of far greater scale, but with far more tools at its disposal. It has a central bank, a modern financial sector, sovereign credit ratings and access to global capital markets. It has regulators, development partners and institutional frameworks that can be mobilised. And yet, when disaster strikes, it continues to rely on humanitarian appeals and budget reallocations. The country is fundraising on television while financial instruments lie underused or unexplored. Piecemeal reforms and isolated climate projects are no longer enough. What is needed is a wholesale reimagining of Pakistan’s financial architecture. One that is designed for a climate-changed world and capable of mobilising capital at the scale and speed required.
This transformation must begin with embedding climate risk into every level of public financial management. Fiscal decisions must no longer be based solely on cost-effectiveness or political expediency. They must account for physical risk, climate vulnerability and long-term resilience. Pakistan’s Public Sector Development Programme must evolve into a climate-smart investment engine, where every rupee spent is screened for its resilience outcomes.
In 1624, the Dutch built a bond and a climate-resilient future. In 2025, Pakistan can either continue to fund the aftermath of disasters or finally invest in preventing them
To signal a shift in posture and capability, Pakistan must also enter the sovereign green bond and sukuk market with confidence and urgency. Countries with comparable risk profiles have successfully issued green instruments, mobilising billions for climate-smart infrastructure, renewable energy and disaster preparedness.
A resilience linked sukuk could help finance early warning systems, elevated housing, flood protection infrastructure or drought-resistant agriculture. These are not just financial instruments. They are signals of intent that can unlock investor interest and attract blended finance.
At the same time, Pakistan’s financial protection strategy must reflect the layered nature of climate risk. For frequent, low-impact events, pre-arranged contingency funds should be in place. For seasonal hazards, such as monsoon-related crop losses or droughts, parametric insurance can provide rapid payouts. For large-scale catastrophes like this year’s floods, catastrophe bonds must be considered. These instruments are already outlined in Pakistan’s Global Shield Against Climate Risks proposal, but ambition must be followed by execution.
The country also needs a consolidated national platform for green and resilience finance. Instead of launching scattered donor projects or fragmented climate funds, Pakistan should establish a ‘Green Financing Facility’ that blends public, private and concessional capital under one roof. Such a facility can provide de-risking tools for private investors, build technical capacity at the provincial level and ensure coherence across institutions like the Ministry of Finance, NDMA, SECP, SBP and provincial governments.
Importantly, resilience must be localised. The effects of climate change are hyper-regional and so must be the solutions. Whether it’s micro-hydropower in Gilgit-Baltistan or rooftop solar in Karachi, local governments and communities must have the technical and financial tools to plan and execute climate solutions. A national strategy that does not empower the local level will fail to deliver real protection or equity.
Pakistan is also underperforming in two of the most transformative shifts in global finance: ESG investing and carbon markets. As international capital reorients toward environmental, social and governance benchmarks, Pakistan risks exclusion without clear sustainability disclosures, reporting standards and regulatory incentives. Similarly, the country holds immense potential in voluntary carbon markets through nature-based solutions and renewable energy, but lacks the monitoring systems, carbon registry and governance mechanisms to build trust and credibility. With proper oversight, carbon finance can become a new and equitable revenue stream that benefits both the national treasury and frontline communities.
This transformation will require institutional alignment in addition to new tools. The Ministry of Finance, SBP, SECP, NDMA and the Ministry of Climate Change must operate under a shared climate finance strategy. Pakistan must be ready to access and deploy funds from the Green Climate Fund and explore innovative financing mechanisms like debt-for-nature swaps and climate-contingent loans.
In 1624, the Dutch built a bond and a future. In 2025, Pakistan stands at a similar crossroads. The question is not whether the floodwaters will return. They will, stronger, sooner and more often. The real question is whether we will continue to fund the aftermath of disasters or finally invest in preventing them. This is not only about climate adaptation. It is also about fiscal responsibility, economic sovereignty and intergenerational justice. The next crisis is already taking shape. What we build now will determine whether Pakistan rises above it or is swept away once again.
The writer is a qualified chartered accountant who works on climate finance, carbon markets and sustainable development across disaster risk reduction and climate change.