In 2023, Pakistan is in the spotlight. At the United Nations Climate Change Conference (COP 28) in Dubai, the whole world was looking to Pakistan as an example and an opportunity. The previous year, in 2022, historic monsoon rains devastated Pakistan, causing more than $30 billion in losses and damage.
This entire incident was a stark reminder of Pakistan’s vulnerability in the face of climate change. At COP28, mostly due to the situation in Pakistan, one of the topics that was front and center was reparations for losses and damages from First World countries to weak Third World economies. Despite all the talk, international climate finance is a complex business, especially when it comes from international organizations.
Amid this traditional dependence on international aid, a new initiative is emerging that could change the way Pakistan deals with climate challenges. The National Rural Support Program (NRSP) along with Sarmayacar has secured Green Climate Fund (GCF) support for the Climaventures program worth $50 million, marking a decisive shift by Pakistan towards nurturing local solutions through its thriving startup ecosystem.
The worsening crisis
The numbers tell a real 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 caused $14.9 billion in damage and losses of $15.2 billion. But these numbers represent only a small part of the climate challenge facing the eighth country in the world most vulnerable to climate change.
Pakistan, at a crossroads between melting glaciers and ongoing drought, faces a monumental task. The World Bank estimates that the country needs approximately $348 billion by 2030 – equivalent to 10% of its cumulative GDP – to implement comprehensive climate solutions. Of this amount, $152 billion is allocated to adaptation and resilience, while $196 billion is needed for decarbonization efforts.
The challenge is further complicated by Pakistan’s international obligations. As a signatory to the Paris Agreement, the country has pledged to reduce its expected 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, requiring comprehensive support. Changes in the energy, transport, waste and agriculture sectors.
A new approach to climate action
Join Climaventures, a new approach to tackling the climate finance crisis in Pakistan. Rather than relying solely on public sector financing – already strained by rising indebtedness – the initiative aims to catalyze private capital to find innovative climate solutions through a two-pronged strategy.
At its foundation is a $10 million project acceleration programme, supported by a repayable grant and technical assistance facility from the Green Climate Fund. This component will serve as an incubator for early-stage climate-focused companies, providing financial support and technical expertise to help entrepreneurs turn their ideas into viable, market-ready products.
The second component, the $40 million Climaventures Fund, represents a more ambitious step. The fund, managed by Sarmayakar, Pakistan’s first formal venture capital institution, will invest in climate projects ready for scale.
What makes this fund particularly innovative is the Green Climate Fund’s commitment to a first loss of $15 million as a lead 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.
| Total GCF funding | Amount (million dollars) |
| Technical assistance facility to accelerate projects | 5 |
| A grant for startups entered into the Accelerator program | 5 |
| Investing in fund shares | 15 |
| the total | 25 |
“We are targeting both DFIs and commercial investors in addition to the GCF commitment. The latter’s commitment also comes with covering the first loss of commercial investors so that their risk-return profile looks better. We will target impactful commercial returns,” said Rabel Waraich, Founder and CEO, Sarmayacar. “For all investors, but this first loss cover provides some downside protection to stimulate private sector participation in the fund.”
The state of climate innovation
Pakistan’s climate technology landscape is as vast as it is unexplored. From carbon capture solutions to sustainable food, from low-carbon mobility to clean energy, the potential for innovation cuts across every sector of the economy. However, climate technology has only been able to attract 2% to 3% of total startup funding between 2018 and 2023 in Pakistan, with most investments concentrated in e-mobility and agritech projects. Even more telling is the average deal size – less than half the size of the broader startup ecosystem.
This tepid investment climate stems from multiple challenges. Domestic private sector engagement in climate action remains remarkably low, with Pakistan’s private sector representing just 5% of the total climate financing to be tracked in 2021 – significantly lagging behind peers such as Nigeria at 10% and Kenya at 14%. Existing donor-funded climate programs often prioritize short-term measures over sustainable impact, while policy implementation lacks clear operational frameworks.
For entrepreneurs, the obstacles are even more pressing. Beyond the usual challenges facing startups, climate technology projects require significant capital expenditure and face an increasing perception of risks in emerging green sectors. Many struggle to access even basic support services – market feasibility studies alone can cost thousands of dollars, putting them out of reach for most early-stage projects.
Seeds of change
Despite these challenges, NRSP, in its proposal to the GCF, claims to have identified more than 100 climate projects in the consideration stage operating within Pakistan’s climate sector, with more emerging as awareness grows.
In parallel, Sarmayakar is stepping in as an investor, having previously invested in climate tech startups, including Orko – a platform designed for electric vehicle diagnostics and after-sales management and Aabshar – a water conservation venture, through their seed venture of Its value is 25 million dollars. In 2018. For the new Climaventures Fund, they have already identified projects ready for investments with a total value of approximately $22 million according to documents submitted to the GCF.
“There is an existing pipeline that can use up to half of the funds we targeted. We have also made climate-related investments from the first fund. Once we have a dedicated fund, we expect a number of new startups to emerge in this space, so over the course of the fund’s investment,” Waraich adds. We hope we can find 15-20 companies to invest in.”
| Projected Equity Structure – Climaventures Fund | ||
| Investors | Amount (million dollars) | Seniority |
| JCF | 15 | Based on GP estimates based on market conditions and performance of invested companies, the Fund will target a total return of 3x |
| Development Finance Institutions (DFIs) | 10 | Class A interest will be allocated to investors with significant orientations and no downside protection requirements, such as development finance institutions and institutional institutions |
| Non-development finance institutions/private investors | 14.6 | Class B interests will be allocated to commercially oriented investors, such as individuals, corporations and pooled funds. |
| Key Persons/GP | 0.4 | Small class D interests intended for portable vehicle |
The fund’s financial outlook also looks promising, even in the face of difficult macroeconomic conditions. As filed with GCF, the fund’s expected total returns are between 2.9x and 4.1x, which translates to net returns of 2.5x to 3.5x and a seven-year internal rate of return of 14% to 20%. But perhaps more importantly, the fund’s greatest impact lies in its ability to demonstrate that early-stage climate projects can be a viable asset class while delivering a tangible environmental impact.
Plan for the future
Climaventures targets both direct climate impact – aiming to mitigate 3.5 million metric tons of CO2 equivalent – and long-term market development, which will benefit Pakistan’s nearly 6 million people vulnerable to climate risks. As Pakistan continues to face increasing climate vulnerability and limited public resources, similar initiatives are likely to emerge in an attempt to experiment with leveraging private sector innovations in climate action.
However, unlike other funds, the risks here are higher. Combined with Acumen’s $80 million Climate Action Fund (also supported by the Green Climate Fund), this $50 million bet on local innovation may be just the catalyst Pakistan needs to build a more resilient future.
Success could transform Pakistan’s approach to climate challenges, shifting from reliance on international aid to promoting sustainable, locally driven solutions.