Pakistan Seeks to Sell $1 Billion ESG Bond Next Month

(Bloomberg) -- Pakistan is seeking to become the next emerging market to turn to the environmental bond market for funding as it prepares to sell its first such note next month. 

The country plans to raise $1 billion from environmental, social and governance Eurobonds, Finance Minister Shaukat Tarin said in an interview in Islamabad. “We will go for environmental development and support” in tapping the international markets to raise dollars, he said.

The South Asian nation would join Mexico and Kenya in exploring ESG bonds as issuance from emerging markets outpaces that of developed economies. The spurt comes even as some investors grow wary of the risks of “greenwashing,” in which the labeling of the bonds may foster a misleading image of environmental and ethical responsibility.

Pakistan would use funds from the ESG bond for projects such as developing clean water and cleaning up the rural landscape, said 68-year-old Tarin. 

Junk-rated Pakistan's financing requirements have increased after its trade deficit widened to a record in November amid a surge in global commodity prices. Its foreign-exchange reserves have dropped by almost a fifth from an all-time high of $27 billion in August last year, according to central bank data. 

Pakistan raised $1 billion from Sukuk last week, and is rated B3 by Moody's Investors Service, six steps below investment grade. 

The nation is still working on its debut Panda bond sale, but some issues have arisen which will be discussed during the visit to China this week, Tarin said. Prime Minister Imran Khan and top ministers are scheduled to participate in the opening ceremony of the Winter Olympics in Beijing.

Pakistan aims to get $1 billion from the International Monetary Fund after it took steps to meet key conditions as part of its bailout program. Saudi Arabia provided $4.2 billion in assistance to Pakistan in October with $3 billion to boost its reserves and the rest to finance oil derivatives.

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