The Securities and Exchange Commission of Pakistan (SECP) has proposed the launch of environmental, social and governance (ESG) mutual funds to promote sustainable investment and offer new opportunities to investors.

The proposed ESG funds will allow investors to earn returns while supporting businesses and projects that meet environmental, social and governance standards. The initiative is expected to channel savings into responsible investments, promote sustainable development and strengthen Pakistan's capital markets in line with global trends.

The proposal is part of SECP's broader ESG Regulatory Roadmap, which focuses on improving transparency, encouraging responsible business practices and aligning Pakistan's financial sector with international standards, says a statement issued on Monday.

In recent years, the SECP has taken several steps to build an ESG ecosystem. These include issuing ESG Disclosure Guidelines, adopting international sustainability reporting standards such as IFRS S1 and S2, strengthening corporate governance frameworks and developing ESG data platforms like ESG Sustain.

To address the lack of structured sustainable investment products, the commission has proposed a clear and regulated framework for ESG mutual funds.