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Shah, et al.

international organizations, and financial institutions either do not meet the requirements for low-carbon
advancing sustainable investment recommendations. In infrastructure and vehicle adoption or are inaccessible
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Pakistan, the transport sector poses considerable health to most users. For example, Pakistan introduced its
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and economic challenges. Green Bus Rapid Transit National EV Policy in 2020, aiming to achieve 30% EV
(BRT) Karachi project (FP085, 2018) addresses these penetration by 2030. However, the lack of dedicated
issues, as traffic congestion in Karachi costs the economy green financing has hindered progress. As of 2023,
approximately 2.3 billion USD annually and results in <1% of registered vehicles in Pakistan are electric,
1.5 billion man-hours. The transport sector accounts according to the Ministry of Climate Change. With
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for over 43% of emissions, contributing substantially over 32 million registered vehicles nationwide, this
to Pakistan’s total air pollution and deteriorating air percentage equates to fewer than 300,000 EVs. Despite
quality and public health. Research indicates that daily the EV policy’s ambitious targets, adoption remains
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vehicle-related air pollution in major cities costs around extremely limited, indicating the gap in financing and
1 million USD in health-related expenses and lost infrastructure support. This financing gap is further
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productivity, resources that could otherwise be invested exacerbated by regulatory barriers, low stakeholder
in developing a greener, healthier future. Despite awareness, and limited participation from financial
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increasing awareness, challenges in implementing institutions and private investors. These challenges
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green financing mechanisms persist. Researchers have undermine the development and adoption of sustainable
investigated Pakistan’s broader green finance policy transport solutions. This research aims to explore
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and regulatory landscape. For example, Kumar et al. how green financing can facilitate the sustainability
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compared the existing policy framework and identified of transportation in Pakistan. It addresses financial,
key gaps. Recommendations for strengthening green regulatory, and institutional barriers that constrain
finance include developing a comprehensive green the extensive use of green finance mechanisms and
finance taxonomy, enhancing green financial literacy, examines the possibility of using innovative financial
and providing clearly defined guidelines for green instruments, including green bonds, climate funds,
bond issuance. Moreover, scholars have emphasized and public–private partnerships (PPPs), to facilitate
the need for capacity within financial institutions and the transition toward low-carbon transport systems.
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regulatory bodies to support green finance policy Ultimately, this study seeks to assess the effects of
implementation and promote sustainability in financial green finance on sustainable transportation in Pakistan
practices. 8 while identifying both the challenges and opportunities
Pakistan’s transportation sector is a major contributor associated with its implementation.
to environmental pollution, poor air quality, and
greenhouse gas emissions. According to the Pakistan 2. Literature review
Economic Survey 2022 – 2023, the sector is responsible
for more than 43% of the country’s total air pollution. The financial sector implements green financing as
Cities such as Lahore and Karachi consistently rank an investment method that facilitates projects and
among the most polluted in the world. A 2020 World ventures promoting environmental sustainability. Green
Bank report estimates that Pakistan’s gross domestic financing supports sustainable endeavors in renewable
product suffers due to lost productivity. Although energy, energy efficiency, waste management,
1,9
there is growing urgency to adopt sustainable transport sustainable agriculture, and other sectors that reduce
solutions (such as electric vehicles [EVs], low- carbon emissions and protect the environment. Various
emission public transport systems, and renewable financial instruments constitute green financing,
energy-powered infrastructure), their implementation including green bonds, loans, equity investments, and
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remains inadequate. One of the key obstacles is the impact investing, all aimed at promoting environmental
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limited availability of green financing to support protection and building climate resilience. Financial
such initiatives. While global green finance flows institutions incorporate environmental, social, and
reached 1.1 trillion USD in 2022, according to a 2023 governance factors into decision-making to align
publication by the Climate Policy Initiative, Pakistan’s financial activities with Sustainable Development Goals
green financing mechanisms remain underdeveloped (SDGs). Growing global environmental problems
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and poorly integrated into the transportation sector. require green financing as an essential mechanism
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Although there are financial supports such as subsidies, for supporting low-carbon economy transitions and
loans, and tax incentives for sustainable transport, these advancing sustainable development.

Volume 22 Issue 4 (2025) 112 doi: 10.36922/AJWEP025160121