The Paris Agreement is globally binding accord, signed by 196 parties at the United Nations (UN) Climate Change Conference (COP21), held on December 12, 2015 in Paris, France. Marking a milestone development, it officially took effect on November 4, 2016. This monumental agreement underscores the critical imperative of addressing climate change and underlines the joint commitment of nations to counter its detrimental impacts.
Recognizing the urgent threat posed by climate change, parties to the agreement have pledged to undertake timely bold actions aligning with its objectives. Grounded in the principles of equity and commonality, but differentiated responsibilities, participating nations have committed to curbing greenhouse gas emissions and bolstering resilience against climate-related adversities. This pledge, backed by the latest scientific findings, aims at capping global temperature rise well below two degrees Celsius above pre-industrial levels. With concerted efforts, even to limit it further, ideally to 1.5 degrees Celsius as outlined in article 2 of the agreement. The accord also underscores the specific vulnerabilities and requirements of developing nations, championing support for adaptation measures and the provision of essential climate finance.
In adherence to the commitments made under the Paris Agreement, nations are actively striving to enact the prescribed legal frameworks for ensuring a more environmentally sustainable world. The recently-published Climate Change Performance Index (CCPI) for 2024 has recognized Denmark as the leading nation placed at number four, as first three positions remain vacant, with Estonia securing the fifth position and the Philippines closely following at sixth place. Utilizing a comprehensive evaluation framework, the CCPI assesses each country’s performance across four key pillars: Greenhouse Gas (GHG) Emissions (40% weighting), Renewable Energy (20%), Energy Use (20%), and Climate Policy (20%). This systematic approach not only ranks countries but also highlights their progress in these critical areas. The CCPI’s findings highlight the global community’s concerted efforts addressing climate change and sustainability, emphasizing the ongoing commitment to achieving tangible progress on a global scale.
Climate change presents a formidable challenge, particularly for nations like ours, which are deemed highly vulnerable to its impacts and have already experienced momentous losses. Adequate funding is a key to addressing these pressing issues effectively. Despite the introduction of the Pakistan Climate Change Act, 2017, it has shortcomings that require an urgent attention. A thorough review suggests the need for a revamped framework that provides comprehensive engagement from both the public and private sectors. This revised approach should clearly delineate responsibilities for each sector and establish robust mechanisms for disclosure requirements, reporting on greenhouse gas emissions, and assessing financial impacts resulting from severe weather events. By prioritizing these measures, we can improve resilience and mitigate the adverse effects of climate change, ensuring a more sustainable future for all of us.
We need to adopt the approach of the European Corporate Sustainability Reporting Directive (CSRD), which mandates that large and listed companies, excluding micro-enterprises, disclose information on the social and environmental risks and opportunities associated with their operations. This disclosure is crucial for stakeholders like investors, civil society organizations, and consumers to gauge the sustainability performance of companies, aligning with the objectives of CSRD guidelines. It will enable us to enhance transparency and promote sustainable practices in line with the broader environmental goals.
The CSRD, effective from January 5, 2023, broadens reporting requirements for large companies and listed small and medium enterprises (SMEs), ensuring disclosure on social and environmental impacts. As per the CSRD, non-EU companies trading over EUR 150 million on the EU market will also need to report. These rules aims at providing stakeholders with necessary information to assess companies’ impact on people, the environment, and financial risks due to sustainability issues, reducing reporting costs over time. The CSRD mandates reporting according to European Sustainability Reporting Standards (ESRS) developed by European Financial Reporting Advisory Group (EFRAG), ensuring alignment with EU policies and international standards. Additionally, the CSRD introduces assurance requirements and a digital taxonomy for sustainability information.
The CSRD introduces two key benchmarks, requiring compliance from both EU and non-EU companies if they meet two requirements out of three: a workforce of over 250 employees, revenue exceeding €40 million, and overall assets totaling €20 million. Additionally, it encompasses listed companies and non-EU entities with net sales exceeding €150 million in the EU, along with at least one subsidiary or branch in the EU.
These entities are mandated to disclose information based on the concept of “double significance”, covering Environmental, Social, and Governance (ESG) statistics, as well as general sustainability metrics. Implementation will follow a staged strategy, with phases spanning fiscal years 2024, 2025, 2026, or 2028, depending on organizational specifics.
In the United States, California is the main state that introduced Senate Bill 253 and 261. The Senate Bill 253, known as the Climate Corporate Data Accountability Act (the Act), introduces comprehensive measures aimed at enhancing corporate accountability regarding climate-related data. Applicable to companies with global revenue of US$1 billion conducting operations in California, the act imposes stringent stipulations to ensure transparency and accountability. It mandates the disclosure of scope 1, 2, and 3 emissions following the GHG Protocol standards, with submissions required to be made to the state of California.
Furthermore, the Act necessitates third-party validation to verify the accuracy and reliability of the disclosed data. The implementation timeline outlines a structured approach, with reporting and validation for scopes 1, 2, and 3 slated for completion by 2026 for the fiscal year 2025, followed by annual assessments thereafter. This legislation highlights California’s commitment to combatting climate change by holding corporations accountable for their environmental impact and fostering greater transparency in emissions reporting.
Senate Bill (SB) 261, the Greenhouse Gases, Climate related Financial Risks target companies with US$500 million global revenue operating in California. It mandates disclosure of climate-related financial risks aligning with Task Force on Climate-Related Financial Disclosures (TCFD) guidelines. Reporting begins in 2026, followed by biennial submissions. The law aims at enhancing transparency and accountability regarding climate risks. It facilitates proactive risk management and informed decision-making. SB 261 aligns with California’s commitment towards climate change’s financial implications.
Apart from California SB 253 and 261, the US Securities and Exchange Commission enacted final rules on March 6, 2024, requiring registrants to disclose specific climate-related data in registration statements and annual reports. Initially proposed on March 21, 2022, the regulatory proposal underwent public commentary, receiving 24,000 letters and comments. It was ultimately passed with a 3-2 majority vote, setting an effective compliance date for 2025 and spanning 886 pages.
The final rule demands comprehensive disclosure requirements, including the disclosure of climate-related risks impacting business strategies and financial conditions. Registrants must also divulge detail activities aimed at mitigating or adapting to such risks, along with reporting on climate-related targets or goals. Oversight by the board of directors and management, integrated risk management processes, and accommodations based on registrants’ status and disclosure content are also integral components. Compliance of the final rule will be phased in from 2025 to 2027 to facilitate adherence to the regulations.
Pakistan must undertake urgent and concrete measures to synchronize its endeavours for meeting climate change challenges with the global community. While Pakistan ranks 30th on the CCPI, its neighbour India holds the 7th position, categorizing us among the medium-performing nations.
The CCPI rates Pakistan poorly in Climate Policy, Renewable Energy, and significantly higher in GHG Emissions and Energy Use. According to CCPI assessment, a notable issue highlighted is the lack of coordination among government institutions, impeding effective policy implementation.
Our existing legal framework and administrative capabilities have failed to comprehend climate realities, omitting crucial aspects such as fossil fuel phase-out and monitoring emissions from the corporate sector. Concerns have also arisen regarding persistent organic pollutants storage and challenges in ensuring social justice within renewable energy expansion efforts. Even in the presence of legislation like the Right of Access to Information and command of Article 19A of the Constitution, lack of transparency remains an issue, with the Ministry of Climate Change avoiding accountability.
The CCPI evaluation additionally highlights the absence of significant endeavours to address the phase-out of fossil fuels in pertinent policy documents. It anticipates the establishment of a long-term vision for emissions reduction, explicit GHG reduction targets within the 2050 nationally determined contributions (NDCs), enhanced backing for decentralized renewable energy systems, and strengthened cooperation among government institutions.
The climate issue has spurred an apt and prompt action from the Supreme Court of Pakistan by summoning respondents for a hearing on March 21, 2024, including the Attorney General for Pakistan and the Advocate Generals of all Provinces. Seeking insights into climate change challenges and governmental initiatives, this move emphasizes the urgency of the matter. However, without a comprehensive climate change law, such efforts will remain ineffective and without achieving the desired results. With Pakistan ranked as the 5th most vulnerable country to climate risks, it is vital to establish comprehensive strategies and policy frameworks. By amending existing legislation and engaging all sectors, Pakistan can improve its resilience and make meaningful contributions towards global climate action plan.
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Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate, media and cyber laws, ML/CFT, IT, intellectual property, arbitration and international taxation. He holds LLD in tax laws with specialization in transfer pricing. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996. He established Huzaima & Ikram in 1996 and is presently its chief partner as well as partner in Huzaima Ikram & Ijaz.
He studied journalism, English literature and law. He is Chief Editor of Taxation. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He is Visiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).
He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary and Master Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
He is author of Commentary on Avoidance of Double Taxation Agreements, Pakistan: From Hash to Heroin, its sequel Pakistan: Drug-trap to Debt-trap and Practical Handbook of Income Tax. Two books of poetry are Phull Kikkaran De (Punjabi 2023) and Nai Ufaq (Urdu 1979 with Siraj Munir and Shahid Jamal). He regularly writes columns for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.
Twitter: DrIkramulHaq
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Abdul Rauf Shakoori, Advocate High Court, is a subject-matter expert on AML-CFT, Compliance, Cyber Crime and Risk Management. He has been providing AML-CFT advisory and training services to financial institutions (banks, DNFBPs, Investment companies, Money Service Businesses, insurance companies and securities), government institutions including law enforcement agencies located in North America (USA & CANADA), Middle East and Pakistan. His areas of expertise include legal, strategic planning, cross border transactions including but not limited to joint ventures (JVs), mergers & acquisitions (M&A), takeovers, privatizations, overseas expansions, USA Patriot Act, Banking Secrecy Act, Office of Foreign Assets Control (OFAC).
Over his career he has demonstrated excellent leadership, communication, analytical, and problem-solving skills and have also developed and delivered training courses in the areas of AML/CFT, Compliance, Fraud & Financial Crime Risk Management, Bank Secrecy, Cyber Crimes & Internet Threats against Banks, E–Channels Fraud Prevention, Security and Investigation of Financial Crimes. The courses have been delivered as practical workshops with case study driven scenarios and exams to insure knowledge transfer.
His notable publications are: Rauf’s Compilation of Corporate Laws of Pakistan, Rauf’s Company Law and Practice of Pakistan and Rauf’s Research on Labour Laws and Income Tax and others.
His articles include: Revenue collection: Contemporary targets vs. orthodox approach, It is time to say goodbye to our past, US double standards, Was Due Process Flouted While Convicting Nawaz Sharif?, FATF and unjustly grey listed Pakistan, Corruption is no excuse for Incompetence, Next step for Pakistan, Pakistan’s compliance with FATF mandates, a work in progress, Pakistan’s strategy to address FATF Mandates was Inadequate, Pakistan’s Evolving FATF Compliance, Transparency Curtails Corruption, Pakistan’s Long Road towards FATF Compliance, Pakistan’s Archaic Approach to Addressing FATF Mandates, FATF: Challenges for June deadline, Pakistan: Combating the illicit flow of money, Regulating Crypto: An uphill task for Pakistan. Pakistan’s economy – Chicanery of numbers. Pakistan: Reclaiming its space on FATF whitelist. Sacred Games: Kulbhushan Jadhav Case. National FATF secretariat and Financial Monitoring Unit. The FATF challenge. Pakistan: Crucial FATF hearing. Pakistan: Dissecting FATF Failure, Environmental crimes: An emerging challenge, Countering corrupt practices .
Twitter: Abdul Rauf Shakoori
The recent publication, coauthored with Huzaima Bukhari, is
Pakistan Tackling FATF: Challenges & Solutions
available at: https://www.amazon.com/dp/B08RXH8W46
