Imagine the year 1624. The world does not have New York and her Stock Exchange that would shape global finance. The Industrial Revolution still lies over a century in the future. The Mughal empire is enjoying its heyday in India.
Around the new year, floods hit the town of Utrecht in the Netherlands. Dikes break. Fields are drowned. Livelihoods are washed away. Without a central system of aid and little reserve, authorities at the local level have no money to finance the immediate needs of recovery.
Confronted with the crisis, a small Dutch water board takes an unprecedented decision: it floats a bond. Not to fund war or conquest, but to finance recovery, to repair the dikes and stem the tide. Amazingly, that bond continues to earn interest today, over 400 years later.
A timelessly wise act of climatic foresight, now in the possession of a foundation under the New York Stock Exchange, in a world that would not have known itself in 1624.
In 1624, the Dutch were able to issue a bond to protect their people from flood-born devastation; in 2025 Pakistan struggles to attain finance for disaster recovery despite its institutions, financial markets, and global partnerships
Fast forward to the year 2025. The setting is different, but the crisis is eerily familiar and hauntingly close to home.
This time, it is not Utrecht but Pakistan. The monsoon season unleashes severe flooding across the country. Millions of people are affected. Crops, homes, schools, and critical infrastructure are swept away. The scale of infrastructure destruction is staggering and the estimates suggest that the destruction is likely to carve away 0.3 to 0.7 percentage points from Pakistan’s GDP growth in FY26, reducing the expected rate to 3.5–3.9pc, against the earlier target of 4.2pc.
As in Utrecht, somber questions linger in Pakistan as well. Who will pay to reinstate the swept away bridges that once connected communities and breathe life into the unusable classrooms? Who will help replant the fields that once provided sustenance? And beneath all such questions lies the greatest one of all, how do we truly prepare for the next calamity before it catches us off guard.
In response, the Government of Pakistan mulls over whether or not to launch an international appeal. Development partners pledge support. Humanitarian assistance trickles in. Yet months later, only a limited portion of recovery financing materialises. The funding gap continues to be large as more than 70–80pc of the estimated recovery needs are still unmet.
The contrast is stark. Four centuries ago, a small town had enough foresight to develop an innovative financial product for its residents and infrastructure. But a country of 240 million, with institutions, financial markets, and global partnerships struggles to muster timely and adequate funding for recovery. It’s obvious that adjustments in the current system are not enough anymore. Pakistan needs to reimagine its financial architecture, to make it fit for the sustainability finance era. This requires five key shifts in the financial system.
First of all, albeit the financial system superficially touches upon climate risks, we need to thoroughly embed them into our public financial management system. Every rupee spent should not only be checked for cost-effectiveness but should be exhaustively screened for climate resilience. Public financial mechanisms must essentially become an engine of adaptation and mitigation.
Second, Pakistan must enter global green capital markets with confidence. Resilience-linked green Sukuks would readily fund flood infrastructure and early warning systems. Developing such financial instruments would announce the progressing evolution of a climate-ready Pakistan.
Third, our financial planning for disasters doesn’t consider the frequency and intensity of these perilous events. The enormous economic shocks suggest that we cannot afford to continue the same way. The financial planning must therefore be risk-informed and follow the risk layered approach, in which, financial instruments are developed and employed according to the frequency and intensity of the events.
That means we retain the financial impacts of high frequency events in the economy, which has low-impact and transfer the risks for medium and low frequency events that have high impact. A policy-level sketch would be wherein we deploy contingency funds for high-frequency, low-impact events and rely on parametric insurance and catastrophe bonds for medium to low frequency and high-impact disasters.
Fourth, the country requires a green financing facility, especially after the approval of the country’s Green Taxonomy. A green financing facility will pool public, donor, and private capital under one roof and will greatly help the first three shifts mentioned above. The facility will also develop a strong equity base for blended finance and reverse our international climate finance drawdown.
Finally, no matter how fancy an instrument looks if the resilience dividends do not trickle down to the masses, the instrument loses its raison d’etre. For this particular purpose, provinces and cities must be empowered both technically and financially so they could seek demand-driven financing for their localised climate solutions.
To make all this work, we need coordination, not chaos. Institutions like the Ministry of Finance, National Disaster Management Authority, National Disaster Risk Management Fund, the State Bank, Securities And Exchange Commission, and Ministry of Climate Change must align around a shared framework for climate finance. No solo-flight is likely to succeed as it’s a whole-of-government mandate.
In 1624, the Dutch issued a bond to protect their people from rising waters. It still functions, centuries later because it was rooted in responsibility, vision, and design. Today, Pakistan faces a similar choice. We can continue reacting to crisis after crisis. Or we can build a system that’s innovative, inclusive, and green.
The writer is an economist and policy strategist, who works on climate finance with multiple governments
Published in Dawn, The Business and Finance Weekly, November 10th, 2025
