Green Export Finance under Emerging Carbon Border Measures: A Pakistan-Centred Qualitative Study

Abstract

Carbon border measures and EU product sustainability rules are beginning to reshape export finance for developing country manufacturers. Focusing on Pakistan’s steel (direct CBAM exposure) and textiles/leather (indirect ESPR/DPP/CSDDD pressures), this paper examines how exporters, banks, and EU/UK buyers translate compliance efforts into cost and terms of capital. Using a multi-actor qualitative design (four focal interviews supplemented by documentary review) and cross-case patterning, we map the mechanism from verified evidence → bank recognition → pricing mechanics. Across cases, lenders respond not to sustainability narratives but to assurance-backed, decision-useful datasets: CBAM-template MRV (steel) and ESPR/DPP-aligned traceability plus effluent/chemical controls (textiles/leather). Where banks have embedded ESG fields in their models (ESRM-mature institutions), these datasets convert into basis-point step-downs, tenor extensions, and receivable-collateral relief. The largest and most consistent pricing effects occur when buyer risk-transfer instruments notably irrevocable payment approvals or sustainability-linked SCF tiers with auditable KPIs allow banks to price against the buyer’s risk. Pricing improved further as policy clarity increased (EU definitive-period CBAM; UK CBAM timing). Persistent frictions include assurance costs and data-plumbing gaps for SMEs; effective packages “stack” LTFF, Renewable-Energy refinance, and buyer-backed SCF in a single credit narrative. We contribute a Pakistan-specific, micro-level account of how regulation becomes finance, and offer actionable guidance for exporters, banks, buyers, and policymakers seeking to mobilize capital for compliance upgrades and decarbonization.