Advising ESG Risk Management for Large Hydropower Projects in Pakistan
United States Institute of Peace (USIP)
The Challenge
Energy-deficient and climate disaster-prone countries like Pakistan face the twin challenge of producing affordable yet clean energy to fuel their economies’ growing needs. Because of Pakistan’s geography, its hydropower generation potential is incredibly high, but in recent decades, internal political divisions have prevented central authorities from making major investments in large-scale dams. With the announcement of the China-Pakistan Economic Corridor (CPEC), the state’s newfound capacity to fill the country’s infrastructure gaps has enabled it to launch massive new projects on the River Indus. But given the complex geographies of these environments — challenging topographies, lack of transport infrastructure, and harsh climate, to name a few — and the regions’ special administrative status within Pakistan’s federation, these projects are vulnerable to environmental, social, and governance (ESG) risks.
If the local protagonists for these projects, together with their foreign funders, do not proactively manage these risks, the downsides of these projects might outweigh the benefits. The key challenge lies in understanding and mitigating these impacts, particularly the displacement and migration of local populations, and the lack of local community engagement because of the gap between de jure regulations and de facto practices. The study seeks to address these critical concerns by investigating the real-world implications of these hydropower projects, aiming to develop a comprehensive understanding of their effects on the environment and local communities and to identify sustainable governance practices that can minimize negative outcomes.
Our Approach
- Focused on two dam sites as detailed case studies, monitoring their surrounding landscape and topography (e.g., slope, roughness, soil moisture, and soil erosion) as well as environmental factors (e.g., air quality, humidity, and land surface heat) using geospatial data.
- Undertook fieldwork to assess the impact on livelihoods (agriculture or fisheries) and experiences of displacement and resettlements due to dam construction.
What We Delivered
After field research and thorough data analysis, we delivered a comprehensive report that critically examines the ESG challenges associated with large-scale hydropower projects in AJK and Gilgit Baltistan, including:
- In-depth insights into the socio-political complexities, potential conflicts, and governance issues that these projects generate.
- A conceptual framework to better understand the intersection of energy governance, local grievances, and the broader implications for the CPEC.
- Policy recommendations aimed at promoting sustainable governance practices, ensuring that future developments in the region are both equitable and environmentally sound.