Karot Hydropower Audit Signals Shift in Pakistan’s Investment Climate

The Karot project, which provides power to 3.8 million residents, became a focal point after the Compliance Advisor Ombudsman found the IFC failed to adequately monitor labour risks, including discrimination and freedom of association. While the investigation cleared the project of health and safety violations, the resulting action plan forces a recalibration of how Pakistan handles its massive infrastructure portfolio. For local policymakers, this necessitates a tighter integration between labour departments, environmental regulators, and international lenders to ensure compliance during the earliest stages of project design.

Moving forward, the ability of Pakistan to attract climate finance and foreign direct investment hinges on its capacity to manage these complex ESG requirements. The government now faces pressure to strengthen inspection systems and provide transparent grievance mechanisms to avoid future project delays or increased financing costs. For developers, the message is clear: robust labour management systems have transitioned from a legal obligation into a core component of risk management. If Pakistan successfully implements these reforms, it could bolster its reputation as a destination for responsible infrastructure, turning a compliance failure into a framework for more sustainable economic growth.