Client Name

Al-Abbas Sugar Mills Limited

Faculty Advisor

Ms. Madeeha Omer Lakhani

SBS Thought Leadership Areas

Investment Decision Making

SBS Thought Leadership Area Justification

This ELP falls into the Investment Decision Making thought leadership domain of IBA. The classification is justified on three bases. First, the project involves using advanced financial analysis (discounted cash flow valuation, scenario modelling, and sensitivity analysis) in a sustainability investment decision, directly impacting on capital allocation decisions. Second, the project speaks to a new category of investment decision—how to incorporate climate risk and carbon pricing into corporate financial models, which is transforming the global landscape of valuation frameworks (TCFD, 2017; IFC, 2021). Third, the project presents findings regarding the implications for shareholder value creation and shareholder value destruction, as a result of ESG aligned investments—a topic relevant for equity investors, institutional lenders and portfolio managers in the Pakistani capital markets. The project therefore adds methodologically and empirically to the existing knowledge on sustainable finance and climate integrated investment decision making.

Aligned SDGs

GOAL 13: Climate Action

Aligned SDGs Justification

There are four SDGs for this project. Majorly revolving around SDG 13 (Climate Action) which basically is taking action against climate change is, and the project has directly quantified and proposed to reduce GHG emissions in industry in line with Pakistan's Nationally Determined Contribution (NDC) under the Paris Agreement. Moreover, there are other SDG’s which can be linked with this project such as, SDG 9 (Industry, Innovation and Infrastructure) is relevant because of the modernization of the boiler infrastructure, the high efficiency boilers using cogeneration and the use of digital monitoring and reporting systems, SDG 12 (Responsible Consumption and Production) is achieved by optimizing the use of bagasse, capturing biogas from effluents, and minimizing waste-to-atmosphere methane emissions.

NDA

No

Abstract

This Experiential Learning Project (ELP) outlines a holistic climate finance and carbon mitigation approach to Al-Abbas Sugar Mills Limited, a publicly listed sugar-ethanol plant in Sindh, Pakistan. The project, which is commissioned due to the increased need for industrial decarbonization and ESG compliance in emerging markets, includes four related stages: carbon footprint quantification, emissions mitigation and transition modelling, financial impact assessment, and shareholder value analysis.

As per the carbon footprint assessment, Al-Abbas GHG emissions for reporting year 2024-2025 are 53,118 tCO₂e (Scope 1 + Scope 2). The major emission source is coal combustion at 45.5% (24,200 tCO₂e) and furnace oil at 29.3% (15,550 tCO₂e). The company's carbon intensity is around 33 kg CO₂e/tonne cane crushed, which is in the bottom end of the global range for the sugar industry (35-60 kg) but has a significant potential for reduction.

The emission mitigation and transition modelling phase results in six technically feasible decarbonization pathways, with an estimated 49,000 surplus bagasse in the period, of which 28,000 ton can be used to replace coal. The recommended Scenario B (Realistic Transition Pathway) shows that a 60% reduction in emissions can be realized by 2033 with a structured four-phase pathway. Total investment for the transition is estimated at PKR 9.55-11.43 Billion (approx. USD 34-41 Million) to be made within 7 years.

The financial modelling phase is based on the discounted cash flow method, and forecasted income statements for Al-Abbas post transition economics. The revenue forecast is based on volume recovery and macro-economic normalisation and is estimated at around PKR 18.8 billion in FY2029 as compared to PKR 15.6 billion in FY2025. Two equity valuation methods have given conflicting signals: an FCFE based model has an intrinsic value of PKR 42.40 per share compared with the market price of PKR 8.52 per share, representing significant undervaluation, while a FCFF based model based on the full capital structure has an intrinsic value of PKR 907.50 per share compared with the sector.

Based on the carbon credit monetisation framework, the total carbon credit revenue (net of costs) under the voluntary carbon market assumptions (USD 12 per tonne) will be PKR 463 million during the period 2027-2034, with an estimated maximum contribution of PKR 118 million per year in the third phase of the transition. These revenues are meaningful to offset transition capital expenditures and to enhance investment payback periods.

The integrated analysis shows that the sustainability transition is not just financially viable and strategically needed but also adds value to the company in terms of ESG. Immediate action is recommended for the enabling infrastructure in Phase 1, as well as for registering emission reduction projects under the voluntary carbon standards and for the adoption of a Science-Based Target (SBT) aligned to the 1.5 °C pathway at board-level. The project is related to Sustainable Development Goals 7, 9, 12 and 13, and contributes to the Investment Decision Making thought leadership domain of IBA

Document Type

Restricted Access

Document Name for Citation

Experiential Learning Project

Download

Share

COinS