Sherab Lhamo
Environmental, social, and governance (ESG) are key focus areas for global investors in Bhutan to drive growth in sustainable investments. By 2022, assets managed with ESG criteria reached around USD 35 trillion, representing 36 percent of all professionally managed assets worldwide.
Bhutan has integrated ESG and sustainable principles into its economic development strategies for over 60 years.
The CEO of the Royal Securities Exchange of Bhutan Dorji Phuntsho said the principles of ESG and sustainable development were deeply embedded in Bhutan long before these terms became widely recognised.
ESG is a set of standards used to evaluate an organisation’s environmental and social impact. While often associated with investing, ESG also encompasses how a company engages with its customers, suppliers, employees, and the wider public.
Despite Bhutan’s alignment with ESG principles and sustainable development values, Dorji Phuntsho pointed out the challenges in capitalising on these efforts.
“We are not yet able to fully monetise or connect with the global financial landscape. Today, our financial market remains in its early stages, relying heavily on bank credit and loans from financial institutions for investments,” he said.
Dorji Phuntsho said Bhutan cannot rely on traditional methods to develop sustainable finance, as this process would take time.
“We are instead working together to design a programme that will accelerate the development of a sustainable bond market in Bhutan,” he said.
The programme will focus on identifying projects that require funding and engaging experts, particularly international agencies specialising in Sustainable Development Goals financing, which will include targeted interventions, covering the entire process from bond issuance to post-issuance, which is notably complex.
“This initiative is specifically designed to build in-house capacity for our issuing companies, regulatory bodies, and market intermediaries,” he said. At the same time, it will explore investment opportunities in sustainable sectors, creating openings for impact investors.
“The programme will be time-bound until we have developed this capacity,” Dorji Phuntsho said.
He said that Bhutan is in the process of developing an ESG reporting standard for listed companies. The initiative aims to monetise Bhutan’s commitment to ESG principles and sustainable development.
The chair of Global Research at J.P. Morgan Chase, Joyce Chang highlighted Bhutan’s strengths: the bold sustainability goals enshrined in its constitution, such as carbon neutrality and land protection, its strong cultural identity, openness to collaboration with private investors, and its strong social values.
JPMorgan Chase & Co., is an American multinational finance company headquartered in New York City.
She recommended Bhutan to begin with a specific sustainable development project, partner with concessional lenders and development institutions, target ESG-focused investors, emphasise transparency and reporting, and consider a mix of funding mechanisms.
The founding partner of Systemiq Capital, Irena Spazzapan said Bhutan’s biodiversity was a valuable resource. She suggested bioprospecting, which involves searching and commercialising genetic materials from natural sources, that holds immense potential for new products and services.
Traditional methods of biodiversity monitoring are expensive and inefficient, but bioprospecting can generate significantly more revenue for Bhutan than carbon trading, she added.
Systemiq Capital, is a company that supports climate tech companies from late seed to Series A/B rounds.
“While hydropower is a valuable resource, Bhutan needs to explore ways to maximise its value beyond just selling electricity. Long-term energy storage solutions are needed to complement renewable energy sources like solar and wind,” said Irena Spazzapan.
The founder of GPI Atlantic, Ronald Colman, raised concerns about the global ESG standards, stating that the global ESG standards are having low bars and being susceptible to greenwashing.
He added that despite 80 percent of global investors claiming sustainable portfolios, environmental and social challenges persist. He warned that these weak standards undermine trust in the investment industry.
Ronald Colman praised Bhutan’s “fail-safe immaculate ESG standards,” rooted in the country’s Gross National Happiness (GNH) philosophy. He explained that GNH, based on Bhutanese wisdom traditions, emphasises interdependence with all life—a genuine sustainability standard.
When asked about Bhutan’s potential to fully harness its hydropower and retain economic benefits within the country, Dorji Phuntsho acknowledged the opportunity to add value to this energy source.
He mentioned green hydrogen as a potential option for energy storage and stressed the importance of policies that value addition and better utilisation of Bhutan’s energy resources.
For Bhutan to set up an effective ESG reporting system and establish transparent frameworks, Joyce Chang recommended that Bhutan, if it moves toward a capital market strategy, should create a comprehensive ESG reporting framework aligned with international standards.
This would involve regular ESG data disclosures, developing measurable metrics, and collaborating with international organizations.