7 Bangladeshi firms make it into Bloomberg's sustainability list

Infographic: TBS

Although corporate Bangladesh was slow to adopt sustainable business practices, there has been a noticeable uptick in recent years, with seven publicly traded companies earning coveted Bloomberg scores in the past year for their environmental, social, and governance (ESG) initiatives.

These companies – Grameenphone, British American Tobacco (BAT) Bangladesh, Marico Bangladesh, Brac Bank, IDLC Finance, Square Pharmaceuticals, and Walton Hi-Tech Industries – have joined the rank of over 16,000 listed companies worldwide, representing more than 93% of the global equity market capitalisation.

However, Bangladeshi companies' Bloomberg ESG scores, ranging from 23 to 40 out of a possible 100, are notably lower than those of their regional counterparts. For instance, the top 100 Indian firms boast scores within the range of 50-70, indicating a more robust sustainability ecosystem.

Experts emphasise the importance of ESG ratings for attracting global investors as these considerations have gained significant traction among foreign investors, especially European institutional investors, who now require ESG compliance as a prerequisite for investment.

Ahsanur Rahman, CEO of Brac EPL Stock Brokerage, which caters to foreign portfolio investors in the local bourses, highlighted this growing trend.

Jahangir Alam, chief financial officer (CFO) of Square Pharmaceuticals, said, "Sustainability practices are not only essential to be appealing to foreign investors; they are also integral to building a business with long-term viability, one that can endure for centuries, serving its shareholders, the economy, and the community."

He said his company embarked on these sustainable practices more than two decades ago. In recent years, they have intensified their efforts, prioritising environmental responsibility and the well-being of their employees and stakeholders.

The ESG scores

Several leading listed firms in Bangladesh have embraced the Sustainable Development Goals (SDGs) in their daily activities, aligning their practices with ESG principles.

Bloomberg, a leading global ESG scoring entity, voluntarily selects relevant quantifiable information from companies' sustainability disclosures in standard formats and rates them accordingly.

Bloomberg terminal user investors use these proprietary scores to make investment decisions.

Telecommunication market leader Grameenphone, a multinational firm, has long practised sustainability and publishes an annual sustainability report. In the Bloomberg ESG universe, Grameenphone secured the highest score among Bangladeshi firms, with 39.6. The backfilled data suggests the company is improving every year.

Tobacco market leader BAT Bangladesh stood second with a score of 35.4, followed by hair care market leader Marico Bangladesh with 34.9.

Homegrown Brac Bank Ltd, the champion in SME lending, also championed sustainability banking in the country with a Bloomberg ESG score of 33.1, while the largest non-bank financial institute, IDLC Finance, followed with a score of 31.1.

Square Pharmaceuticals, the leader in the pharmaceuticals market, scored 26, while homegrown electronics market leader Walton scored 23.7.

The good practices

SM Shoyeb Hossain Nobel, additional managing director of Walton Hi-Tech Industries, said Walton has embraced environmental protection, social responsibility, and good governance in line with its vision to go global and green.

According to the official, Walton phased out CFC-emitting cooling products even before its Chinese and Indian counterparts, and is now investing in solar power as well as phasing out energy-inefficient products from its portfolio.

Two decades ago, Square's sustainability practices started with zero pollution from its pharmaceutical plants, and over the years they have only raised the bar in every sustainability element, says the company's CFO Jahangir Alam.

He said Square has employees who are the fourth-generation members of their families working for the company. He also emphasised that his company has a longstanding commitment to good governance and employee welfare.

Brac Bank, having the world's largest NGO Brac as its sponsor, has instilled sustainability in its DNA, said its managing director and CEO Selim R F Hossain. He added that the bank has been successfully balancing sustainability and profitability, achieving tremendous business growth in the process.

"Sustainability and compliance have a cost, and it's not always profitable enough as a business," Hossain said. "But we do not engage ourselves in any business that harms the environment or is socially irresponsible, even if it is a legal and profitable business."

Tashmeem Muntazir Chowdhury, Brac Bank's head of sustainable finance, said, "ESG is crucial for Bangladesh as it is one of the lowest carbon-emitting nations in the world and it ranks seventh in the list of the countries most vulnerable to climate devastation due to its geographic positioning."

IDLC Finance Chief Financial Officer Md Masud K Majumder said, "I think if every player of the ecosystem adheres to best practices of ESGs, we will have a better place to live in."

The NBFI started signing in sustainability initiatives in 2010 and already has 30 commitments in the ESG space. Under its sustainability roadmap 2021-25, IDLC is pursuing the sustainability goals and it is disclosing the updates every year following the Global Reporting Initiative's standard format that is followed widely, he said.

Grameenphone's Chief Corporate Affairs Officer Hans Martin Hoegh Henrichsen told TBS that the company's commitment to empowering societies is at the heart of its business purpose.

Since its inception, Grameenphone has connected rural marginal communities, especially women, to uplift their livelihoods, he said.

"As an integral part of our business, we adhere to high standards of environmental, social, and governance (ESG) practices to create value for our customers, employees, and society," he said.

"As a growing telco-tech company, our ongoing efforts include carbon footprint reduction aligned to SBTi (Science Based Targets initiative), driving digital inclusion, online safety and upskilling the youth, with a high focus on addressing the gender gaps to contribute to the country's social and economic progress," he added.

ESG investment potentials and the Bangladesh scenario

Global ESG assets are on track to exceed $53 trillion by 2025, representing over one-third of total assets under management, according to Bloomberg.

Emerging economies are becoming a hub for ESG funds, as issuance for sustainable funds tripled to $190 billion in 2022, according to Brac EPL Stock Brokerage, the leading local brokerage firm serving foreign portfolio investors.

India mandated ESG disclosure during the pandemic by implementing the Business Responsibility and Sustainability Report rule, requiring the top 1,000 companies listed on the Indian market to provide ESG disclosure. These efforts have helped India to secure third place in the MSCI Emerging Markets ESG Leaders Index.

On the fixed-income side, Indian corporations raised $13.7 billion in ESG debt in 2021 alone.

The Securities and Exchange Board of India has already extended the requirement to disclose sustainability subsections, such as sustainability practices across the value chain.

Thailand, among many other peer countries, has made ESG disclosures mandatory for listed firms in response to the increasing appetite of investors.

Mohammad Anwarul Karim, executive director and head of the Standard Setting Division at the Financial Reporting Council (FRC), said sustainability reporting remains optional for Bangladeshi companies until requested by primary regulators such as the Bangladesh Bank, investors, or foreign clients.

However, many multinational corporations and a number of forward-thinking local firms have already adopted sustainability practices voluntarily.

Mahbub Ahmed Siddique, chief operating officer, Institute of Chartered Accountants of Bangladesh (ICAB), mentioned that his institute, among others, is actively engaged in raising awareness among these companies.

Bloomberg which started its proprietary ESG database of the global capital market in 2020 also emerged as a consultant for regulators across the globe in framing regulations for a vibrant ESG ecosystem.

Yeali Park, APAC ESG Data Team Lead at Bloomberg, told The Business Standard, "Bloomberg prioritises companies with a certain market capitalisation threshold that have publicly disclosed ESG information in an independent ESG report or integrated annual report, concerning the mainstream ESG disclosure frameworks like Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board or the International Sustainability Standards Board."

Unfortunately, a five-year joint work of the Dhaka Stock Exchange (DSE) and GRI got only 14 listed firms in Bangladesh reporting their sustainability factors in the GRI standard, which was over 80 in Sri Lanka.

Brac EPL CEO said his firm started to collaborate with Bloomberg in mid-2022 so that more Bangladeshi firms join the ESG club as almost all international investors use Bloomberg's sea of investment data.

M Shaifur Rahman Mazumdar, chief operating officer of the DSE, said at least two dozen listed firms are practising sustainability in their opinions and the bourse is renewing its efforts for more awareness among firms for standard reporting of their progress.

ICAB COO Mahbub Ahmed Siddique believes regulatory obligation for sustainability disclosures will come in Bangladesh in the coming days, while investment professionals believe the sooner it happens the better it will be.

Bangladesh Securities and Exchange Commission spokesperson and executive director Rezaul Karim said the market regulator was encouraging and facilitating sustainability-linked products including green bonds in recent years and it was working on a better regulatory framework for sustainability-practising firms and investors.