The number of Bangladeshi firms more than doubled to 16 in terms of reporting on Environmental, Social and Governance (ESG) compliance in the last two years, according to Bloomberg.
ESG is the most recognised sustainability matrix worldwide, and the global investment data provider Bloomberg leads in rating publicly traded firms worldwide based on their structured, measurable disclosures of sustainability practices.
As the call for sustainable business is getting louder, more and more firms are embracing the key principle surrounding it -- care for the planet, people, and society, ensuring good governance, said Akramul Alam, head of research at Royal Capital.
Higher scores indicate strong performance in environmental, social, and governance (ESG) in measurable disclosures of sustainability practices.
The evaluation is important as many global investors look at the scores before making investment decisions. "ESG ratings are now vital for attracting global investors (FDI)," Alam added.
The new entrants in the Bloomberg ESG club this year are Linde Bangladesh, Reckitt Benckiser Bangladesh, Singer Bangladesh, Heidelberg Materials Bangladesh, and Robi Axiata, along with City Bank, helping elevate Bangladesh's ESG profile globally.
In the latest report unveiled in the first week of December, Bloomberg said these companies were making measurable strides towards responsible business practices with a long-term commitment to sustainability.
Earlier in 2023, only seven local listed firms - Grameenphone, BAT Bangladesh, Marico Bangladesh, BRAC Bank, IDLC Finance, Square Pharmaceuticals, and Walton Hi-Tech Industries - made it to the Bloomberg ESG-rated club.
In 2024, three firms --- LafargeHolcim, MJL Bangladesh, and BSRM Limited -- joined the group.
Bloomberg assesses firms by voluntarily selecting pertinent, measurable data from their standard sustainability reports and assigning scores based on the information.
Among the firms, Linde Bangladesh now tops the chart with an ESG performance score of 6.16 out of 10, excelling particularly in the environmental domain with a score of 5.09.
Reckitt Benckiser Bangladesh, a market leader in the homecare industry, secured second position with an overall score of 6.11, driven by an outstanding 7.46 score in governance.
Singer Bangladesh, with a remarkable 8.92 score in social criteria, secured third place with an overall ESG score of 5.34, although it lags behind in the environmental and governance criteria.
LafargeHolcim Bangladesh improved its ESG score from 1.35 to 2.07 in a year. But its competitor Heidelberg Materials made its debut with a solid 4.84 score, occupying the fourth spot.
Among the three local financial firms in the club, BRAC Bank saw the biggest improvement, raising its score from 2.19 to 3.99 to land in fifth place.
City Bank, with a score of 3.28, trailed behind to attain the sixth position while IDLC Finance, the previous champion, raised its score from 3.01 to 3.28 but slid to the seventh position.
Grameenphone, a long-time ESG leader in the telecom sector, has been outperformed by its competitor Robi Axiata. While GP raised the score to 1.83 from 1.78, Robi entered the club with a much higher score of 3.08.
BSRM Limited, the steel market leader, improved its score from 1.36 to 2.22,
Square Pharmaceuticals, long committed to sustainability, raised its score from 0.73 to 1.22 but remained at the bottom of the list.
ESG is a global framework used to evaluate a company's sustainability and ethical impact beyond traditional financial metrics. It examines a company's environmental performance, for example carbon emission, social impact such as labour practices, and governance structure through assessment of board composition and executive pay.
Although Bangladesh's progress is notable in ESG reporting, it still lags behind regional peers, including Sri Lanka, Vietnam, Pakistan, Indonesia and India.
To date, Sri Lanka has 23 ESG-rated firms, Vietnam 57, Pakistan 74, Indonesia 205, and India 680.
"Corporate Bangladesh has been slow to embrace the sustainable practices, compared to its peers since ESG compliance needs huge investment without short-term returns," said Alam of Royal Capital.
"We should commit to scaling up green and inclusive financing so that our progress contributes meaningfully to the nation's sustainable development goals," he added.
However, Bangladesh is home to the highest number of green apparel factories --- 268. Exporters are adopting sustainable practices faster to meet global demands.
Bloomberg's ESG scoring system rates firms based on their structured, measurable disclosures of sustainability practices.
The platform evaluates companies if consistent public disclosures of ESG performance are available, assigning a score out of 10 in each category.
Bloomberg has been publishing ESG ratings for publicly traded firms globally since 2020. The first ESG rating for companies in Bangladesh was published in 2023.
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