The Dhaka bourse has made a move to bring green ready-made garment factories into the capital market either through an initial public offering (IPO) or through issuance of bonds.
It is set to sign an agreement with the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) within a month from now.
The Dhaka Stock Exchange has come to know that there are about 100 LEED certified garment units across the country, which are capable of meeting regulatory requirements to get equity or debt financing solutions.
"Such companies have the opportunity to get sustainable investment solutions as more and more investors are now willing to put money in environment-friendly businesses," said DSE acting managing director Shaifur Rahman Mazumdar.
The DSE and the BGMEA will work together to help potential green companies get the financial solutions that they need.
After the signing of the agreement, the DSE will sit with leading green companies to assess their capacity and demand for funds through equity financing or green bonds.
To accelerate the process, the board of the country's premier bourse last week approved a draft of the proposed MoU (memorandum of understanding) to be signed with the BGMEA.
Considering the business prospects of green RMG factories, the Dhaka exchange held a meeting with the directors of the BGMEA about three months ago.
Both the parties at the meeting discussed how to make BGMEA members understand the fund support that they can get from the capital market.
The association of the garment manufacturers agreed to share the information of their members that may consider seeking funds.
Do the RMG exporters need fund support?
Md. Morshedul Hoque, chief financial officer of Bitopi Group, said green RMG companies needed funds to meet operational and maintenance expenses.
The demand for funds has intensified since foreign currency loans have become more expensive due to currency depreciation. Also, Green Transformation Fund (GTF) that the central bank used to provide is no longer available, said Mr Hoque.
Many companies are keen on raising funds by issuing green bonds as such investment tools offer a fixed repayment method unlike loans from banks.
Mr Hoque, however, explained why it is difficult for RMG companies to fulfill the regulatory requirements set out for issuance of green bonds.
Bitopi Group with three green RMG companies had tried to issue green bonds but failed.
As per the rules, a company has to submit a proposal to the securities regulator for green bonds with financial statements within four months after the closing of the financial year. It is often not possible for companies to get an audited financial statement within the timeframe.
Talking to The FE, Chairman of the Bangladesh Securities and Exchange Commission (BSEC) Shibli Rubayat Ul Islam said that if LEED certified platinum rated RMG manufacturers came up with proposals for IPOs or bonds, the regulator would give its approval in the shortest time possible.
Bangladesh has 63 platinum rated garment companies, the highest in the world.
Mohammad Rezaul Karim, a BSEC executive director, said the regulator would welcome green companies in a bid to fulfill the target of sustainable development goals (SDG).
Present state of RMG sector in equity market
Business performances of many of the 58 listed companies of the sector are very poor.
Non-performing companies include Ring Shine Textiles, Familytex (BD), and C & A textiles while good performers include Square Textiles, Al-Haj Textiles and Envoy Textiles.
As many as 46 stocks have been stuck at floor price while the remaining 12 have traded at higher than the floor prices.
The sector accounts for 4 per cent of the total market capitalisation of the premier bourse. Its market value rose from Tk 167 billion on February 2 to Tk 170 billion on Sunday.
On the outcome of the listing of green RMG companies, Chairman of EDGE Asset Management Asif Khan said good companies usually did not show any interest to go public.
Whether the market will see any positive impact or not will depend on the companies that will join the capital market, he added.
Meanwhile, the DSE has arranged another meeting scheduled for today (Monday) with the Bangladesh Merchant Bankers Association (BMBA). The meeting will discuss ways of bringing good companies to the capital market.
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