As global investors increasingly prioritize Environmental, Social, and Governance (ESG) criteria, Bhutan stands out with over six decades of integrating sustainability into its economic framework. By 2022, ESG-focused assets surged to approximately USD 35 trillion, accounting for 36 percent of all professionally managed assets worldwide, signaling a robust trend towards sustainable investment.
Dorji Phuntsho, CEO of the Royal Securities Exchange of Bhutan, emphasized that Bhutan’s dedication to ESG principles predates their global recognition. “Our commitment to environmental and social stewardship has been ingrained in our development strategies long before ESG became a buzzword,” Phuntsho stated. He underscored that ESG not only pertains to investment decisions but also to how businesses interact with stakeholders, including customers, suppliers, and employees.
Despite Bhutan’s strong alignment with ESG values, Phuntsho acknowledged significant hurdles in fully leveraging these principles within the global financial ecosystem. “Currently, our financial markets are nascent, heavily dependent on bank credits and institutional loans,” he explained. To overcome these limitations, Bhutan is collaborating on a strategic program aimed at accelerating the establishment of a sustainable bond market. This initiative seeks to identify funding needs, engage international Sustainable Development Goals (SDG) experts, and streamline the complex process from bond issuance to post-issuance management.
The program is designed to build internal capacities among issuing companies, regulatory bodies, and market intermediaries, creating a conducive environment for impact investors. Phuntsho highlighted that this initiative is temporary, intended to establish the necessary infrastructure and expertise to sustain the bond market independently.
Parallel to these efforts, Bhutan is developing an ESG reporting standard tailored for its listed companies, aiming to monetize its longstanding commitment to sustainability. Joyce Chang, Chair of Global Research at J.P. Morgan Chase, praised Bhutan’s constitutional sustainability goals, such as carbon neutrality and land protection, alongside its rich cultural heritage and strong social values. Chang advised Bhutan to initiate specific sustainable projects, partner with concessional lenders, target ESG-focused investors, and maintain transparency through rigorous reporting.
Adding to the discourse, Irena Spazzapan, founding partner of Systemiq Capital, highlighted Bhutan’s rich biodiversity as a significant asset. She proposed bioprospecting – the exploration and commercialization of genetic materials from natural sources – as a lucrative alternative to traditional biodiversity monitoring and carbon trading. Spazzapan also recommended that Bhutan explore value-added applications of its hydropower resources, such as green hydrogen for energy storage, to maximize economic benefits.
However, not all voices were unreservedly optimistic. Ronald Colman, founder of GPI Atlantic, critiqued global ESG standards for being too lenient and vulnerable to greenwashing. He pointed out that despite widespread claims of sustainable portfolios, genuine environmental and social challenges remain. Colman contrasted this with Bhutan’s robust ESG standards, rooted in the nation’s Gross National Happiness (GNH) philosophy, which emphasizes harmony with all life forms and provides a genuine sustainability framework.
Phuntsho concurred, noting the potential for Bhutan to enhance its hydropower sector through policies that promote value addition and optimal resource utilization. He mentioned green hydrogen as a promising avenue for energy storage, which could further integrate Bhutan’s renewable resources into its economic strategy.
To establish a credible ESG reporting system, Joyce Chang recommended that Bhutan align its frameworks with international standards, ensuring regular data disclosures and measurable metrics. Collaboration with global organizations will be crucial in maintaining transparency and fostering investor trust.
As Bhutan navigates the complexities of sustainable finance, its blend of traditional values and modern investment strategies positions it uniquely on the global stage. With strategic initiatives and international partnerships, Bhutan aims to harness its environmental and social strengths, driving growth in sustainable investments while upholding its enduring commitment to Gross National Happiness.
