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1. ESG Unvarnished: More Than Just Buzzwords for Nepal

In recent years, the acronym ESG (Environmental, Social, Governance) has become increasingly common in business circles around the world. But what is really behind these three letters, and what does it have to do with doing business in Nepal? Is ESG just another passing trend or a fundamental shift that could shape the future of Nepalese companies?

1.1 What is ESG? Explaining the principles of ecology, social responsibility and governance in simple terms

ESG is a system of criteria used to evaluate a company’s performance in terms of its ethical impact and commitment to sustainable development principles.¹These three components are considered holistically, allowing investors and other stakeholders to gain a more complete understanding of the company’s long-term prospects and risks.

Environmental (E): This aspect concerns the company’s interaction with the environment. It includes an assessment of how the business manages its energy consumption, carbon emissions, waste, use of natural resources, pollution, as well as how it responds to climate change and preserves biodiversity.¹It’s not just about “green” initiatives, it’s about managing environmental risks and opportunities that can significantly impact the long-term viability of a business.
Social (Social – S): This component covers the management of the company’s relationships with its employees, suppliers, customers, and the local communities in which it operates. Key aspects include labor practices, employee relations, diversity, equity, and inclusion (DEI), human rights, community engagement, customer satisfaction, and product safety.²The focus is on human capital and the social impact of the company’s activities.
Governance (G): This element describes the systems and processes a company uses to ensure ethical governance in the best interests of all stakeholders. This includes board composition and independence, executive remuneration, shareholder rights, transparency of political contributions, anti-corruption measures, and oversight of environmental and social commitments.²The emphasis is on accountability, transparency and ethical leadership.

It is important to understand that ESG is not three separate pillars, but an interconnected system. Good corporate governance (G) is often a prerequisite for effective environmental (E) and social (S) performance. For example, a board that prioritizes ESG (G) is more likely to invest in cleaner technologies (E) and ensure fair labor conditions (S).²Moreover, ESG goes beyond mere compliance; it is a strategic approach aimed not only at preventing negative consequences, but also at creating positive value and enhancing the long-term sustainability of a business.²

1.2 Why it matters in the world: the transition from “profit only” to sustainable development goals

The growing importance of ESG at the global level is driven by several key factors. Investors are increasingly using non-financial ESG metrics to assess the long-term success and ethical impact of companies.²There is a shift from a purely shareholder-oriented model, where profit comes first, to a concept of “stakeholder capitalism” that takes into account the impact on all stakeholders: employees, communities, the environment.⁶This transition was symbolically cemented in 2019 by the Business Roundtable statement.

ESG factors help identify and reduce risks associated with poor corporate governance, environmental disasters or social conflicts.²At the same time, ESG regulations are becoming more stringent around the world, especially in Europe (e.g., the Sustainability Reporting Directive (CSRD), EU Taxonomy). This puts pressure on international companies and their supply chains, which may indirectly affect countries like Nepal.⁶Finally, growing public concerns about climate change, social inequality and corporate ethics are influencing consumer preferences and employer choices.⁵

Global ESG momentum, particularly regulatory pressure in developed markets6, will inevitably impact developing economies like Nepal’s through trade relations, foreign investment, and supply chain requirements. Nepali businesses seeking international partnerships or access to export markets will face increasing scrutiny of their ESG performance.³However, this attention is not only a challenge, but also an opportunity. Proactive Nepalese companies that embrace ESG can differentiate themselves and gain a competitive advantage in attracting responsible capital and partners.⁵

1.3 Nepalese context: ESG – a passing fad or a fundamental shift for business?

Given global trends as well as Nepal’s specific vulnerabilities (e.g. to climate change⁹) and his desire for development⁸, ESG is increasingly becoming a necessity rather than just a fad. In Nepal, the first signs of this are already visible: awareness is growing and some organizations are starting to implement ESG principles.³

Experts in Nepal confirm this shift. For example, Sonika Manandhar, co-founder and CTO of Aloi, notes, “In the last few years, ESG in Nepal has evolved from a buzzword to something more tangible… it’s a ‘must have’ for businesses to operate smartly.”⁸The relevance of ESG for Nepal is driven by the need to achieve sustainable development goals, meet climate commitments and build a resilient economy.⁸

ESG implementation in Nepal is driven by both domestic needs (climate vulnerability, social development needs, resource management⁸), and external pressure (investor expectations, access to international markets, requirements of international financial institutions (IFIs)⁸). This dual pressure suggests that this is more of a fundamental shift than a temporary phenomenon. Given Nepal’s historical political instability,¹⁵and the need for transparent governance, the “G” (Governance) aspect of ESG can be particularly important in building investor confidence and ensuring effective implementation of environmental and social initiatives.³

2. ESG Benefits for Nepalese Business: Value Creation and Capital Attraction

Implementing ESG principles is not just about meeting new requirements, but a strategic step that can bring tangible benefits to Nepalese companies, from improving financial performance to strengthening reputation and attracting investment.

2.1 Improving profitability: how ESG can improve financial performance and operational efficiency

Global research shows that companies with high ESG scores often perform better financially.⁵Meta-analyses of more than 2,200 studies have found a positive correlation between ESG performance and corporate financial performance (CFP).⁵This is achieved in several ways.

First, the introduction of energy efficient technologies and waste reduction directly reduce operating costs.⁵For many Nepalese businesses, especially small and medium-sized enterprises (SMEs),¹⁷, basic eco-efficiency (in the areas of energy, water and resource conservation) is an easily accessible way to reduce costs while improving their ecological footprint. This can be a tangible starting point on the path to ESG.

Second, proactive ESG management can encourage innovation in processes and products by eliminating costly or wasteful practices.²Third, strong ESG practices, especially in the social sphere (fair wages, good working conditions, DEI), help attract and retain talented employees, increasing their morale and productivity.⁵

The key problem in Nepal⁷is the perception of ESG as a cost. It is important to highlight that while some ESG initiatives require initial investment, many of them lead to long-term savings and value creation, shifting the focus from cost to investment.⁵

2.2 Attracting investors: why local and international capital is increasingly seeking ESG commitment

ESG is becoming a key factor for investors in their decision-making, allowing them to reduce risks and align investments with their values.²Transparent ESG reporting builds trust and attracts funding.⁵Companies with good ESG ratings can gain access to capital on more favorable terms.¹⁹

Foreign direct investment (FDI) from investors with high ESG performance can help improve ESG practices in host economies¹³, and the quality of management is a positive factor for attracting FDI.¹⁴Green finance instruments such as green bonds (NIFRA examples) are emerging in Nepal²⁰and NMB Bank²¹), and the private equity and venture capital industry is looking at ESG as a way to attract FDI.¹²Additionally, international financial institutions (IFIs) often have ESG requirements for their investments in countries such as Nepal.¹²Sharad Tegi Tuladhar of NMB Bank emphasizes, “Compliance with international ESG standards positions Nepal as a competitive player in global markets by attracting sustainable investments and providing access to green finance.”⁸

While FDI can help drive ESG best practices¹³, there is a risk if host countries such as Nepal have weak regulation or enforcement. This could lead to “ESG laundering” or exploitation if investors do not demonstrate genuine commitment. Therefore, strong domestic ESG mechanisms are essential to effectively leverage the positive aspects of FDI.⁷As Nepal’s green finance market develops²⁰, companies with strong ESG performance could potentially benefit from a “green premium” – that is, access to capital on slightly more favourable terms due to high demand for sustainable assets.⁵

Table 1: Key ESG factors influencing investor decisions in Nepal

This table provides companies with a clear guideline on what ESG aspects investors are looking for, making the concept of “attracting investment” more concrete and actionable.

2.3 Building a sustainable brand: enhancing reputation, trust and stakeholder relationships

Companies with well-thought-out ESG strategies enhance their reputation and strengthen customer and employee loyalty.⁵Younger generations particularly value sustainability and ethical practices when choosing employers and brands.⁵Strong social (S) practices, including engagement with local communities, help build local support and a “social license to operate”², which is especially relevant for sectors such as hydropower in Nepal.²²Supporting responsible business also improves the reputation of the investors themselves.¹⁹According to Sandeep Shrestha, “Strong ESG performance leads to reduced disruptions and improved reputation.”⁸

In Nepal, where community ties are strong and conflicts over resource use (e.g. hydropower) can arise¹⁵), a strong social component of ESG is not just desirable, but critical to project success and long-term operational sustainability. This “social license” is a key intangible asset. For Nepalese businesses, especially in an environment where governance can be a concern¹⁵, transparently communicating ESG efforts (even if they are imperfect) is vital to building trust with all stakeholders – local communities, employees and investors.²

2.4 Managing Risks in a Changing World: From Climate Impacts to Social Stability

Nepal is extremely vulnerable to climate change, including glacier melt, glacial lake outburst floods (GLOFs), landslides, and impacts on agriculture and hydropower.⁹ESG helps manage these physical risks. Nepal could lose up to 9.9% of its GDP by 2100 due to climate change if no action is taken.¹⁰

ESG considerations in supply chains are becoming critical worldwide.⁷Failure to comply with new ESG standards could result in fines or loss of market access.⁶Poor working conditions or conflicts with local communities can lead to disruptions and reputational damage.²Corruption or lack of transparency can discourage investors and harm business.³As Anthesis Group’s Graham notes, “ESG is important because it helps organizations identify and manage risks.”²

Given Nepal’s extreme climate vulnerability,⁹, the environmental (E) component of ESG, especially climate change adaptation and resilience measures, is not just an environmental issue but a core strategy for business continuity and economic survival. The World Bank Development Program for Nepal also aims for “greener and more sustainable” development.²³Companies in Nepal that demonstrate robust ESG risk management, particularly around climate and social issues, are more likely to attract “patient capital” – long-term investors (such as IFIs) that understand the local context and value stability over short-term speculative gains.⁵

3. Navigating the ESG Landscape in Nepal: Opportunities and Obstacles

Understanding the current ESG landscape in Nepal, including early adopters, regulatory initiatives and existing challenges, is key to developing effective implementation strategies.

3.1 Current State of Play: Early Adopters and Growing Awareness

The understanding of ESG in Nepal is gradually growing, moving from an abstract concept to more concrete actions.⁸Awareness is particularly high in the private equity and venture capital sector, where MFIs are present.¹²

Among the first followers we can highlight:

Banking sector: NMB Bank actively attracts green bonds and implements ESG management.³Nabil Bank publishes carbon emissions reports.²⁵Nepal Infrastructure Bank (NIFRA) has developed a framework for green bonds.²⁰These banks are often guided by partnerships with IFIs and international standards.
Aviation: Yeti Airlines has announced its commitment to carbon neutrality.³
Tourism: Hyatt Regency Kathmandu is committed to sustainable development initiatives.⁸
Hydropower: Butwal Power Company focuses on governance issues²⁹, and the sector as a whole is seeing initiatives towards sustainable development.³⁰
Food Industry/Technology: Foodmandu is a company that promotes eco-friendly initiatives.¹²

Historically, Nepal has focused on environmental assessment of projects⁸, but now there is increasing attention being paid to climate risks, human rights and gender issues.⁸

A significant driver for early ESG adoption in Nepal, especially in the financial and private equity/venture capital sectors, is the demands and influence of IFIs and foreign investors.¹²This points to a kind of “top-down” pressure that can help build initial capacity and demonstrate benefits. Different sectors of the Nepalese economy approach ESG based on their unique risks and opportunities: hydropower focuses on environmental impact and social license⁸, tourism – on environmentally friendly practices²⁸, and finance – on risk management and green financing.⁸This suggests that a one-size-fits-all approach to ESG will not work; industry-specific guidance is needed.

3.2 Regulatory Impetus: Understanding the Central Bank of Nepal (NRB) Guidelines and the Potential Role of SEBON

Central Bank of Nepal (Nepal Rastra Bank – NRB):

Issued the Environmental and Social Risk Management (ESRM) Guidelines (2018, updated 2022), which require banks and financial institutions (BFIs) to integrate E&S risk assessment into credit risk management. This includes an 8-step environmental and social due diligence (ESDD) process and project exclusion list screening.³
It is important to note that the current ESRM guidance from the NRB misses the “G” (Governance) aspect.³
A Green Finance Taxonomy has been developed, with which the NIFRA Green Bond Framework is aligned.²⁰NRB also gives directions to commercial banks on lending to the power sector.²⁵
In its Financial Stability Reports, the NRB recognizes climate events and technological threats as new sources of risk.³³

Securities Board of Nepal (SEBON):

There is a view that SEBON should issue comprehensive ESG guidelines for listed companies to ensure compliance and attract responsible investment.³
The Indian Business Responsibility and Sustainability Reporting (BRSR) framework can be used as a model.³
Research shows that SEBON’s management can support ESG-focused investments.⁴

Other legal frameworks include the Environmental Protection Act, the Labor Act, the Child Labor Act and provisions on gender equality.⁸

Current ESG regulation in Nepal (mainly ESRM by NRB) is largely risk-oriented and somewhat reactive. To accelerate widespread adoption, a shift to proactive regulation that incentivizes opportunity creation (e.g. incentives for ESG leaders, clear disclosure requirements by SEBON) is needed.³Of particular note is the fact that the NRB ESRM guidance misses the ‘Governance’ aspect.³Strong governance is the foundation for robust environmental and social performance and investor confidence, particularly in an emerging market environment. It should be a priority for future regulatory development.

3.3 Challenges on the ground: financial constraints, lack of awareness, data availability and infrastructure for SMEs

Despite growing awareness, ESG implementation in Nepal faces a number of serious challenges:

Financial restrictions: This is a significant barrier for developing countries and SMEs. Sustainable practices require investment in infrastructure, technology, training. Access to green finance is limited.⁷High interest rates for SMEs make the situation worse.¹⁷
Lack of awareness and expertise: Businesses, especially SMEs, may not understand the principles and benefits of ESG, viewing it as an additional cost.⁷There is a shortage of ESG specialists.⁷Some studies suggest Nepalese investors may be ignoring ESG factors⁴, although others point to growing interest.⁴
Economic priorities versus ESG goals: Developing country governments can prioritize economic growth and poverty reduction over ESG objectives.⁷
Consumer and investor behavior: In emerging markets, consumers may prefer affordability over sustainability and investors may prefer financial returns, reducing incentives for ESG.⁷
Data availability and quality: Lack of quality and reliable data for monitoring SDGs¹¹and ESG reporting in general. Banks face challenges in obtaining physical activity data from their portfolios to account for carbon emissions.²⁵
Infrastructure deficiencies: Poor infrastructure (relevant for the environmental aspect), regulatory complexities and bureaucracy hinder the development of SMEs.¹⁷
Problems of the EIA (Environmental Impact Assessment) system: Poor quality of EIA reports, lack of meaningful public participation and ineffective monitoring.³⁴

SMEs play a vital role in Nepal’s economy¹⁷, but face the biggest barriers to ESG implementation (financial, informational, infrastructural). Adapted, low-cost solutions and supportive policies are urgently needed to include them in the ESG transition, otherwise a significant part of the economy will be left behind. Lack of reliable data¹¹– This is not just a reporting problem; it hinders informed decision-making by businesses, policymakers and investors by making it difficult to establish baselines, track progress and demonstrate the value of ESG. This could perpetuate the “no evidence” cycle mentioned by Sandeep Shrestha.⁸Interestingly, although some sources7suggest that investors in developing countries are more focused on financial returns, other studies4indicate a “strong and positive correlation between investment decision-making and environmental, social and governance (ESG) considerations” among active investors in the Nepal stock market. This may indicate the emergence of a growing, perhaps nascent, segment of investors in Nepal who truly value ESG.

3.4 Using International Standards: Experience of IFC, ADB, World Bank for Nepalese Business

International financial institutions play an important role in promoting ESG practices in Nepal:

International Finance Corporation (IFC): Applies the Environmental and Social Sustainability Performance Standards.³⁵The Upper Trishuli-1 HPP project example highlighted challenges in their implementation (in particular with Free, Prior and Informed Consent (FPIC) and language access).³⁶IFC Invests in NMB Bank Green Bonds²¹and implements the Powered by Women initiative in Nepal’s hydropower sector.³⁷
World Bank Group: The new Country Partnership Framework (CPF) for Nepal prioritises job creation and resilience building, including climate resilience.³⁸US$100 million has been allocated to support greener, more sustainable and inclusive development.²³
Asian Development Bank (ADB): Has a Safeguards Provision (SPS) covering the environment, forced displacement and indigenous peoples.³⁹The goal is to promote sustainability of projects by protecting the environment and people.

These standards often become de facto requirements for projects seeking international funding. Example of the Upper Trishuli-1 project³⁶demonstrates a critical gap between stated international ESG standards (such as the IFC Performance Standards) and their practical implementation and enforcement in Nepal. This highlights the need for stronger local oversight, community empowerment, and capacity building for both project developers and affected communities to ensure meaningful compliance with these standards. Despite the challenges, engaging with the IFC, WB, and ADB standards can be a way for Nepalese companies and regulators to build their own ESG capacity, learn from best practices, and align their operations with global expectations, especially at a time when local regulation is still evolving.²⁰

4. Practical ESG Toolkit for Business in Nepal: Steps to Implementation

Starting an ESG journey can seem like a daunting task, especially for small and medium-sized enterprises. However, by breaking the process down into manageable steps and focusing on the most important aspects, Nepalese companies can successfully integrate sustainability principles into their operations.

4.1 Starting your ESG journey:

4.1.1 Understanding your impact: conducting a simple materiality assessment

Materiality assessment is the process of identifying the ESG issues that are most relevant to a particular business and its stakeholders.²This helps companies, especially SMEs with limited resources, focus their efforts where they will deliver the greatest benefit and mitigate the greatest risks, rather than trying to cover everything at once.¹⁶

The process can be simplified to the following steps:

Identify and engage stakeholders: These include internal (board of directors, employees) and external (customers, investors, local communities, regulators) groups.⁴¹Their opinion is invaluable for determining ESG priorities.
Make a list of potential ESG questions: Consider the specifics of your industry and activities. You can focus on industry standards (for example, GRI, SASB) and competitor reports.²
Prioritize questions: Assess each issue in terms of its potential impact on your business and its importance to stakeholders. You can use a materiality matrix to help you visualize this.⁴¹SMEs should start with a few of the most critical and manageable questions.

Effective materiality assessment depends on genuine engagement with stakeholders.⁴¹In Nepal’s community-oriented culture, ignoring the views of local residents or employees can lead to misidentification of material issues, especially social ones, which will undermine all ESG efforts.³⁶

4.1.2 Stakeholder engagement: who to talk to and why

Key stakeholders include employees, customers, suppliers, local communities, investors and regulators.⁴¹It is important to understand their expectations and concerns in order to formulate an ESG strategy.¹⁶Methods may include surveys, interviews, public meetings. Two-way communication is essential. In Nepal, where trust in institutions can sometimes be low¹⁵, proactive and transparent engagement on ESG issues can be a powerful tool for building trust, distinguishing responsible companies.⁵

4.2 Integrating ESG into your operations (adapted for SMEs):

For most Nepalese SMEs, a “revolutionary” approach to ESG is unrealistic. Gradual implementation¹⁶, focusing on a few essential issues and gradually expanding, is more feasible and sustainable. Nepalese culture is often characterized by strong community ties and respect for nature. SMEs can use these inherent values as a basis for their social and environmental initiatives, making ESG adoption more organic.

Ecology (E):

Energy: Energy saving measures, switching to energy efficient appliances, exploring the possibilities of using renewable energy sources (solar potential in Nepal¹⁹).
Water: Water saving, rainwater harvesting, water recycling.
Waste: Waste reduction, reuse and recycling programs, proper disposal.
Sustainable Purchasing: Working with suppliers according to environmental standards.¹⁶

Social sphere (S):

Employees: Fair wages, safe working conditions, health and safety training, non-discrimination, employee well-being initiatives.
Local community: Local hiring, local supplier support, community engagement programs.
Clients: Product safety and quality, data confidentiality.¹⁹

Management (G):

Transparency: Clear communication with stakeholders, simple reporting on ESG efforts.
Ethical behavior: Anti-corruption policy, code of conduct.
Board of Directors/Management: Even for SMEs, it is important to have a clear allocation of responsibility for ESG, even if it is just one person.⁴²

Table 2: Practical Low-Cost ESG KPIs for Nepalese SMEs

This table directly addresses the “how-to” aspect for SMEs, which are a key audience. It demystifies the ESG dimension by providing concrete, achievable starting points, which is especially important given the financial constraints and lack of awareness among SMEs in Nepal.⁷

4.3 Reporting on your progress: simple ways to communicate your ESG efforts

Reporting is important for ensuring transparency, accountability, communicating with stakeholders and attracting investors.²For SMEs, this doesn’t necessarily have to be an expensive glossy report. Simple updates on the website/social media, inclusion of information in annual reports or newsletters can be sufficient.¹⁶The key is honesty and showing progress, not perfection. Key elements of the report: what you are doing, why it is important (essential), your goals, your progress (even small wins), problems encountered.¹⁹

For many Nepalese SMEs, initial ESG communications should focus on authentic storytelling about their journey and impact, rather than on strict adherence to complex international reporting standards. This makes reporting more accessible and understandable.⁷ESG reporting shouldn’t be a one-way street. It’s an opportunity to solicit feedback from stakeholders⁴², which can then inform and improve ESG strategy, creating a virtuous cycle.

4.4 Learning from the Leaders: Nepalese Companies Leading the Way

Local examples can provide inspiration and demonstrate the practical feasibility of ESG in Nepal.

NMB Bank: Issued the country’s first green bond with the support of IFC and BII, aimed at financing electric vehicles and solar energy, a major milestone for sustainable finance in Nepal.²¹The bank actively implements ESG management and follows international reporting standards.³
Nabil Bank: Publishes carbon emissions reports related to its funded portfolio using PCAF standards and seeks to improve data quality to enhance the reliability of disclosures.²⁵
Yeti Airlines: In partnership with UNDP, became the first airline in Nepal to declare a goal of achieving carbon neutrality by measuring its carbon footprint and developing plans to reduce and offset it.³
Hyatt Regency Kathmandu: Integrates ESG by focusing on energy efficiency, waste reduction, community empowerment and cultural heritage preservation.⁸
Butwal Power Company: Has a long-standing corporate governance culture based on transparency and accountability to all stakeholders.²⁹
Foodmandu: A food delivery tech company that encourages the use of bicycles among its couriers as part of its ESG initiatives.¹²
NIFRA (Nepal Infrastructure Bank): Developed a green bond framework, consistent with ICMA principles and the national green finance taxonomy, to finance renewable energy and clean transport projects.²⁰

These local examples are critical in demonstrating to other Nepalese businesses that ESG is not just a Western concept, but a feasible and beneficial approach in the Nepalese context.³Companies that become “early adopters,” such as NMB Bank and Yeti Airlines, gain a reputational advantage and potentially attract specialized investors or clients, which could encourage others to follow.⁵

5. The Future of ESG in Nepal: Path to Sustainable Prosperity

Integrating ESG principles offers Nepal opportunities to achieve national development goals, strengthen the economy and ensure the well-being of future generations.

5.1 ESG as a catalyst for national development: Alignment with Nepal’s SDGs and climate goals

The corporate sector’s ESG efforts directly contribute to Nepal’s national commitments, such as the Sustainable Development Goals (SDGs), on which the country has generally shown slow progress.¹¹, Strategy to achieve net zero emissions by 2045³, Nationally Determined Contributions (NDC) and National Adaptation Plan (NAP).⁸For example, renewable energy projects contribute to achieving climate goals¹⁹, and responsible agriculture supports food security and sustainable land use.¹⁹

The Government of Nepal cannot achieve ambitious SDG and climate targets alone. Private sector ESG adoption is critical to mobilizing the necessary capital, innovation, and operational change needed to meet these national targets.³By encouraging ESG, Nepal can reduce risks in its development path. For example, promoting sustainable hydropower³⁰simultaneously reduces dependence on fossil fuel imports and addresses climate issues, given the country’s vulnerability to climate change.⁹

5.2 Recommendations for Business: Implementing ESG for Long-Term Success

For Nepalese companies seeking sustainable growth and increased competitiveness, the following key recommendations can be formulated:

Start small, but start now: Don’t wait for ideal conditions. Focus on the issues that are essential to your business.
Leadership from the top: Management commitment is the driving force behind ESG transformation.
Integrate, don’t isolate: Integrate ESG into core business strategy and operations rather than treating it as a stand-alone initiative.
Educate and engage: Raise employee awareness and engage with stakeholders.
Collaborate: Work with industry peers, associations and government.
Be transparent: Be honest about your efforts and progress.
View ESG as an investment, not a cost: This is a fundamental shift in thinking that is perhaps the most important first step. Overcoming the initial perception of ESG as a burden⁷and the transition to understanding it as a source of long-term value⁸– the key to widespread implementation.

5.3 Recommendations for policymakers: creating a favourable environment for ESG implementation

To stimulate ESG practices at the national level, targeted actions by government bodies are required:

Strengthening the regulatory framework: SEBON should develop clear guidelines for ESG disclosure.³NRB needs to include the Governance (G) aspect in its ESRM recommendations.³
Providing incentives: Consider tax incentives and preferential financing for ESG leaders, following the example of India.³
Capacity Building: Support ESG training and awareness programmes for businesses (especially SMEs) and professionals.⁷
Improving data infrastructure: Improve the collection and availability of reliable ESG data.
Promoting green finance: Further development of markets for green bonds and other sustainable investment instruments.
Ensuring strict compliance with existing environmental and social laws.
Facilitating dialogue between the public and private sectors on ESG issues.

Effective promotion of ESG in Nepal requires a coordinated approach from various government bodies (NRB, SEBON, line ministries) rather than disjointed initiatives. This will ensure consistency and avoid conflicting signals.³Policymakers need to find a balance between setting ESG requirements (regulation) and providing support (incentives, capacity building), especially for SMEs, which face significant barriers to implementation.³

Conclusion: ESG – A Necessary Investment for Nepal’s Future

ESG is not a passing fad, but a strategic imperative for Nepalese businesses to thrive in today’s global economy, increase their value, attract investment, and contribute to the country’s sustainable development. This path requires commitment from all stakeholders – businesses, government, investors, and civil society. Given Nepal’s vulnerabilities and development needs, delaying widespread ESG adoption is a missed opportunity and a growing risk.³The time has come for Nepali businesses and policymakers to take decisive action on ESG. As rightly noted, “integrating ESG practices… is not just about compliance, but about creating long-term value for both people and the planet. By embracing these principles, Nepal can pave the way for a more sustainable, equitable, and prosperous future.”⁸

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