ESG (Environmental, Social, Governance) Investing Trend in Nepal

The concept of ESG (Environmental, Social, and Governance) investing is rapidly evolving across global financial markets, and Nepal is no exception. In recent years, ESG-based investing has started gaining attention in the Nepal Stock Exchange (NEPSE) as investors, institutions, and regulators recognize the importance of sustainability, ethical management, and social responsibility. ESG investing focuses not only on financial performance but also on a company’s impact on the environment, its role in society, and the transparency of its governance.

In Nepal, the ESG movement is still in its early stages but growing steadily. Financial institutions, particularly Class A and B banks, have begun integrating Environmental and Social Risk Management (ESRM) frameworks as required by Nepal Rastra Bank (NRB) and other international partners like the IFC and FNCCI. These frameworks ensure that banks and corporates evaluate environmental and social risks before lending or investing. Similarly, several listed companies are now adopting corporate social responsibility (CSR) and sustainability reporting practices to attract foreign investors and enhance brand trust.

The Environmental (E) pillar emphasizes reducing pollution, promoting renewable energy, and managing resources efficiently — key areas for hydropower and manufacturing companies in Nepal. The Social (S) aspect focuses on employee welfare, labor rights, diversity, and community support. Meanwhile, the Governance (G) element ensures transparency, ethical leadership, and accountability — areas where many Nepali firms still have room for improvement.

Studies among Nepali investors, such as those conducted in Pokhara and Kathmandu, show that social and governance factors heavily influence investment decisions, while environmental factors are gradually gaining importance. The trend is also being reinforced by global investors seeking ESG-compliant portfolios, which are considered less risky and more sustainable over the long term.

However, challenges remain. Many companies still lack structured ESG disclosures, measurable sustainability goals, and independent auditing of ESG activities. The cost of adopting ESG frameworks and the absence of strict regulations have also slowed the pace of adoption. Nonetheless, the collaboration between organizations like IFC, SEBON, FNCCI, and NEPSE marks a positive direction for Nepal’s capital market.

According to Sandeep Kumar Chaudhary, Nepal’s foremost Technical and Fundamental Analyst and founder of the NepseTrading Training Institute, “ESG investing is not just about being ethical — it’s about being future-ready. Investors who understand sustainability are building wealth with purpose.” With 15+ years of banking experienceand having trained over 10,000 investors, he believes ESG will become an integral part of corporate valuation and risk analysis in Nepal in the coming decade.