HANOI, June 2 (Xinhua) -- The environmental, social and governance (ESG) investment has become a trend in Vietnam, and such commitments are being driven by the country's shift to a low-carbon economy, the Vietnam News reported on Friday.
"Corporations have found that aligning with ESG standards is not just about growth but survival," experts said at Vietnam ESG Investor Conference 2023.
ESG is a set of standards measuring factors related to sustainable development and corporate impact on society.
Experts said in an era of growing environmental and social concerns, ESG standards have emerged as a game-changer for companies seeking to improve their financial access.
ESG commitments are reported to correlate to improved risk management, thereby improved financial performance.
That means companies that demonstrate better ESG policies will receive better lending terms, effectively reducing their cost of capital, said experts at the conference.
"ESG and stewardship are increasingly important for investors and companies globally, and nowhere is that more relevant than in Vietnam as it reaches a key inflection point in its industrialization and urbanization growth," said Craig Martin, executive chairman of Dynam Capital.
More than 80 percent of Vietnamese businesses have either made ESG commitments or planned to do so. This shift is basically driven by the demands of consumers, employees and investors, according to a report by international accounting firm PricewaterhouseCoopers.
However, those willing to embrace ESG are finding themselves stuck in a vicious circle: they need funds to adopt ESG, yet without ESG standards in place, their accessibility to funds remains limited, said the report.
Despite current challenging economic conditions, there will be increased allocation of public and private capital to green projects and low-carbon economic growth, according to Fitch Ratings.
Global ESG assets could reach 50 trillion U.S. dollars by 2025, Bloomberg Intelligence said in a report.
Given Vietnam's commitments in COP26 and Just Energy Transition Partnerships to attain a dual goal of power security and green transition, green industries and services are forecast to contribute up to 300 billion dollars to Vietnam's gross domestic product by 2050 from only 6.7 billion in 2020, according to the Ministry of Planning and Investment.
International investors are seeking opportunities with green projects in priority markets like Vietnam, said Srini Nagarajan, managing director and head of Asia at British International Investment.
Experts also noted ESG regulatory requirements are fragmented across industries and government agencies in Vietnam, which would present a barrier to foreign investors investing in the green sector.
Industry experts suggested Vietnam implement a regulation framework for green energy and provide regulatory support for financial institutions to boost green finance. They also called for more measures to raise the awareness of ESG among companies such as measures to impose annual ESG disclosure reporting requirements on businesses.