Opportunities there for businesses embracing strong ESG practices

May 23, 2024 - 19:51
Investing in Environmental, Social and Governance (ESG) requires effort, but the rewards for businesses who embrace it make the investment worthwhile, attendees were told at a conference on motivations and breakthroughs in ESG, held in Hà Nội on Thursday.
Panelists discuss the costs and effort needed at the ESG conference. — VNS Photo

HÀ NỘI — Investing in Environmental, Social and Governance (ESG) involves effort, but the rewards for businesses which embrace it, make those investments worthwhile, attendees at a conference on ESG in Hà Nội on Thursday were told.

Speaking at the conference, Nguyễn Thị Bích Ngọc, Deputy Minister of Planning and Investment said while economic growth remains a primary objective for every country, prioritising green and sustainable development is increasingly seen as essential for achieving, not just economic prosperity, but also environmental preservation and social justice.

"ESG is also becoming a prerequisite for investors when funding any project or business in Việt Nam," Ngọc said.

The MPI, coordinating with USAID, recently announced the '2024 ESG Initiative' for a second year to help the Vietnamese business community seize new opportunities in the green transformation.

“Under this initiative, we aim to promote sustainable practices in the private sector to conduct business sustainably and work within an ESG assessment framework to measure factors related to sustainable development and the impacts of business activities on the community.

"We look forward to receiving the support and participation of the Vietnamese business community for the implementation of ESG,” she said.

Lê Trọng Minh,VIR's editor-in-chief said: “Achieving growth is in itself a big challenge, but many believe doing it while complying with ESG directives is even more difficult due to the perceived cost increase and strict requirements affecting profits and competitiveness.

“In fact, applying ESG criteria doesn't have to be a costly affair. Numerous firms have realised that this is an opportunity to deploy a sustainable business model. Expansion opportunities for businesses that are successful in applying ESG standards are becoming more frequent. ESG itself has become a new growth driver for those who quickly understand and comply with the new rules.”

A recent study found that businesses with higher ESG ratings achieve better financial results, along with 35 per cent higher profit-to-equity ratios and 20 per cent higher business valuations than those with lower ratings. That means ESG can turn compliance responsibilities into greater value while helping realise the sustainable development goals of the Vietnamese Government.

The 2022 ESG report for Việt Nam, published by PwC, reveals that 80 per cent of companies who took part in the survey, plan to embrace ESG practices within the next two to four years. Economic experts emphasised that adopting ESG, alongside sustainable business models and green growth, is not just a trend but a mandatory requirement. Many of Việt Nam's key trade and investment partners already impose strict criteria in this regard.

Matthew Smith, Research Director at Yuanta Vietnam Securities Company said that in the current investment landscape, ESG factors are no longer optional, but essential. Companies upholding higher ESG standards are perceived more favourably, as investors consider them to be better managed and more attuned to potential risks and opportunities. Such companies find it easier to attract investment, as capital markets tend to offer them better terms and greater growth prospects.

He added that companies with robust ESG practices often command higher value due to reduced risk and enhanced access to capital. Investors are willing to pay a premium for the perceived stability and sustainability of these companies. In summary, ESG factors significantly influence financial decisions and company valuations. By embracing strong governance, companies not only improve their ESG performance but also position themselves as being appealing investment opportunities. Consequently, investors can anticipate stable, sustainable and more lucrative investments.

Patrick Haverman, UNDP Deputy Resident Representative said: “There are different challenges and barriers to advancing ESG practices in Việt Nam, including lack of knowledge, human resources and government regulation. We see the need for a comprehensive programme to work on capacity building for businesses, to support their access to the ESG and Impact investors, to develop clear regulatory frameworks for businesses and financial institutions and to raise awareness about the importance of doing ESG the right way, with focus on scientific validity and real-world impact.”

At the conference, leading companies such as Green and Smart Mobility Joint Stock Company (GSM), BCG Energy, Yuanta Vietnam, UOB Vietnam, TÜV Rheinland Vietnam, Đông Dương Import-Export Industry Investment Joint Stock Company (DDG) and Lam Trần Plastic Recycling Joint Stock Company shared their success stories and ESG insights.

Nguyễn Thị Quỳnh Như, CEO of WBS Systems and Solutions Company Limited (WBS), the event’s co-organiser said that RIS.ER24 aims to establish a regular dialogue forum among policymakers, leading economic experts and pioneering businesses to promote responsibility in implementing sustainable growth strategies. WBS's goal is to foster sustainable economic connections and long-term co-operation to support businesses in achieving the Government's net zero commitment.

RIS.ER is an annual series of events on ESG and sustainable development which aims to enable investors and leaders to seize opportunities for accessing green capital, supporting business recovery and facilitating international trade by committing to sustainable growth, environmental protection and fairer trade standards. — VNS