A Vinamilk farm in Lam Dong Province. The largest dairy producer is known as one of the listed companies with the best environment-society-governance practices. — Photo vinamilk.com.vn

It is undeniable that adopting environment, society and governance (ESG) principles is helping local companies improve business management and attract more foreign capital.

Investment assets, which are sustainable and managed by sustainability-striving organisations have kept growing steadily amid the volatility of the global financial markets.

According to the US-based Forum for Sustainable and Responsible Investment (US SIF Foundation), the total value of sustainable assets in November soared 42 per cent to US$17.1 trillion from $12 trillion at the beginning of the year.

Around $16.6 trillion worth of assets was overseen by investment funds, personal asset managers, institutional investors and public investment funds who use ESG principles as one of the key factors when evaluating the assets.

The rest of the assets were owned by the organisations that evaluate the companies’ shares on their adaptability to ESG principles before buying the shares.

Nowadays, interest in ESG-related assets is rising among individual investors. A recent Morgan Stanley survey showed 85 per cent of American individual investors were more interested in sustainable investment, up 10 percentage points on-year.

US SIF also found asset managers and wealthy investors had the best interest in how environmental issues – such as climate change, carbon emissions and clean energy – would be dealt with.

In Britain, 36 per cent of all 277 bond and stock investments in January-November 2020 adopted sustainable investment policies and purchased ESG-related assets. The figure was up from 19 per cent from 2019.

According to Tom Galvin, director of investment fund Columbia Select Large Cap Growth, ESG principles are one of the decisive factors in making investment as good financially-governed companies also make sure of sustained business development and high responsibility.

According to SSI Securities Corp’s research unit, ESG-related investment funds lured a total of $120 billion worldwide in January-October.

The global crisis caused by the COVID-19 pandemic and other natural disasters has emphasised the importance of how companies handle ESG issues.

According to market members and securities firms, investing in ESG-related assets brings less risk and higher profit in the long term, especially when climate change issues are getting more serious.

Viet Nam’s partnership with other nations and economic blocs, for example the European Union-Viet Nam Free Trade Agreement, has motivated local companies to pay more attention to ESG issues to draw attention from foreign investors.

Viet Nam Holding has already invested in the Viet Nam Dairy Products JSC (Vinamilk) and tech group FPT Corporation as the fund has faith in the companies’ high quality of corporate governance and sustainable development policy.

Dragon Capital said the fund accepted to lose 20 per cent of investment opportunities when asking firms for ESG scoring and import criteria on environmental protection and climate change response into their business portfolios.

The fund’s executive chairman Dominic Scriven said environmental issues were not the biggest concerns at local companies while governance and social issues were often highly attended, tinnhanhchungkhoan.vn reported.

Jennie C Ahren, head of ESG unit at Tundra Sustainable Frontier, said there was still room for improvement among Vietnamese companies regarding their efforts in environmental protection, social responsibility and corporate governance.

Compared to other nations on the same level of socio-economic conditions, education activities in Viet Nam were much more outstanding while interests from foreign investors would also strengthen the conditions on environment, transparency and labour.

A report by the Ho Chi Minh Stock Exchange (HoSE) in August pointed out that local companies understanding and adopting ESG principles had a higher ability to bounce back during the COVID-19 crisis.

To get higher ESG scores, local companies should audit their supply chains, the compliance of employees and the quality of internal operations and make adjustments if needed, according to Rachael Johnson, Head of Risk Management and Corporate Governance for Professional Insights at ACCA.

The audit will provide detailed information about the suppliers to help local firms get through the rough times such as the COVID-19 pandemic. — VNS