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Eco Voice Q & A with Chi Ha Nhat Nguyen, ESG Manager at Dragon Capital

To provide insights into “Vietnam Now: Exploring New Opportunities in New Frontiers,” Tim Langdon, publisher of Eco Voice, had the pleasure of facilitating a Q & A with Chi Ha Nhat Nguyen, ESG Manager at Dragon Capital, Vietnam.

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Wind turbines in Phan Rang, Ninh Thuận at sunset – Vietnam’s renewable energy.

Q1. What opportunities are there in Vietnam in terms of sustainability-focused investments?

Vietnam’s government has recently placed a strong emphasis on green development, which presents numerous opportunities for sustainability-focused investments in the country. Here are some key areas:

 Renewable Energy: Between 2016 and 2020, the Vietnamese government introduced significant incentives to promote renewable energy (RE) investments. This led to a substantial increase in installed RE capacity. In 2015, renewable energy accounted for only 2-3% of the total installed power generation capacity, but by 2020, this figure had surged to 16%. While the rapid expansion has faced challenges due to transmission line capacity, the recently approved Power Development Plan (PDP8) in 2023 aims to address these issues by promoting wind power, rooftop solar, and hydrogen energy in a more technically sustainable manner. PDP8 also establishes that no new coal-fired thermal power plants (TPPs) will be approved after 2030, with existing plants to be phased out starting in 2045. By 2050, renewable energy is expected to contribute 50% of the national power generation. This creates significant investment opportunities in Vietnam’s green energy sector.

 Green Infrastructure and Energy Efficiency: There are opportunities for investments in sustainable cities and transportation systems, such as electric vehicles (EVs) and smart city technologies, as well as improvements in energy efficiency across the manufacturing and construction sectors. In 2018, the Prime Minister issued Decision No. 950/QD-TTg, which outlines a development plan for smart and sustainable cities through 2025, with a vision toward 2030. Since then, many cities have prioritized enhancing IT applications across various sectors of the economy. Investments in public transportation, urban energy efficiency, and industrial energy-saving measures are also highlighted in the country’s legal framework, positioning green infrastructure as a significant investment area.

 Carbon Projects: Under the Paris Agreement’s Article 6.2 and 6.4, mechanisms for trading emission reductions/carbon credits—known as Internationally Transferred Mitigation Outcomes (ITMO)—have been established to help countries meet their Nationally Determined Contributions (NDCs). Vietnam and Singapore, for example, have signed a bilateral agreement allowing Vietnam to sell carbon credits to Singapore to meet the latter’s climate goals. Vietnam has significant potential for carbon projects, such as forest management, blue carbon initiatives (mangrove forests), waste management, and rice paddy field projects. Moreover, Vietnam plans to launch a compliance carbon market in 2028, which would allow a 10% offset from carbon projects. With more channels becoming available for carbon credits, investment opportunities in this sector are likely to grow.

Q2. Why is it important to consider Environmental, Social, Governance (ESG) when investing in Vietnam?

Incorporating ESG factors into investment decisions involves both negative and positive screening approaches, each of which plays a crucial role in identifying sustainable opportunities while mitigating risks.

 Negative Screening: This approach is essential for avoiding investments in activities that pose significant risks to the environment and society. Such risks can damage not only the surrounding communities and ecosystems but also the investor’s reputation. Given that Vietnam is still considered a frontier market, the availability and quality of information disclosure, especially regarding sustainability-related data, are limited. Therefore, employing robust ESG screening and rating methodologies during both the pre- and post-investment phases can help investors reduce exposure to potentially harmful or controversial activities. Since 2016, Dragon Capital has adopted ESG integration in its investment process, which has proven effective in screening out activities that may be detrimental, thus protecting the integrity of its investment portfolio.

 Positive Screening: In addition to avoiding harmful activities, ESG considerations can also help investors identify projects that offer positive impacts on the environment and society. This approach allows investors to actively seek out opportunities aligned with sustainability goals, such as renewable energy, green infrastructure, and carbon projects. By focusing on projects with strong ESG performance, investors can contribute to Vietnam’s sustainable development while also generating financial returns.

Overall, integrating ESG factors into investment decisions in Vietnam helps mitigate financial and reputational risks while unlocking new opportunities for long-term, sustainable growth. Furthermore, as global demand for ESG-compliant investments continues to rise, companies with strong ESG credentials are likely to have a competitive edge, making them attractive to both domestic and international investors.

READ MORE:

https://www.ecovoice.com.au/eco-voice-q-a-with-chi-ha-nhat-nguyen-esg-manager-at-dragon-capital/



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