In the current era, the trend of ESG (Environment – Society – Governance) investment is being mentioned more and more and has become an undeniable development trend of businesses. With the environmental and social situation increasingly affected, investors believe that implementing ESG activities not only helps businesses save costs but also benefits the environment and society.
Outstanding trend in the real estate market
Many experts believe that real estate investment will be more active in the second half of the year after 2023. To do this, companies and investors need to grasp current real estate trends in the world. and one of the most important trends is ESG. The ESG (environment-society-governance) concept establishes clear environmental standards in the real estate market by using metrics associated with business success.
Specifically, environmental factors include an organization’s influence on the environment, such as energy consumption, greenhouse gas emissions, waste management, climate and resource impacts. Social factors focus on labor rights, working environment, safety and health of workers, as well as impacts on the community. Governance factors affect issues such as board structure and composition, executive compensation, business ethics and shareholder rights.
ESG practices can improve risk identification and assessment during investment decision making and strategy development. Real estate managers and investors increasingly attach importance to this criterion. Businesses with good ESG activities are also highly appreciated and have access to many investment opportunities from foreign investors. According to some recent surveys, up to 66% of foreign investors believe that implementing activities will contribute to reducing investment risks and increasing the sustainability of the company.
Why focus on ESG?
Many businesses are gradually adopting ESG as a method of managing potential risks. For some additional upfront costs, it enables significant savings in operating costs over the life of the investment. As an example, we can consider investing in energy efficiency as a possible solution. We can expect that the millennial generation will become the dominant generation in the coming years, and this generation places more emphasis on issues related to climate change and social responsibility than the previous generations.
ESG gradually develops in Vietnam real estate market
With the market in Vietnam, besides Green Mark, there are other green building certification systems such as Lotus or Leed to evaluate the performance of a building in terms of energy use, emissions, design, and safety and working environment. According to the Vietnam Real Estate Association (VNREA), real estate products in smart eco-urban areas have twice the liquidity compared to conventional projects. In addition, well-planned projects, forming a prosperous urban area are always attractive, competitive and have high selling prices. Industry is a field that has a strong influence on the environment, investors must pay more attention to the planning of industrial parks to limit emissions, maintain a safe working environment and protect the environment live for neighboring communities.
Vietnam is one of the countries that is on a strong development momentum, attracting a lot of investment credit from foreign investors. To meet the ESG trend, assessors must evaluate the ability of Vietnamese businesses to conduct and implement social activities, protect the environment, and improve corporate governance. In addition, in order to attract quality investments from foreign investors, Vietnam needs to implement regulatory and legal reforms on ESG investment. In particular, towards a complete corporate governance system, ensuring the orientations and principles of ESG, and at the same time, it is necessary to have policies to support and encourage enterprises to carry out ESG activities.
What should foreign investors do to keep up with the Vietnamese market?
The implementation of policy activities and social work, environmental protection and corporate governance have an impact on the business activities of enterprises and the search for new sources of investment capital. However, to meet this demand, foreign investors need to take the following actions to keep up with the ESG trend in the Vietnamese market.
Update information and capture ESG trends:
Foreign investors wishing to invest in Vietnam need to grasp the ESG trend of this market. This ensures that investment enterprises can meet the requirements of social activities, environmental protection and corporate governance as best as possible. Information on market access, laws and regulations as well as ESG activities of successful enterprises in Vietnam is essential for foreign investors.
Assessing risks in ESG investment activities:
Foreign investors need to fully assess the risks in ESG investment activities, from the ability to carry out activities to economic risks, operational phase and legal issues. This ensures that foreign investors use robust and effective risk management systems to secure their investments.
Strengthen cooperation with businesses with good ESG performance:
Cooperation with businesses with good ESG performance is one of the most effective ways for investors to self-assess and ensure their investment activities. Foreign investors well understand the problems and challenges businesses are facing, and therefore, approaching and cooperating with businesses that are capable and enthusiastic in ESG activities, can be the right way to invest unify.
In short, ESG policies and activities have become a new investment trend in Vietnam. Therefore, for foreign investors who want to find new sources of capital in this market, grasp the ESG trend in Vietnam, assess the risks in investment activities and cooperate with enterprises with high potential for investment. Good ESG activities will be important moves to keep up with trends in Vietnam market.
Conclusion
In summary, the ESG trend is not only an important factor to help businesses save costs, but also plays an active role in the sustainable development of Vietnam’s economy. Persistence and determination to carry out activities will help businesses strengthen their competitiveness and create sustainable values for the community and the environment. With ESG standards becoming more and more interested and appreciated by foreign investors, Vietnam as well as businesses here need to continue to promote ESG activities and meet this standard. The positivity and professionalism in ESG implementation is an encouraging signal to attract foreign investors and jointly build a sustainable economic environment, develop and integrate with the requirements of the world.
HMLF is always available to offer assistance in understanding the procedures with authorities.
Harley Miller Law Firm “HMLF”
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