Earth Day (April 22nd) is the largest civic event in the world and an important opportunity to raise awareness about climate change, global warming, biodiversity loss and the need to conserve the environment. Even leaders from the USA and China are setting aside their differences to discuss initiatives to lower carbon dioxide emissions at a climate summit.
When Earth Day was established in 1970, much of Asia was in a real or perceived conflict, with regime changes and the war in Vietnam being the biggest threats to South East Asia. In fact, the student antiwar movement across US university campuses was one of the key catalysts for the creation of Earth Day. Five decades later, much of South East Asia has seen dramatic economic growth, with Vietnam leading this momentum over the last few years.
Now the threats are more from rising sea levels, increased plastic waste and global warming caused by increased levels of greenhouse gases (GHG) in the environment.
As a sign of its more prominent role in global trade, and on the back of its recent chairmanship of ASEAN, the Vietnamese government has revised the Law on Environmental Protection (LEP) with more detailed provisions on climate change and waste management, including promoting climate change mitigation and regulating the roadmap for Vietnam’s pledge to reduce GHG and setting out legislation towards the development of the ‘circular economy’ including establishing extended producer responsibility towards the use of plastic bottles and containers.
This comes after a year in which Vietnam has been hailed as a Pandemic Winner, having controlled the outbreaks of COVID-19 in a super-effective way and managed to keep its economy roaring ahead despite the woes in other parts of the world.
The pandemic has accelerated many global trends, and the increasing importance of investing for a sustainable future is picking up pace in Vietnam as much as it is anywhere in the world now. Although environmental, social and governance (ESG) criteria have been fully integrated into VNH’s investment process for over a decade now, we’re seeing a new wave of forces moving sustainability up the Board agenda in Vietnam as more investors and regulators wake up to the urgencies of climate change and its material impact on people and the planet. As a responsible investor and pioneer of ESG investing in Vietnam, we appreciate how integral our stewardship role for each of our investee companies is in helping them achieve their sustainability goals.
This is why we are pleased to reveal the findings of our latest independent carbon footprint assessment, which shows that our portfolio was 41% less carbon intensive than its benchmark, the VN All Share Index, for each US$100 invested in the year ending December 31st2019. The positive performance is a result of sector and stock picks – a feature of an actively managed portfolio.
Vietnam Holding was recently flagged as a ‘Strong Buy’ in Investors Chronicle and has seen its Net Asset Value rise more than 53% since the start of its financial year.
The assessment was conducted by Vietnam Energy and Environment (VNEEC), a climate change specialist firm in Hanoi, which established that the carbon footprint of the VNH portfolio is 18,003 tCO2e compared with an investment of the same size in VN All Share being 30,396 tCO2e.
It is essential that we track our progress in low-carbon investing and keep a pulse on how companies across sectors are dealing with upcoming regulations on reporting on GHG emissions and reductions.
VNEEC, which uses an internationally recognised methodology for the reports, will release the findings for 2020 in June.
With exports growing fast and a US$2 bn trade surplus continuing in March 2021, Vietnam is making more of a name for itself in global value chains. As such, companies will be under greater pressure by stakeholders to be more transparent about their ESG risks. One of Vietnam Holding’s more recent investments is HSC, the first broker in Vietnam to produce a research report on ESG in August 2020. It explored how companies that are more ESG aware have better supply chain resilience and corporate governance. “It stands to reason that companies which are focused on the long-term are better managers of investors’ capital, more able to minimise volatility and risk in their operations and therefore better positioned to generate longer-term returns,” the report stated. We share this view and believe that our ESG approach and analysis of financial and non-financial risks enables us to better understand how a company creates and delivers value for its stakeholders now and into the future.
According to the International Monetary Fund, Vietnam’s GDP growth forecast is still set to reach 6.5% in 2021, and economic indicators show that manufacturing continues to recover strongly. Nevertheless, the IMF is one of many also saying that Vietnam needs to catch up on the sustainable infrastructure front and roll out more reforms aligned with the UN’s 17 Sustainable Development Goals (SDGs) if it is to continue attracting new foreign players. We are seeing more opportunities for SDG investment in Vietnam, in this respect, particularly in transport infrastructure, green real estate, and improved digital access.
In our view, ESG is already becoming less of a trend and more mainstream for companies everywhere in the world if they are to survive the fast-changing landscape this decade brings and allow us to celebrate Earth Day for generations to come. Collective action, SDG #17, is crucial if we are to build a sustainable future for us all.
Vietnam Holding (LSE: VNH) is listed on the main board of the London Stock Exchange and its shares can be bought through your broker. The shares currently trade at an attractive discount of 20% to its Net Asset Value. Sign-up for the monthly factsheet here.
