September 22, 2022 | 10:45 GMT+7

Readiness for ESG journey in Vietnam and experience from Thailand

Hà Thanh -

In the context of rising concerns about climate change, natural habitat loss, Covid-19, and regional conflicts, investors are increasing their interest in environmental, social, and governance (ESG) criteria to minimize potential risks.

The KPMG conference.
The KPMG conference.

On September 21, KPMG Vietnam collaborated with KPMG Thailand and the Thailand Chamber of Commerce and Industry in Vietnam (ThaiCham) to organize an online conference entitled “Readiness for the ESG journey in Vietnam and experience from Thailand”. Speakers and guests discussed trends and priorities in ESG, the experience in Thailand of ESG, and its implementation in Vietnam.

Mr. Nguyen Chi Hieu, Director of Risk and ESG Consulting at KPMG Vietnam, explained that environmental criteria include a company’s use of energy, creation of waste and pollution, natural resource conservation, and supply chain and sourcing matters. The social criteria refer to the company’s business relationships, including supporting gender equity, fair labor practices, health and safety, combating discrimination, and addressing impacts on local communities. The governance criteria emphasizes ethics, openness, and transparency in decision-making at the board and C-suite levels.

Mr. Hieu said inflows into ESG funds continue increasing this year, the number of employment decisions relating to flexible working increased, and there has been growth in the sustainable debt market. He pointed out certain expectations for ESG in the 2023-2025 period, such as rising numbers of regulations, especially in developing countries like Vietnam, difficulties in recruiting talent, growing concerns about data privacy and cyberattacks, and a growing number of enterprises undertaking a materiality assessment. Additionally, more and more stakeholders are interested in extending the product lifecycle through the circular economy, and businesses will increasingly address climate change adaptation as part of their risk mitigation strategy.

Mr. Hieu said the ESG trend in Vietnam focuses on renewable energy, investment in green buildings, supply chains, electric vehicles, agriculture, and food and beverages.

Regarding Vietnam’s status quo with climate change, he sees that Vietnam has opportunities to shift its development paradigm by incorporating two critical pathways, including the resilient pathway and the decarbonizing pathway, which will help the country balance its development goals with increasing climate risk. The country’s economic transformation will greatly depend on the better management of natural capital such as agriculture, forests, and mineral resources.

So, he recommended that both the public and private sectors in Vietnam need action to build climate resilience, achieve the country’s pledge of net-zero greenhouse gas emissions by 2050, and advance socio-economic development. All need to ensure a “just transition” to support households disrupted by the shift to a climate-resilient, low-carbon economy.

Mr. Natthaphong Tantichattanon, Partner in Climate Change and Sustainability at KPMG Thailand, said in response to COP 26, the Bank of Thailand committed to setting a common policy direction for the financial sector, incorporating environmental factors into the supervisory framework, integrating environmental impacts into financial stability and macro assessments, and strengthening collaboration with international stakeholders.

He cited a statement from Mr. Sethaput Suthiwartnaueput, Governor of the Bank of Thailand, in September 2021 that banks need to increasingly incorporate sustainability considerations into their lending decisions and improve disclosure of climate-related information and their risk assessment tools.

Responding to VET’s questions about key solutions for Vietnam enterprises to improve ESG criteria, Mr. Hieu said: “I suppose that the business should identify their ESG level. Before that, you had to compare it with some other leading companies to see what the gap is. There are many solutions for that, however, depending on the type of business and sector, and we had to find some proper ESG indicators to improve that. In the enterprise, we can see how ESG brings you opportunity or risk. The solution to improving is to align strategy.”

Additionally, he pointed out that the business had to calculate the management risk or something like the reporting standard framework. “To improve ESG, we can set up the ESG mark or ESG data level,” he said. “So my answer is focusing on strategy and ESG data.”