Vietnamese investors embrace sustainability reporting

Vietnamese investors embrace sustainability reporting

Sustainability reporting has become crucial for corporate transparency and investment choices globally, including in Vietnam's growing economy. Are Vietnamese investors considering sustainability reports when making decisions?

Emerging capital markets have traditionally seen investors prioritise short-term profits over long-term sustainability and Vietnam's capital market is no exception. However, evidence suggests that this mindset is changing. A recent study, by Dr Samuel Buertey, Dr Richard Ramsawak, and Dr Nguyen Hoang Binh from The Business School at RMIT University Vietnam, sheds light on how investors in Vietnam react to the annual Sustainability Reporting Awards (SRA), introduced in 2013 to recognise listed companies for outstanding sustainability practices. 

(L-R) Dr Nguyen Hoang Binh, Dr Richard Ramsawak and Dr Samuel Buertey (L-R) Dr Nguyen Hoang Binh, Dr Richard Ramsawak and Dr Samuel Buertey

Positive market response to sustainability awards

Using organisations listed on the Vietnam Stock Exchange from 2013 to 2022 and applying event study methodology, the research reveals that investors in Vietnam respond positively to sustainability reporting, particularly compared to their counterparts in other emerging markets.  

Companies receiving the SRA in Vietnam demonstrated higher than average abnormal returns within five days following the announcement. This contrasts with markets such as China, where a similar study found that investors tend to react negatively to recognition of a company’s sustainability efforts.  

Similarly, while some Latin American countries like Argentina and Chile have positive market reactions to sustainability awards, the responses are not as pronounced as those in Vietnam.  

Dr Ramsawak said: “Investors on the Vietnamese stock market are placing greater value on transparent sustainability efforts by companies, aligning with global trends towards responsible investing.” 

Challenges remain

Dr Binh explained that despite growing interest, sustainability reporting in Vietnam has not kept pace with the country's economic growth. Primarily concentrated among large organisations on the stock market, sustainability reporting faces obstacles. 

One of the primary obstacles is the lack of clear regulatory guidelines on what constitutes comprehensive and reliable sustainability reporting. While there are various international reporting frameworks for voluntary adoption by organisations, a clear guideline from policymakers will set the tone for companies to follow and there will be a call for accountability in that regard.  

Another barrier to promoting sustainability reporting is the managerial and board-level commitment which will set the pace for everyone within the organisation.  

According to a recent report by Vietnam Listed Company Awards (VLCA), only 3.3 per cent of companies in Vietnam have a board-level committee or appointed board members to oversee sustainable development, and among these, just 2.7 per cent identify risks and opportunities related to sustainable development issues.  

Dr Binh emphasised: “Addressing these barriers will require capacity-building initiatives, stronger regulatory frameworks, and fostering a corporate culture that values transparency and long-term sustainability.” 

What are the future trends?

Dr Buertey said the study’s findings send a clear message to Vietnamese companies: sustainability reporting can enhance market perceptions and investor confidence. Firms that invest in transparent, high-quality sustainability practices are likely to see a positive market reaction, potentially driving up their stock value.  

“Sustainability reporting is not only an ethical or regulatory obligation but also a strategic tool for improving market standing,” said Dr Buertey. 

Researchers looking at maps and clean energy models RMIT lecturers expected a growing trend toward more standardised and comprehensive sustainability reporting among Vietnamese firms.

Looking ahead, Dr Buertey anticipated a growing trend toward more standardised and comprehensive sustainability reporting among Vietnamese organisations.  

As investor awareness of environmental, social, and governance (ESG) factors increases, companies will adopt more transparent and comparable reporting frameworks. This shift may be driven by both regulatory pressure and market demand, as more global investors incorporate sustainability metrics into their investment criteria.  

Dr Buertey said: “We also expect technology to play a significant role in the evolution of sustainability reporting, with advancements in data analytics allowing companies to track and report their ESG performance more accurately.” 

Additionally, as consumer preferences increasingly favour ethical and sustainable brands, Vietnamese companies may start using sustainability reporting not only as a compliance tool but as a competitive advantage to differentiate themselves in both domestic and international markets.  

He also believes this trend could significantly influence Vietnam’s investment landscape by attracting more sustainability-conscious investors. 

Implications for policy recommendations

Dr Ramsawak highlighted: “From a policy perspective, the organisers of the SRA should ensure that the award continues to align with internationally accepted standards, fostering greater investor trust.  

“This alignment will be essential to sustain a long-term market impact and encourage more companies to adopt sustainable practices.” 

Dr Buertey said: “To further enhance the role of sustainability reporting in Vietnam’s financial markets, regulators could introduce clearer and more stringent guidelines on sustainability reporting standards, ensuring consistency and comparability across industries.”  

This would provide investors with more reliable data to assess a company’s long-term value.  

According to Dr Buertey, promoting the establishment of sustainability committees within corporate governance structures could also ensure that sustainability is treated as a strategic priority at the board level.  

“Overall, these policy measures would promote a robust and transparent investment environment, ultimately driving sustainable growth and enhancing Vietnam’s position in the global market,” said Dr Buertey.  

Dr Binh concluded: “There is still room for growth, and investors in Vietnam are increasingly recognising the importance of sustainability reporting.” 

“As both local and international investors recognise the long-term value of sustainable business practices, ESG considerations will play an increasingly vital role in Vietnam's investment landscape.”

Story: June Pham

08 November 2024
Engage

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