Businesses urged to usher in sustainability era

Giants like Vingroup are leading the way in sustainability strategies , Photo: Le Toan

The Ho Chi Minh City Stock Exchange (HSX), the Hanoi Stock Exchange (HNX), and Vietnam Investment Review last week held the annual Vietnam Listed Company Awards (VLCA) under the exclusive endorsements of Dragon Capital to boost sustainable competitiveness in the domestic equity sector.

Highlighting at the awards ceremony, Le Hai Tra, CEO of the HSX and head of the VLCA 2021 organising committee said, “Vietnam’s pledge to net zero emissions at November’s COP26 summit has demonstrated the country’s high will to accelerate economic transformation in order to contribute to the resolution of the climate catastrophe. The stock market, as one of the most crucial capital channels in the country, is also continuing to propose initiatives to formalise the government’s proclamations of addressing environmental issues.”

Greenhouse gas (GHG) emissions in ASEAN are expected to peak in 2030, with some forecasts predicting net zero emissions by 2050. “ASEAN is extremely sensitive to climate change, that’s why financing is critical to the region’s capacity to promote its sustainability objectives,” said Vu Chi Dung, director general of the International Cooperation Department at the State Securities Commission of Vietnam (SSC). “The newly-launched ASEAN Taxonomy for Sustainable Finance guideline acts as a common language and overarching guide for nations to adhere across all segments, including Vietnam, particularly for publicly listed companies, besides the environmental, social, and governance (ESG) standards.”

VLCA 2021 also saw an improvement in scores on material linked to corporate responsibility to the environment and society, with a score of 11.59 compared to 9.46 in 2020. However, nearly a quarter of listed firms have not disclosed their short and medium-term sustainability objectives and primary programmes, while 42 per cent of businesses have hazy declarations. Only 33 per cent have precise, explicit claims with extensive justifications.

Stock market on agenda

The VLCA 2021 also included two evaluation contents for the first time, relating to whether the company disclosed information about the total amount of direct and indirect GHG emissions and whether the company stated measures and solutions to reduce these.

Fresh data from the SSC shows that only 65 of the 500 listed corporations in VLCA last year have indicated plans to cut emissions, and only 27 have disclosed their explicit total GHG emissions.

“If the required disclosure of information relating to GHG reductions is enforced, more than 90 per cent of enterprises in the market will most likely fail to comply with the requirements,” said Tran Anh Dao, deputy CEO of the HSX and chairwoman of the selection panel of the VLCA. “Furthermore, the fact that firms have not given information on the aforementioned subjects is a hurdle to woo high-quality overseas funds.”

Century Synthetic Fiber Corporation, the runner-up in the recognised Sustainable Development Report category after Vinamilk, has also encountered difficulties defining concrete objectives for lowering GHG.

Nguyen Phuong Chi, strategic director of Century Synthetic, shared the firm’s experience on preparing the sustainability report over five years. Particularly, the company has been measuring its carbon footprint since 2016, such as diesel oil for forklifts under SCOPE 1 and energy usage under SCOPE 2.

“Our finance team has been cooperating with relevant departments on a monthly basis to gather power consumption data per product and then comparing these statistics to industry standards,” she said. “Involved parties would cover a plethora of solutions to tackle the aforementioned issues on a regular basis. However, most firms do not set targets when determining their carbon footprint. Instead, they just measure them. To be honest, it is also incredibly challenging to address all these problems.”

Nguyen Viet Thinh, president of ACCA Vietnam Member Committee, has acknowledged that transparency on ecological and socially responsible actions become ever more prevalent. “ESG research and reporting may deliver considerable insight and assist stakeholders build long-term value. It may have a substantial influence on a company’s financial targets and help to guide investment decisions,” he said.

Experts at the VCLA 2021 also agreed that companies that are proactive and forward-thinking will recognise the significance of expressing ESG criteria in their corporate strategy and mission. “Companies will embrace ESG disclosure in 2022 and beyond. ESG concerns are currently being evaluated by investors as a way of alleviating their potential losses,” added Dao of the HSX.

2021 throwback

Vietnam’s stock market has expanded dramatically, reaching 122.2 per cent of national GDP on November 12 – exceeding the government’s target of 120 per cent.

Additionally, 147 listed companies are expected to expand their equity by 3.8 per cent, through share offerings in 2021.

The number of newly-registered securities accounts, likewise, reached an all-time high in 2021. Statistics from the SSC indicated that the total number of securities accounts will be 4.08 million by the end of November, up from 2.77 million at the end of 2020.

Thus, over 1.31 million new accounts were established in the first 11 months of 2021. In addition, the number of domestic individual investor accounts in 11 months was 3.3 times more than the total number in 2020.

The average trading value of the whole market in 2021, as of December 17, hit $1.14 billion per session, the greatest level in the market’s 21-year history.

Last year, foreign investors had net sold about $2.5 billion by mid-December.

Dragon Capital believed that net selling by foreign investors is a regular tendency in many stock markets. Furthermore, when net selling by foreign investors was absorbed by local investors and did not damage investor sentiments as much as in prior years, Vietnam’s stock market managed to maintain a very astounding upward trajectory.

Additionally, according to regulatory data, the net withdrawal of overseas funds is insignificant and substantially lower than in many other emerging and frontier economies. Even though foreign investors were net sellers, foreign financial flows persisted in Vietnam and sought opportunities.

In 2021, the pandemic exerted a significant impact on Vietnam, leading GDP to fall by 6.17 per cent in the Q3. The stock market, on the other hand, had an exponential rise, culminating in the occurrence of exceeding the historic top of 1,200 points in April 2021. With two peaks in 2007 and 2018, this is the record peak set throughout the Vietnamese stock market’s 20-year history. After the VN-Index surpassed its record high, the market continued to fall and eventually achieved a new high of roughly 1,500 points.

Despite the market reaching new record highs on a regular basis, valuation levels continued to fall because of the remarkable rise in business results of listed businesses.

When the VN-Index topped at 1,200 points in 2007, the market’s price-to-equity (P/E) ratio was 34 times; when it peaked at 1,200 points in 2018, the P/E ratio was 22 times; but now the VN-Index is at 1,500 points, with a P/E ratio of slightly over 17 times.

The modified laws on securities, enterprises, investment, and other relevant decrees took effect in early 2021, exploring a unique legal corridor for a healthy stock market.

In December, the Vietnam Stock Exchange (VNX) went live, ushering in a new era for the Vietnamese market.

The VNX, which is wholly owned by the state, would mirror the parent-subsidiary model of the HNX and the HSX. With VNX making its debut, HNX will now oversee derivatives, bonds, and other securities markets. Meanwhile, the HSX is responsible for managing the stock exchange and other securities in accordance with legislation.