Vietnamese investors embrace sustainability: report

Historically, investors in emerging capital markets have prioritised short-term profits over long-term sustainability, and Vietnam’s capital market is no exception. However, evidence suggests that this mindset is evolving.

A recent study by Samuel Buertey, Richard Ramsawak, and Nguyen Hoang Binh from RMIT University Vietnam’s Business School highlights how investors in Vietnam respond to the annual Sustainability Reporting Awards (SRA), introduced in 2013 to recognise listed companies for their commitment to sustainability.

Nguyen Hoang Binh, Richard Ramsawak, and Samuel Buerte (left to right). Source: RMIT

Challenges remain

The research, which analysed organisations listed on the Vietnam Stock Exchange from 2013 to 2022 using an event study methodology, found that Vietnamese investors respond positively to sustainability reporting, particularly compared to investors in other emerging markets.

Companies receiving the SRA in Vietnam showed above-average abnormal returns within five days of the announcement. This contrasts with markets such as China, where similar studies have indicated negative investor reactions to sustainability recognition. Likewise, while some Latin American countries, like Argentina and Chile, exhibit positive reactions, the responses are not as pronounced as those observed in Vietnam.

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

“From a policy perspective, the organisers of the SRA should ensure the award continues to align with internationally accepted standards, fostering greater investor trust. This alignment will be essential for sustaining long-term market impact and encouraging more companies to adopt sustainable practices.”

Binh said that despite this growing interest, sustainability reporting in Vietnam lags the country’s economic growth. It remains primarily concentrated among large listed organisations and faces several obstacles.

A major hurdle is the absence of clear regulatory guidelines defining comprehensive and reliable sustainability reporting. While various international reporting frameworks are available for voluntary adoption, clear local guidelines from policymakers would set a standard for accountability and encourage companies to adopt sustainability practices.

Another barrier is the need for stronger commitment from management and boards, which would establish a company-wide focus on sustainability. A recent report from the Vietnam Listed Company Award shows that 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 sustainability issues.

“Overcoming these barriers will require capacity-building initiatives, robust regulatory frameworks, and fostering a corporate culture that values transparency and long-term sustainability,” Binh said.

RMIT lecturers expected a growing trend towards more standardised and comprehensive sustainability reporting among Vietnamese firms. Source: Freepik

Future trends

Buertey said the study’s findings deliver a clear message to Vietnamese companies: sustainability reporting can improve market perceptions and investor confidence. Companies that invest in transparent, high-quality sustainability practices are likely to see a positive market response, potentially boosting their stock value.

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

Looking ahead, Buertey anticipates a trend towards more standardised and comprehensive sustainability reporting among Vietnamese organisations. As investor awareness of environmental, social, and governance (ESG) factors grows, companies are expected to adopt more transparent and comparable reporting frameworks. This shift may be driven by both regulatory pressure and market demand, as global investors increasingly include sustainability metrics in their investment criteria.

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

With consumer preferences increasingly favouring ethical and sustainable brands, Vietnamese companies may begin using sustainability reporting not only for compliance but also as a competitive edge to differentiate themselves in both domestic and international markets. This trend could significantly impact Vietnam’s investment landscape by attracting sustainability-conscious investors.

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

This would provide investors with reliable data to assess a company’s long-term value. He also suggested that establishing sustainability committees within corporate governance could help ensure sustainability is prioritised strategically at the board level.

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

“There is still room for growth, and investors in Vietnam are increasingly recognising the importance of sustainability reporting,” said Binh. “As both local and international investors appreciate the long-term value of sustainable business practices, ESG considerations will play an increasingly important role in Vietnam’s investment landscape.”

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