ESG awareness expected to gather pace in Vietnam realty market

Vietnam's efforts to pursue carbon neutrality by 2050 has created positive impacts on the perception of environmental, social, and corporate governance (ESG) in local real estate investments.

The Ministry of Construction has been carrying out a project backed by the UNDP’s Global Environment Facility over the past five years to enhance energy efficiency in commercial and high-rise residential buildings, better known as the EECB project. As a result, the country had about 200 green buildings nationwide by the end of 2021, according to Vietnam Green Building Council (VGBC).

In Vietnam's real estate market, a number of certification systems are already in place like Green Mark, LOTUS and LEED that help assess the performance of buildings in terms of energy use, emissions, design, and level of construction and working environment.

In Ho Chi Minh City, office buildings already granted LEED certification include Deutsches Haus, Friendship Tower, President's Place, Phu My Hung Tower, Saigon Center 2, all located in the heart of District 1. In Hanoi, some prime examples are Techcombank Tower, Capital Place, and Lancaster Luminaire.

According to Cushman & Wakefield, Vietnam needs more high-quality, sustainable buildings to reduce environmental damage and costs.

A report by this global real estate services firm shows that about 40% of emissions worldwide come from real estate, including commercial and residential. "Theoretically, it is not difficult to achieve ESG criteria, as the difference in ratio between the actual construction cost of green buildings and conventional buildings is not much."

Trang Bui, General Manager of Cushman & Wakefield Vietnam, said in reality, the biggest obstacle is still the time and effort the developers have to exert to establish an ESG-compliant design from the get-go. “In the long term, green buildings can be considered an investment for the future as property developers and operators begin to see benefits in terms of energy savings, resources, and reduced cost of upgrades and repairs."

"Many major global pension funds are putting pressure on developers and owners to apply ESG principles to attract investment capital. With the stream of foreign capital pouring into Vietnam, unsustainable assets will be less competitive and at risk of becoming obsolete as foreign investors increasingly require strict ESG measures," she added.

The firm recommends investors need to promptly develop a business strategy associated with long-term value not only for the business itself, but also for society and the environment, because reducing the effects of climate change is unequivocally in the long-term interest of all businesses.