RMIT: Sustainable economic development a boon for business

How would you assess the current situation of green economic development in Vietnam?

At this point in time we are seeing some of the impact from the central government’s push for green development, with notable FDI examples such as LEGO building its first carbon-neutral facility. We are also seeing greater institutional greening, with commitments to minimizing packaging waste and the utilization of less ecologically-damaging materials. There is also a consideration of new technologies and techniques within the country’s agri-business sector. However, there remain substantial hurdles to overcome, chief of which is the degree of informational asymmetry within the green investment sector. While there are concerted efforts by central regulators to further improve information dissemination by enterprises in terms of environmental credentials, cases of greenwashing are still persistent. This is not unique to Vietnam and exists on a global scale. There is also a need to consider if existing metrics such as ESG (environment, social, governance) are adequate tools for assessing green credentials, and this is as yet an unanswered question.

With Vietnam’s green development journey only at the beginning, what can be done to raise awareness and promote green investment in the country?

If we were to consider this from a traditional economic demand-side perspective, one key driver of building awareness and promoting green investment in Vietnam would be the underlying wealth of the national populace. We have some relatively strong evidence of this from country-level data, with many of the greenest nations being wealthier per capita than their counterparts. This notion of green awareness is also supported within the socio-psychological literature, with individuals indicating greater consideration of the environment above a certain level of wealth. Some might contend that risk-adjusted returns will also play a role in the promotion of green investment, and while the arguments for this do make logical sense from an economic bottom-line perspective, that is purely returns, and the nature of green investment does contain some nuance in relation to investor behavior. More specifically, with green investments, it is possible that investors are willing to accept a lower level of risk-adjusted return in pursuit of some social-moral dimension from environmentally-friendly investing or the so-called “green premium”. We are uncertain as to how this variation in green investor behavior and their interface with more “traditional” investors will impact the uptake of such investment instruments.

The supply-side arguments are more distinct and focus heavily on central government and monetary institution intervention and commitment as part of the green investment framework to mobilize private investment for green investment. Such a commitment to the framework would involve policies and regulatory protection for investors to mitigate issues such as greenwashing and any form of fraud. Moreover, such policies should also seek to motivate green behavior not only at a meso-institutional level but also micro-populace level. From a Vietnamese perspective, we do acknowledge the green investment direction with the National Green Growth Strategy for 2021-2030.

What benefits will businesses receive from sustainable economic development?

I believe that one of the greatest benefits of sustainable economic development will be the creation of new business opportunities going forward. We are already observing this, as existing enterprises engage in a process of greening that can result in the use of new less-ecologically damaging materials. The demand for such resources breeds greater opportunities within these new sectors that support such institutional greening activities. Moreover, such development will invariably also lead to greater research and development and innovative practices affording new entrants the prospect of addressing various environmental pain points. As with any form of innovation and research and development, there can be trickle-down or complementary effects across the economic sphere that can result in further generative economic development with a green focus.

What advantages do you think Vietnam has to attract green investment?

One of the biggest advantages for Vietnam would be its scope for growth, especially within the realm of green investment. While there is a need to be mindful of the gloomy economic outlook over the short to medium term, Vietnam’s economy is relatively well positioned for this push towards green investments, especially in relation to the modernization of its agri-business sector and the rapidly growing digital sector that is generating a substantial repository of high-quality human capital. What we then have in Vietnam is both opportunity and a growing base of sophisticated resources to push green growth and investments.

What would you suggest Vietnamese enterprises do to attract green investment and practice green development?

The recent trend of enterprise synergies in Vietnam, such as the MoMo and Gojek partnership, could be a valuable instrument in the institutional green development toolkit. Such strategic partnerships could enable enterprises to pool institutional resources, resulting in a greater ability to conduct valuable innovation research and development with regard to enterprise greening. Moreover, much of the green innovation can also be found within the small and medium-sized enterprise (SME) sector, so larger institutional engagement with venture capitalists and business incubators would provide greater oversight of potential partnerships.

Such strategic partnerships could also help focus the greening strategies of enterprises, which in turn will have institutional benefits from aligning innovation and research and development goals with that of enterprise objectives. This has the follow-on benefits of minimizing the informational asymmetries of green investments, as enterprises are then able to provide more cogent narratives of their green / greening targets, thus attracting both private and public sector investment.