Embracing ESG in Vietnam’s Real Estate Sector
Environmental, Social, and Governance (ESG) standards are rapidly becoming essential criteria for attracting investment in the real estate sector. A recent forum held in Hà Nội highlighted the crucial role ESG plays in ensuring that real estate projects align with global sustainability goals. This gathering brought together government representatives, financial institutions, investors, and property developers, all with a shared goal: to create a robust ESG framework tailored for Vietnam’s real estate landscape.
The Significance of ESG
Experts at the forum emphasized that ESG is more than just a trend; it has transformed into a “financial passport” for real estate projects. Major lenders and institutional investors—ranging from the International Finance Corporation (IFC) to institutions in Europe, the US, and Japan—are increasingly using ESG criteria to evaluate potential investments. This shift reflects a growing awareness of sustainability’s importance in adapting to modern market demands.
Current Landscape in Vietnam
Vietnam has begun its journey toward integrating ESG into its policy framework, yet challenges remain. While the nation’s Green Growth Strategy acknowledges ESG as a vital pillar for achieving economic transition by 2030, many experts argue that the absence of a nationally recognized ESG framework hinders real estate development. Nguyễn Công Thịnh, Deputy Director at the Ministry of Construction, noted that banks are willing to finance green initiatives, but without a clear national benchmark, determining which projects qualify for green funding is complicated.
Green Financing Challenges
Despite the existing framework, accessing green capital remains tough for developers. The State Bank of Vietnam reported that 47 financial institutions have disbursed green loans, aggregating nearly VNĐ600 trillion, accounting for approximately 4.6% of total credit. However, due to the lack of certified ESG standards and supportive government policies, real estate developers often struggle to secure funding for environmentally friendly projects.
Setting Ambitious Targets
Vietnam has ambitious goals, including the establishment of 150 green buildings by 2030, alongside a reduction of 74.3 million tonnes of CO₂ emissions by 2050. Achieving these targets requires improvements in standards, financial mechanisms, and regulatory enforcement, according to Thịnh.
Embedding ESG from the Start
For effective ESG integration, experts suggest that these standards must be woven into the very fabric of real estate development from initial design stages through construction and operation. Richard Mark Leech, Deputy CEO of Phú Long Corporation, stated that if ESG is sidelined in early stages, the nation risks lagging behind in the green transition. Moreover, he highlighted that consumers are increasingly seeking energy-efficient and well-ventilated homes.
Market Demand for ESG Projects
Consumer interest in ESG-certified projects is rising, as indicated by a survey from CBRE Việt Nam. An impressive 65% of homebuyers in HCM City expressed a willingness to pay a premium of 5–10% for ESG-certified properties. Additionally, green-certified buildings tend to command rental prices approximately 4% higher than their conventional counterparts. Jonathan Flexer from CBRE Việt Nam noted that implementing ESG could potentially increase asset values by 10–15%, enhancing developers’ access to international capital.
Real-World Applications
Becamex Tokyu, a joint venture between Becamex IDC and Tokyu Corporation of Japan, exemplifies how ESG standards can be applied in real estate projects. Their township developments in Bình Dương Province incorporate innovative ideas like solar-powered homes, rainwater irrigation systems, and compost aquaponics. Leo Nishimura, Deputy Director of the firm, emphasized the importance of embedding Japan’s expertise in sustainable practices into their projects, while also calling on the Vietnamese government to provide clearer policies that endorse ESG infrastructure investments.
Expert Insights on Implementation
Experts at the forum emphasized the urgent need for comprehensive guidelines to assist businesses in adopting ESG principles effectively. Nguyễn Hoa Cương from the Central Institute for Economic Management pointed out that firms need clear ESG regulations, better access to green financing, and incentives such as tax breaks or favorable land policies. He characterized Vietnam’s current implementation of ESG as fragmented, with limited supportive policies.
The Role of Financial Products
Drawing from the experiences of successful models in other countries, the Việt Nam Green Building Council (VGBC) pointed to Australia’s effective ESG ecosystem as a blueprint for Vietnam. They suggested that establishing a national ESG code and developing ESG-linked financial instruments could facilitate greater investment in sustainable projects.
Future Financial Needs
The IFC estimates that Vietnam will require around US$753 billion by 2030 to finance climate-resilient infrastructure projects. The bulk of this funding could potentially come from the private sector if a robust ESG framework is established.
Connecting Policy, Finance, and Business
The forum concluded with a shared vision among stakeholders to not only make ESG a buzzword but to transform it into a practical standard for evaluating, financing, and executing real estate projects. This initiative is crucial for supporting the Government’s aspirations for a net-zero future while contributing to a more resilient and livable urban environment in Vietnam.