Dynam Capital's Chairman On Driving Forward Amist Complexity In Vietnam's ESG Landscape 

Navigating the intricate and evolving landscape of Environmental, Social, and Governance (ESG) investment in Vietnam is no small feat, especially on the path to achieve Net Zero in 2050. The goal is to achieve a net zero supply chain, eliminating bottlenecks, and becoming highly efficient.

But where are we on this path? Craig Martin, Chairman of Dynam Capital, will bring his 30-year expertise and insight to the table. As chairman, Marin has led Dynam Capital in promoting responsible investment strategies, focusing on companies committed to ESG principles.

His established reputation in ESG commitment saw him as keynote speaker on ESG Investment Criteria in Vietnam for Institutional Investors at the ESG Conference 2023 and as a panel moderator at the ESG Conference 2024. During this occasion, Vietcetera had the opportunity to speak with him directly, where he elaborate deeply on the ESG landscape in Vietnam.

Is there any improvement today in terms of implementing ESG-friendly regulations?

The landscape has become more complex with an increase in regulations, both domestic Vietnamese regulations and EU regulations. Companies now have to measure and report more on their ESG activities, which presents a great challenge.

This shift is driven by clients and buyers of Vietnamese goods and services, who are demanding those manufacturers to adopt higher standards and best practices. That will move ESG activities faster than the local regulations can keep up.

It's worth noting that this is a competitive and ever-changing world. Domestic manufacturers must compete with other manufacturing centers in Asia, which adds to the challenges. It's essential to establish a baseline set of data around their operations, including carbon footprint, waste management, and energy consumption, as these can all be measured.

What could companies do to cope with this complex landscape?

To effectively implement these regulations, companies need to invest significantly in technology to aid in reporting and improving ESG results. This technological investment should lead to greater efficiency over time, though it does come with initial costs. Beyond technology, companies must also invest in their human resource by establishing ESG committees and best practice groups.

Crucially, the commitment of senior management is vital. They need to fully embrace the sustainability journey, setting clear objectives and regularly measuring performance against these goals. Without compliance across all levels of the organization, it will be challenging to drive the necessary changes and meet the ambitious targets set by both local and international regulations.

How do you access the readiness of Vietnam's business to embrace these transitions?

As investors, we assess portfolio companies based on 80 different ESG categories. We try to identify one or two areas where we can drive improvement during our investment period. By engaging and having conversations with these companies, we can discuss their current initiatives and board priorities.

What key factors influence their success to achieve these transitions and how does Dynam Capital assist them?

There is now a significant requirement for companies in Vietnam to increase their sustainability reporting. Many companies are still learning how to navigate this, so we assist our portfolio companies by bringing in consultants and experts.

For example, we help them develop a path to net zero by examining and adjusting their processes to reduce carbon emissions. It requires a collective effort from portfolio companies and us as engaged, responsible investors to journey together towards these goals.

What potential synergy between digitalization and ESG principles initially within the Vietnamese landscape?

The goal is to achieve a net zero supply chain, eliminating bottlenecks, and becoming highly efficient. Technology, particularly digitalization, plays a critical role in this. Companies must implement systems to capture and measure data on energy efficiency, waste production, and greenhouse gas emissions. Having this data available on management dashboards requires embracing technology.

Artificial intelligence (AI) also plays a crucial role in climate impact reporting and improving efficiencies within manufacturing and supply chains.. AI and generative AI can enhance efficiency, reduce costs, and accelerate prototyping or the implementation of new ideas. This can offset some costs and provide companies with a framework and toolkit for their ESG journey.

Take FPT, for example, our top investment company across our funds.

FPT has made substantial investments in education, particularly in STEM fields. FPT is not only training individuals in AI but also working on generating, producing, and designing semiconductors essential for AI computation. They are involved in training engineers to meet the increasing demand for AI expertise.

What emerging sector or niches do you believe hold the greatest potential for growth and value creation in Vietnam?

There are two areas that are highly relevant to Vietnam.

One is industrial parks and industrialization. In the panel “Moving Vietnamese Manufacturing up the Value Chain” at the ESG Conference 2024, eco parks were frequently mentioned in the context of industrial parks.

I believe that eventually, every industrial park will need to become an eco park, focusing on sustainable practices such as wastewater management, recycling, upcycling materials, and enhancing energy efficiency. Modern industrial parks that adopt these eco-friendly approaches can drive significant growth and value creation.

The other key area is digitization and data centers, particularly given their substantial energy consumption. By incorporating renewable energy sources and improving energy management practices, data centers can become more energy-efficient.

These sectors are highly relevant to Vietnam, not only as a large domestic market but also as a global supply center.

How do you envision the ESG landscape in Vietnam in five years?

In five years, I foresee a greater integration and implementation of renewable energy sources. However, energy efficiency isn't just about producing more energy; it is also about reducing consumption. The energy-intensive industries need to adopt sustainable material and process that fueled by renewable energy, which will also go hand in hand with an increased availability of renewable energy.

All of this comes at a cost: affordability. While we prefer budget-friendly options, we can't sustain that in the long term. We must place a higher value on these resources to encourage mindfulness in consumption and business practices. Then, only companies that excel in ESG can perform on a long run.