The ESG Phenomenon: Dragon Capital, Vietnam

Editorial Staff, 18 May 2022


The latest developments in the ESG space.

Dragon Capital, Vietnam
Vietnam needs “much more” private investment to achieve high marks for sustainability in such a fast-growing economy, a wealth management firm specialising in the country argues.

One of the more promising of “frontier markets” in the world, the Communist Party-run country nevertheless is seen as a relatively promising and investable nation. It has grown rapidly since economic reforms in the mid-1980s. Between 2002 and 2021, GDP per capita rose 3.6 times, reaching almost $3,700. Poverty rates ($1.90/day) declined sharply from over 32 per cent in 2011 to below 2 per cent (source: World Bank). 

Rapid growth can hurt the environment unless managed wisely, according to a widely-held view among those embracing environmental, social and governance-themed (ESG) approaches to managing money. 

“Vietnam may be vulnerable to climate change, but it is demonstrating resilience and ingenuity across all three pillars of ESG. If the country is to meet its green and digital transformation goals, support from private investors is paramount,” Dragon Capital Group’s co-founder and executive chairman Dominic Scriven said in a statement yesterday. Dragon Capital Group oversees about $6.5 billion of assets.

“Policymakers need to continue the positive momentum while asset owners should embrace the sustainable investment opportunities Vietnam presents,” Scriven said. 
Dragon Capital cited research showing that Vietnam has added nearly 10 gigawatts of capacity from renewable power plants since 2018 – nearly half the total capacity added – and much more is needed to keep pace with energy demand forecast to rise 9 per cent a year till 2025. The Vietnamese government, which has pledged to be carbon-neutral by 2050 and phase out coal power generation by 2040, estimates that it needs $128.3 billion to develop its electricity industry in the 2021 to 2030 period.

Dragon Capital has been highlighting such arguments for some time. It supports research on the economics of biodiversity and natural capital management from Exeter University in the UK, the Fulbright School of Public Policy and the Institute of Strategy and Policy on Natural Resources and Environment.

Funds managed by Dragon Capital include Vietnam Enterprise Investment, a $2.6 billion closed-end fund listed on the London Stock Exchange. It also manages three actively managed public equity and debt funds as well as two exchange-traded funds, one of which is listed as a depositary receipt on the Thailand Stock Exchange. This publication interviewed the firm here in 2019 to mark its 25th anniversary of investing in Vietnam.

Vietnam is, for example, included in the MSCI Frontier Emerging Markets Index, capturing large and mid-cap firms from 32 markets, totalling 121 constitutents. Last year, the index chalked annual performance in price terms of 2.21 per cent. It fell by 5.84 per cent in 2020 when the pandemic struck, but rose by 10.67 per cent in 2019.

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