Lack of Private Sector Support

There is a lack of available private sector support for the fund as well as its portfolio companies because:
1) Companies and investors in Vietnam are still confused between traditional investment and the value
propositions of responsible, sustainable, impact, ESG considerations investments. Therefore, investing in
funds or private companies that contribute to measurable positive developmental impact is not highly
advocated nor sufficiently deployed in Vietnam
2) Most investment funds operating in Vietnam often overlook companies which are taking gender lens and
sustainable development into consideration. This is due to the misunderstanding that these companies are
similar to social enterprises, and that the return might not be attractive.
3) SMEs represent over 90% of businesses in Vietnam, yet development finance institutions (DFIs) and NGOs
often do not have enough resources to invest or support SMEs, and there are very few developmental
impact related funds operating in Vietnam.

ESG is actually contributing to financial performance

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 ESG and Financial Performance
• Improved financial performance due to ESG becomes more marked over a longer time horizon
o Dorfleitner et al., (2018) cross-sectional study on firms with strong ESG ratings found returns up to 3.8%
higher per standard deviation of ESG score in the mid- and long-term 1.
o FTSE’s Opportunities All Share Index - an index that includes companies with involvement in Renewable &
Alternative Energy, Energy Efficiency, Water Infrastructure & Waste Management, Pollution Control,
Environmental Support Services, and Food, Agriculture & Forestry – outperformed its traditional counterpart,
FTSE Global All Cap Index by 4.9% annualized over the five-year period from October 2015 – October
20202.
• ESG investing appears to provide downside protection, especially during social or economic crisis
o In the first quarter of 2020 COVID downturn, 24 of 26 ESG index funds outperformed their conventional
counterparts, which they credited ESG leading to more resiliency and at the end of the third quarter, 45% of
ESG-focused funds outperformed their index (Morningstar, 2020) 3.
o OECD (2020) analyze four different indices provided by Thomson Reuters from 2009-2010, 2 of which are ESG
indices showed that the best Sharpe ratio belongs to the TR IX Global ESG Equal Weighted, which has a
higher Sharpe Ratio than the other and also the highest absolute returns. The minimum volatility also
belongs to the TR ESG High Dividend Low Volatility Index 4.
• Sustainability initiatives drive financial performance due to improved risk management and more
innovation
o Glossner (2018) concluded that controversial firms with a known history of ESG incidents exhibit an alpha of
−3.5% per year, even when controlling for other risk factors, industries, or firm characteristics. In addition,
with regards to climate-change related risk, 51% of the studies found a positive correlation between better
1 Dorfleitner, G., Utz, S., & Wimmer, M. (2018). Patience pays off – corporate social responsibility and long - term stock returns
2 Tensie Whelan, financial performance
Ulrich Atz, Tracy andClark,
Van Holt and Casey managing
CFA for physical and transition risk related to climate change 5.
3 Morningstar. (2020). Sustainable Funds Weather the First Quarter Better Than Conventional Funds.
4 Boffo, R., and R. Patalano (2020), “ESG Investing: Practices, Progress and Challenges”, OECD Paris
5 Glossner, S. (2018). The Price of Ignoring ESG Risks. Social Science Research Network

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