52% of Grade A offices in Vietnam are certified as environmentally friendly.

DNHN - According to extensive research on the evolution of ESG in commercial real estate throughout the Asia-Pacific region, best practices from Hong Kong, Korea, and Japan, as well as an insightful analysis of the context of Vietnam's growing ESG

Prioritise sustainability in building construction

According to the United Nations Environment Programme, construction will account for approximately 31% of global final energy consumption and 28% of CO2 emissions by the year 2020. Real estate companies in Asia-Pacific are beginning to take ESG more seriously in light of the crucial role real estate plays in combating climate change.

According to research, major regional markets including Australia, Hong Kong, Japan, New Zealand, and Singapore are at the forefront of ESG innovations in the region, followed by China and Vietnam with impressive advances. This development is somewhat hampered by obstacles such as calculation methods, capital costs, support policies, and access to sustainable construction materials.

Asia-Pacific is home to twenty of the world's thirty-six megacities, so according to experts, the region must prioritize sustainability in its real estate development. The urban population is projected to increase by 52 percent by 2050, resulting in a sharp increase in real estate demand. Greater supply and demand present sustainable development efforts in the region with challenges and opportunities. Work must be done to ensure urban infrastructure expands and reduces carbon emissions at the same time.

Vietnam is making progress in green building certification, with twenty office buildings currently holding LEED or Green Mark credentials. 17 projects in Ho Chi Minh City account for approximately 25 percent of the existing office supply. By 2026, it is anticipated that this ratio will increase to 31%. Between 2024 and 2026, four projects will deliver up to 164,000 m2 of green office space for the NLA.

According to PwC's 2022 report on ESG Readiness in Vietnam, 80% of companies surveyed intend to commit to ESG within the next two to four years. The fact that FDI companies and private/family businesses are taking the lead in implementing ESG demonstrates the growing sense of responsibility among Vietnamese businesses.

"It is too late to resist change. In addition to growing public concerns and government regulations, there are numerous legitimate financial incentives for investors to improve the sustainability of their investment portfolios, such as Risk management, transparency, cost savings, and increased revenue, according to Troy Griffiths, Deputy Managing Director of Savills Vietnam.

Carbon emissions from new construction drive ESG adoption.

With so many different guidelines, certifications, and standards, measuring ESG compliance remains difficult. Nonetheless, initiatives like the Task Force on Climate-related Financial Disclosures (TCFD) and the Sustainable Development Goals (SDG) framework are providing investors with direction and impetus. Investors in real estate implement specific energy reduction action plans.

As of the third quarter of 2023, 95% of Grade A office supplies in Singapore have earned green certification, followed by 64% in Kuala Lumpur and 48% in Hong Kong. Vietnam is gradually improving, with 52% of floor space certified as environmentally friendly.

Simultaneously, the financial benefits of applying ESG are becoming increasingly evident. Green-certified buildings have 10% higher rents than non-certified buildings. As corporate ESG compliance becomes increasingly closely monitored and implemented, tenants and investors favor it, putting buildings that do not meet these standards at risk of incurring higher interest rates. a lack of content.

In a recent survey conducted by the Urban Land Institute and PwC, 37% of respondents indicated that ESG factors are now a required consideration in real estate investment decisions, up from 22% in 2021.

To analyze these issues in greater depth, Savills also has studies with real-world examples, including:

New carbon emission regulations for new buildings in Korea as of 2023 promote ESG adoption, with a mandatory Zero Energy Building (ZEB) certification policy in Seoul. In Asia-Pacific, green building certification is an important performance standard.

Collaboration between landlords and tenants in Hong Kong accelerates the goal of achieving net zero emissions, thereby enhancing the investment returns for green-certified buildings. Increased ESG initiatives in Japan.

As ESG activities are emphasized in the overall development of the Asia-Pacific commercial real estate market, "ESG in Vietnam Spotlight 2023" provides all parties with valuable and useful information and analysis. Industry participants are attempting to comprehend, implement, and profit from sustainable initiatives.

Nhan Ha Phan