ESG Tentacles Could Strangle Growth in ASEAN Countries

By Vijay Jayaraj

It is well known that green enthusiasts in government and big business are seeking to divert financing away from the use of fossil fuels in the U.S. and other developed countries. However, the draconian pressures of this movement are now being applied in Vietnam and other members of the Association of Southeast Asian Nations (ASEAN) whose economies can ill afford impediments to growth.

The U.S. Agency for International Development (USAID) is working with partner banks abroad to implement policies of ESG (environmental, social and governance), an investment rating system that requires the incorporation of political ideologies into government spending and the operations of businesses, including banks.

Both amorphous and wide ranging, ESG criteria can include subjects such as employment quotas based on race and ethnicity and an organization’s commitment to the climate industrial complex’s fantasy of a global economy free of carbon dioxide emissions. The ESG insistence on advancing technologies such as wind and solar energy over the use of coal, oil and natural gas is perhaps the most direct threat to alleviating poverty in poorer nations.

Under ESG, businesses that do not comply with approved criteria are punished financially, undermining capitalism and centralizing power to a few “experts.” Neither scientifically valid nor helpful to the people it purportedly seeks to benefit, ESG could usher in an era of darkness for economic systems that would otherwise thrive on intensive energy use and free markets.

Vietnam, for example, is a country that has undergone significant economic progress in recent decades. However, despite this progress, poverty remains a significant issue. According to the World Bank, around nine percent of the population lived below the poverty line in 2019.  

One of the main drivers of economic growth in Vietnam has been the country’s rapidly expanding export sector comprising textiles, footwear and other manufactured goods. In 2021, Vietnam industry contributed 2.68 thousand trillion Vietnamese Dong ($113 million) to the gross domestic product (GDP) – the largest contribution among all sectors, according to Statista.

In order to continue economic growth and reduce poverty, Vietnam must depend on its carbon-intensive industries. A stable energy supply decides the rate at which the country’s people prosper. Only fossil fuels – supported by nuclear and hydro – can provide industrial-scale energy that is affordable, reliable and abundant.

Vietnam National Coal and Mineral Industries Group says there will be a six percent growth in the National coal demand between 2022 and 2025. Four main industries – cement, fertilizers, metal and power generation – are expected to retain over 90 percent of the combined share of domestic consumption.

Though the reasons for Vietnam’s reliance on hydrocarbons are obvious and understandable, the country’s use of them is now under threat.

“USAID Green Invest Asia has entered into agreements with four of Vietnam’s largest banks to provide bespoke technical assistance to improve ESG systems, including developing relevant policies, defining lending criteria, and building environmental and social risk management/reporting capacity,” the agency reports in language only a bureaucracy can create.

The deputy director of USAID with Vietnam says, “Financing the planet’s transition to net zero is creating a growing investment opportunity for banks worldwide and Vietnam is no exception…I applaud the government of Vietnam for going beyond recommending green growth or green credit to taking action on it.”

In other words, USAID wants Vietnam to achieve net zero, the irrational and destructive concept of living without fossil fuels. Vietnam’s top banks are likely to use ESG rating for lending. This will likely reduce the growth of an economy that was traditionally reliant on coal, oil, and gas – the only affordable and reliable energy sources readily available to it.

The current U.S. administration has been dedicated to this disruption of developing economies from its inception, announcing from the beginning that U.S. foreign aid for fossil fuel projects would be terminated.

Lawmakers in the U.S. must address this issue before the tentacles of ESG strangle Third World development.

This commentary was first published at BizPac Review, March 30, 2023, and can be accessed here.

Vijay Jayaraj is a Research Associate at the CO2 Coalition, Arlington, Virginia. He holds a master’s degree in environmental sciences from the University of East Anglia, UK and resides in India.