This is the latest report in a series of reports HSBC Global Research has published that stress the importance of using an integrated approach for ESG analysis, rather than some form of simplistic scoring system. This report expands our coverage by providing an ESG primer on two Asian frontier markets – Vietnam and Bangladesh. We present a one-stop guide for investors, covering:  Climate change challenges and the measures being taken to offset the threats  Green financing landscape  Corporate governance codes and their comparison with OECD practices  Progress being made to meet the UN’s 17 Sustainable Development Goals (SDGs)  ESG indicators of companies in the VN30 Index and the DS30 Index At the front line of climate change. According to the World Bank, Vietnam is one of the top five countries likely to be affected by climate change and Bangladesh is also extremely vulnerable. We assess the initiatives being taken in both countries to combat the threats, as well as their fledgling green financing programmes.

Foreign investment and corporate governance. Vietnam and Bangladesh are starting to get to grips with the governance and social elements of ESG. Many investors will be surprised to know that both countries have detailed corporate governance codes. Foreign investment is helping to embed ESG practices in the corporate world. To sustain strong economic growth, both countries will need to develop their respective capital markets and foreign capital has a key role to play. For example, Vietnam has the highest level of investment in renewable energy across ASEAN and its stock market already has a sustainability index.

Why these markets matter. We have long seen Vietnam as one of the region’s best investment stories. The country is not only a growing base for supply chains, it is also assembling a homegrown economic growth engine that is making Vietnam an even more attractive destination in its own right. Vietnam is also the most liquid equity market in ASEAN after Thailand. Daily average trade turnover is now double that of both Singapore and Indonesia. Bangladesh’s market, though smaller and less liquid, is on a similar growth trajectory to Vietnam but has a larger economy and population and is growing at a faster pace. In our view, Bangladesh is one of Asia’s most exciting long-term demographic stories.