The Impact of ESG Application on Foreign Direct Investment and Economic Growth in Vietnam

Abstract

This study analyzes the impact of applying Environmental, Social and Governance (ESG) criteria on foreign direct investment (FDI) inflows and economic growth in Vietnam during 2018–2023. The research sample consists of 378 observations from unbalanced panel data of 63 provinces, collected from the General Statistics Office, VCCI, World Bank and internal ESG index set. Using the System Generalized Method of Moments (SGMM) to control for endogeneity and dynamics, the results show that ESG has a positive and statistically significant impact on both FDI (coefficient = 0,185; p < 0,01) and economic growth (coefficient = 0,151; p < 0,05). In addition, FDI also contributes to promoting growth (coefficient = 0,273; p < 0,05), especially in conditions of political stability (coefficient = 0,275; p < 0,01). The findings confirm the key role of ESG in attracting quality investment and improving the efficiency of sustainable economic development.