CARBON EMISSIONS AND THE COST OF CAPITAL: EVIDENCE FROM VIETNAM’S LISTED FIRMS (2022–2024)

Abstract

In alignment with global sustainability trends and Vietnam’s Net-Zero commitment, this study examines the relationship between greenhouse gas (GHG) emissions and the weighted average cost of capital (WACC). Analyzing 45 listed Vietnamese enterprises from 2022 to 2024, GHG emissions serve as a quantitative proxy for environmental performance and transition risks. Utilizing panel data and a random effects model (REM) with clustered standard errors, the research investigates both contemporaneous and one-period lagged effects of emissions on WACC. The empirical findings reveal that the impact of GHG emissions on WACC is not statistically significant, suggesting that the Vietnamese capital market has yet to fully integrate carbon risks into its cost of capital pricing mechanisms. Instead, WACC variations remain predominantly explained by traditional financial control variables, indicating that investors prioritize fundamental financial metrics over environmental considerations. These findings provide critical empirical evidence for policymakers to design financial incentives for environmentally proactive firms and impose stricter constraints on those with adverse ecological impacts.