Green finance a must for Vietnam to realize sustainable development goals: scholar
Developing green finance is one of the orientations set by the Vietnamese government to promote environmental protection projects and improve green production efficiency among businesses, thereby helping Vietnam fulfill its sustainable development goals, said Truong Hoang Diep Huong, a scholar from the Banking Academy of Vietnam.
Orientations for green finance development in Vietnam
Vietnam is suffering from multiple impacts of climate change. A 2017 study by Germanwatch, an independent organization that lobbies for sustainable global development, showed that Vietnam ranked fifth among the 10 countries most affected by climate change.
In fact, in recent years, Vietnam has experienced a series of unusual weather patterns, including storms and floods, and is struggling to deal with their impacts. Climate change has posed significant risks to urban infrastructure and the well-being of people, especially in coastal areas.
In that context, the Vietnamese government has shown increasing concern over issues related to the environment and climate change. Vietnam has made a strong international commitment to achieve a carbon-neutral economy by 2050, aiming for zero greenhouse gas emissions. This commitment was emphasized during the 26th UN Climate Change Conference (COP26) in Glasgow, Scotland in November 2021. The government concluded that promoting green finance in Vietnam is the appropriate action to mobilize capital for a sustainable economy.
The legal framework on green policy in Vietnam has been developed after the National Action Plan on Green Growth was adopted in 2014. In 2021, the government issued Decision No. 1658/QD-TTg approving the National Strategy on Green Growth for the 2021-2030 period, with a vision to 2050.
Following the plan, the government and its bodies have devised regulations to promote green growth. Some typical documents include the government’s Decree No. 95/2018/ND-CP on green government and local administration bonds; the Finance Ministry’s Decision No. 2183/QD-BTC on an action plan for the financial sector to implement the National Strategy on Green Growth until 2020; and the State Bank of Vietnam governor’s Decision No. 1604/QD-NHNN dated August 7, 2018 on a scheme for green banking development in Vietnam.
These regulations aim to ensure that green financial sources play a role in effectively allocating capital and regulating resources to achieve sustainable and environmentally friendly development. This taps resources from the government financial sector and large financial institutions, as well as from the private sector and microfinance institutions.
Green finance activities in Vietnam
Green credit
Following the direction of the State Bank of Vietnam, banks have been implementing green credit packages. Among them are Sacombank, BIDV, VietinBank, Vietcombank, Agribank, Saigon-Hanoi Bank (SHB), Asia Commercial Bank (ACB), VietABank, NamABank, Orient Commercial Bank (OCB), PVCombank, HSBC, and HDBank.
About 24% of green credit projects have been developed and appraised by banks; 50% have built and deployed environmental and social risk management in credit granting, and issued written environmental and social risk management procedures; and 68% plan to expand green credit activities in the short and medium term.
In the 2017-2022 period, the system's outstanding credit balance for green fields had an average growth rate of more than 23% per year. By September 30, 2023, outstanding green credit loans had reached nearly VND564 trillion ($22.56 billion), accounting for about 4.4% of the total outstanding loans of the entire economy.
Among the 12 green fields that the SBV guided credit institutions to lend, outstanding loans focused mainly on renewable energy and clean energy (45%), and green agriculture (31%). Credit institutions enhanced the assessment of environmental and social risks in credit granting activities with outstanding loans under environmental and social risk assessments reaching over VND2,485 trillion ($99.4 billion under the current foreign exchange rate), accounting for nearly 20% of the total outstanding loans of the economy.
Bond issuance
Besides green credit, green financial activities include other tools such as green bonds (GB), sustainability bonds (SB), sustainability linked bonds (SLB), and sustainability linked loans (SLL). Green credit is still the main green financial activity in Vietnam. However, this activity has become more diversified in recent years with the first issuance of green and sustainable bonds in 2021, and sustainability linked loans in 2022. Sustainability linked bonds have not yet been issued in Vietnam.
Although there was an increase in quantity and type in the 2019-2021 period, compared to other countries in the region, green finance activities in Vietnam are low. In particular, in 2022, under great economic pressure and geopolitical tensions, green finance activities in ASEAN countries decreased compared to 2021. Among regional countries, Thailand led in green finance, followed by the Philippines, while Vietnam stood at the bottom in terms of volume and value of issued bonds.
Recommendations
Developing green finance is one of the directions set by the government to promote environmental protection projects and improve green production efficiency among businesses, thereby helping Vietnam fulfill its goals on sustainable development. Reality shows that green finance activities in Vietnam are more diverse in type and increasing in value. To further promote green finance in Vietnam, here are some recommendations:
Firstly, it is necessary to diversify green finance sources and attract business participation. In Vietnam today, the main source of green finance is still green credit, while green bond sources remain limited. To attract more green finance sources and encourage the private sector to participate in the green finance market, what needs to be done now is to build appropriate green finance mechanisms to promote motivation and demand for green finance sources.
Some possible directions include: (1) encouraging the development of green transition roadmaps among businesses, both voluntary and mandatory (for some businesses in specific fields); (2) improving the ability of enterprises to self-assess their environmental performance; (3) improving the requirements for listed companies’ transparency and disclosure of information related to the environment; and (4) supporting the private sector in developing criteria to determine environmental quality for each specific business sector and industry.
Secondly, the green tax mechanism should be refined. Vietnam has issued a number of tax policies related to promoting green production and green consumption, such as a reduction of 50-70% on special consumption tax for products that are less harmful to the environment, 10% in corporate income tax for businesses operating in the environmental field; corporate income tax exemption for a maximum of no more than four years and a 50% reduction in tax payable for a maximum of no more than the next nine years for newly established enterprises operating in the environmental field.
These tax policies have contributed significantly to encouraging the development of environmentally friendly products, technologies, and projects, creating attraction and demand for green finance sources.
Despite some positive results, in the process of implementing green tax policies in Vietnam, there are still some limitations that need to be fixed, such as: (1) determining more appropriate green tax rates for each target group; (2) identifying taxable subjects more accurately; and (3) more supportive mechanisms for green projects. In that context, referring to the tax rate systems currently applied in ASEAN countries could provide a good basis for Vietnam to make adjustments.
Thirdly, it is necessary to develop the carbon credit market. Developing the carbon credit market will create many opportunities for Vietnam, especially those to develop green technology and attract green finance sources. Therefore, increasing access to the green financial market, through solutions such as completing the legal framework for the carbon market, enhancing funding sources for green projects, and promoting research and development activities related to the environmental field, is a necessary direction for the government.
* Truong Hoang Diep Huong is an expert from the Sustainable Finance Research Program of the Research Institute for Banking under the Banking Academy of Vietnam.
The Investor will hold a seminar on green credit and green bonds on Wednesday (April 3) to discuss ways to remove bottlenecks in the legal framework and boost market development.
The event, themed “A matter of urgency: Completing the legal framework to develop green credit, green bonds”, is a collaboration between The Investor and the Institute of Strategy and Policy on Natural Resources and Environment, under the Ministry of Natural Resources and Environment.
- Read More
Vietnam, Brazil elevate bilateral ties to strategic partnership
Vietnam and Brazil issued a joint statement on elevating their bilateral relations to a Strategic Partnership in Rio de Janeiro on Sunday (local time) on the occasion of Prime Minister Pham Minh Chinh’s ongoing trip to the Latin American nation to attend the G20 Summit and join bilateral activities.
Politics - Mon, November 18, 2024 | 8:11 am GMT+7
The Investor to host seminar on removing legal bottlenecks for infrastructure, property investment
A seminar themed “Removing legal bottlenecks for infrastructure and property investment” will be organized by The Investor in Hanoi on Tuesday.
Companies - Mon, November 18, 2024 | 7:52 am GMT+7
State-owned housing developer HUD has new chairman
Dau Minh Thanh, chief of the Ministry of Construction (MoC) Office, has been appointed chairman of the ministry’s Housing and Urban Development Corporation (HUD).
Companies - Sun, November 17, 2024 | 9:34 pm GMT+7
Vietnam private lender LPBank reports $394 mln profit in 10 months
Hanoi-based Loc Phat Vietnam Joint Stock Commercial Bank, or LPBank, logged an after-tax profit of VND10 trillion ($394 million) in the first 10 months of this year, said its leadership at the EGM on Saturday.
Banking - Sun, November 17, 2024 | 3:30 pm GMT+7
Vietnam stock market unlikely to experience further steep declines in next sessions: experts
The probability of continued sharp falls in the Vietnamese stock market over the next sessions is relatively low, barring unexpected geopolitical turbulences that could cause significant volatility, according experts.
Finance - Sun, November 17, 2024 | 1:30 pm GMT+7
Taiwan’s Cooler Master gets nod for $125 mln additional investment in northern Vietnam
Taiwan-headquartered Cooler Master, a global computer hardware giant, especially in cooling devices, will invest an additional $125 million in the northern province of Bac Ninh, according to a project report.
Industries - Sun, November 17, 2024 | 10:00 am GMT+7
Vingroup’s hospitality arm Vinpearl becomes public company as part of listing plan
Vinpearl JSC, a hospitality subsidiary of conglomerate Vingroup, has completed its registration as a public company, the State Securities Commission of Vietnam (SSC) said on Friday.
Companies - Sun, November 17, 2024 | 9:00 am GMT+7
Vietnam pledges to make more contributions to APEC cooperation
APEC leaders adopted a joint statement and endorsed two signature initiatives proposed by host country Peru: the Lima Roadmap to Promote the Transition to Formal and Global Economy and the Ichma Statement on a New Look to Advance the Free Trade Area of the Asia-Pacific.
Politics - Sun, November 17, 2024 | 8:05 am GMT+7
Construction of $2.3 bln central Vietnam LNG power plant to restart in 2026
Construction of the 1,500-MW Hai Lang Power Center project in Quang Tri province will restart on January 1, 2026, the project investor has informed local authorities.
Energy - Sun, November 17, 2024 | 8:00 am GMT+7
PM arrives in Brazil, beginning trip to attend G20 Summit
Prime Minister Pham Minh Chinh, his spouse and a high-ranking delegation of Vietnam arrived in Rio de Janeiro, Brazil on November 16 afternoon (local time), beginning their three-day visit to attend the G20 Summit and have bilateral meetings.
Southeast Asia - Sun, November 17, 2024 | 7:30 am GMT+7
Vietnam-China partnership to enable export of Kim Long brand cars
Vietnam’s Kim Long Motor and Futa Group have struck a strategic cooperation agreement with China’s Dongfem Dana that will enable the production and export of cars under the Kim Long brand, executives said Friday.
Companies - Sat, November 16, 2024 | 7:13 pm GMT+7
Northern Vietnam province attracts $124 mln investment from Taiwan firm
Taiwan-based Nien Made Enterprise Co., Ltd. will invest $124.1 million to make furniture accessories at Phu Ha Industrial Park in the northern province of Phu Tho.
Industries - Sat, November 16, 2024 | 7:01 pm GMT+7
Vietnam’s first LNG-fired power plants to enter commercial operation in Jun-Sept 2025
Nhon Trach 3 and Nhon Trach 4, Vietnam’s first LNG-to-power plants, will begin commercial operations in June and September 2025, respectively, says project investor PV Power.
Energy - Sat, November 16, 2024 | 3:20 pm GMT+7
Vinhomes spends $276 mln on buying back 162 mln shares, more than half to go
Vinhomes, the largest housing developer in Vietnam, has spent around VND7 trillion ($275.7 million) on implementing its record buyback plan since kick-starting it on October 23.
Finance - Sat, November 16, 2024 | 1:21 pm GMT+7
Indonesia secures funding for green power infrastructure at COP29
Indonesia has attracted EUR1.2 billion ($1.26 billion) worth of green funding for the electricity sector from Germany’s Kreditanstalt für Wiederaufbau (KfW) at the 29th UN Climate Change Conference of the Parties (COP29) in Baku, Azerbaijan.
Southeast Asia - Sat, November 16, 2024 | 10:10 am GMT+7
Hanoi-based fledgling firm spends $12.3 mln on buying 17.2 mln shares of lender VIB
Hanoi-based Quang Kim Development and Investment JSC acquired 17.2 million shares of Vietnam International Commercial Joint Stock Bank (HoSE: VIB) on Monday.
Banking - Sat, November 16, 2024 | 9:47 am GMT+7
- Consulting
-
Remove roadblocks to lure foreign investment into Vietnam: HSBC exec
-
Rethinking resilience: How typhoon Yagi redefines supply chain strategies in northern Vietnam
-
In trade and investment, ASEAN and China are better together
-
AI can be a game changer for Vietnam tourism
-
Investment opportunities in LNG-to-power projects in Vietnam
-
Pepper prices 2024: will the dream of 'black gold' repeat?