Green finance a must for Vietnam to realize sustainable development goals: scholar

By Truong Hoang Diep Huong
Tue, April 2, 2024 | 7:24 am GMT+7

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.

Developing green finance is one of the orientations set by the Vietnamese government. Photo courtesy of Assa Abloy.

Developing green finance is one of the orientations set by the Vietnamese government. Photo courtesy of Assa Abloy.

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.

Comments (0)
  • Read More
Chinese automaker Chery licensed to invest $800 mln in Vietnam

Chinese automaker Chery licensed to invest $800 mln in Vietnam

China's state-owned automaker Chery Automobile has received an investment registration license to pour $800 million into Vietnam’s northern province of Thai Binh.

Industries - Tue, October 22, 2024 | 10:31 pm GMT+7

Sweden’s Ericsson, H&M, Hitachi Energy commit to Vietnam’s greener future

Sweden’s Ericsson, H&M, Hitachi Energy commit to Vietnam’s greener future

Major Swedish businesses are displaying innovative green solutions at the Green Economy Forum and Exhibition (GEFE) 2024 in Ho Chi Minh City, aiming to meet Vietnam’s urgent needs in sustainability and circular economy.

Companies - Tue, October 22, 2024 | 4:44 pm GMT+7

Can Tho-Da Lat flight route reopens on November 11 

Can Tho-Da Lat flight route reopens on November 11 

The Can Tho-Da Lat flight route will resume operations on November 11 after being suspended since September 2023.

Companies - Tue, October 22, 2024 | 4:33 pm GMT+7

AI robots provide customer service at new HCMC hypermarket

AI robots provide customer service at new HCMC hypermarket

Customers to the newly opened Co.opXtra Long Binh supermarket in Ho Chi Minh City are welcomed by an AI robot named Xtrabot.

Companies - Tue, October 22, 2024 | 4:00 pm GMT+7

Mitsubishi Estate’s logistics brand to make overseas debut with $90 mln project in Vietnam

Mitsubishi Estate’s logistics brand to make overseas debut with $90 mln project in Vietnam

Mitsubishi Estate, under Japanese conglomerate Mitsubishi, is set to invest JPY13.5 billion ($89.5 million) in two large-scale logistics facilities under its logistics facility brand Logicross.

Industrial real estate - Tue, October 22, 2024 | 3:53 pm GMT+7

Five Vietnam securities majors host trading of 147 bln shares in Jan-Sept

Five Vietnam securities majors host trading of 147 bln shares in Jan-Sept

Five major securities firms on the Ho Chi Minh Stock Exchange (HoSE) hosted transactions of 147 billion shares in the first nine months of this year.

Finance - Tue, October 22, 2024 | 3:38 pm GMT+7

Vietnam parliament to okay 15 draft laws, consider transnational high-speed railway proposal

Vietnam parliament to okay 15 draft laws, consider transnational high-speed railway proposal

The ongoing session of the National Assembly, Vietnam’s highest legislative body, is scheduled to approve 15 draft laws, including those related to investment, pharmacy, bidding, and securities.

Economy - Tue, October 22, 2024 | 2:57 pm GMT+7

Central Vietnam LNG-to-power project adds terminal to host 90,000-ton vessels

Central Vietnam LNG-to-power project adds terminal to host 90,000-ton vessels

Quang Tri province in central Vietnam has been allowed to add a terminal that can accommodate vessels of up to 90,000 tons to serve the 1,500-MW LNG-fired power project (LNG Hai Lang Power Center).

Energy - Tue, October 22, 2024 | 1:29 pm GMT+7

Vietnam major broker VNDirect’s Q3 earnings fall on dwindling market share

Vietnam major broker VNDirect’s Q3 earnings fall on dwindling market share

Hanoi-based VNDirect Securities, among the 10 biggest brokers in Vietnam, earned a net profit of VND505.15 billion ($20 million) in Q3/2024, down 20.6% year-on-year, as its lost brokerage market share to rivals.

Companies - Tue, October 22, 2024 | 12:18 pm GMT+7

Major private lender Techcombank reports 33.5% growth in nine-month profit

Major private lender Techcombank reports 33.5% growth in nine-month profit

Hanoi-headquartered Techcombank’s pre-tax profit reached VND22.8 trillion ($901 million) in the first nine months of the year, up 33.5% year-on-year.

Banking - Tue, October 22, 2024 | 11:39 am GMT+7

Vietnam targets 'fair' prices for gas-fired power, prepares 'first gas' from Block B in 2026

Vietnam targets 'fair' prices for gas-fired power, prepares 'first gas' from Block B in 2026

As Vietnam prepares to receive “first gas” from Block B-O Mon gas-to-power project in 2026, project participants should negotiate a “suitable” power price on the basis of “fair share of risks and benefits” for the State, businesses, and the people, says Prime Minister Pham Minh Chinh.

Energy - Tue, October 22, 2024 | 10:54 am GMT+7

Vietnam pharma major Imexpharm plans new facilities with proactive investment approach: exec

Vietnam pharma major Imexpharm plans new facilities with proactive investment approach: exec

Imexpharm Pharmaceutical JSC, which has emerged as a market leader in Vietnam over nearly 50 years of development, will adopt a proactive investment approach and establish new facilities to sustain the company’s growth momentum, says Nguyen An Duy, deputy general director in charge of finance at Imexpharm.

Executive Talk - Tue, October 22, 2024 | 8:13 am GMT+7

Indonesian President pledges to continue promoting new capital’s development

Indonesian President pledges to continue promoting new capital’s development

Indonesian Forestry Minister Raja Juli Antoni announced on Monday that President Prabowo Subianto remains committed to advancing the development of the new capital, Nusantara (IKN), located in East Kalimantan province.

Southeast Asia - Mon, October 21, 2024 | 11:01 pm GMT+7

Thailand ready for new economic stimulus efforts

Thailand ready for new economic stimulus efforts

The Thai Finance Ministry is preparing additional stimulus measures, including plans to promote tourism and encourage spending towards the end of the year to contribute to speeding up the recovery of the economy, according to Deputy Finance Minister Julapun Amornvivat.

Southeast Asia - Mon, October 21, 2024 | 10:57 pm GMT+7

Malaysia announces record budget plan for 2025

Malaysia announces record budget plan for 2025

Malaysian Prime Minister Anwar Ibrahim has submitted to the parliament a budget spending plan for 2025 worth MYR421 billion (about $97 billion), the biggest in history, in efforts to accelerate the country’s journey to become an economic powerhouse in Asia and position it for sustainable growth and resilience.

Southeast Asia - Mon, October 21, 2024 | 10:54 pm GMT+7

Indonesian President announces new cabinet line-up

Indonesian President announces new cabinet line-up

Indonesia's new President Prabowo Subianto on Sunday unveiled the so-called “red and white” cabinet, including ministers, deputy ministers and heads of agencies at the State Palace.

Southeast Asia - Mon, October 21, 2024 | 10:52 pm GMT+7