Making the most of Vietnam's Just Energy Transition Partnership

By Luong Phuong Mai
Thu, July 20, 2023 | 10:45 am GMT+7

Vietnam’s efforts toward carbon neutrality and international institutions’ support for the transition offer various business opportunities, but challenges exist, writes Luong Phuong Mai from HSBC Vietnam's commercial real estate and wholesale banking division.

Since COP26, everyone has started to talk about JETP, making the acronym popular in news articles and social media. It stands for Just Energy Transition Partnership – a financing cooperation mechanism designed to help a selection of heavily coal-dependent emerging economies make a just energy transition.

The aims of such multilateral financial agreements are to support the phase-out of fossil fuels in a tailor-made and country-driven pathway that addresses the social consequences involved, such as training and reskilling affected workers and new economic opportunities for affected communities.

The first JETP - South Africa JETP - was announced at COP26 or the 26th UN Climate Change Conference of the Parties in Glasgow two years ago. Since then, a few additional countries have taken part in these mechanisms, with Vietnam becoming the third country to adopt a JETP with the International Partners Group (IPG) including the EU, UK, the U.S., France, Germany, Italy, Canada, Japan, Norway, and Denmark.

Opportunities and challenges

Under the terms of Vietnam JETP, IPG commits an initial $7.75 billion in public capital over a three-to-five-year period to support Vietnam achieve a number of energy transition targets. In support of these efforts, the Glasgow Financial Alliance for Net Zero (GFANZ) established a Working Group, of which HSBC Bank is a member, to help mobilize and facilitate a matching $7.75 billion of private capital.

In short, Vietnam JETP involves the mobilization of $15.5 billion of public and private financing to achieve net zero ambition. Following Vietnam's bold commitment at CO26 where Prime Minister Pham Minh Chinh put forward the ask that the country requires external support to achieve net zero transition, Vietnam JETP absolutely will be helpful for Vietnam to drive its climate agenda.

We see huge potential for shifting in energy and transportation, the top two emitting sectors in Vietnam, in implementing Vietnam JETP. Leapfrogging from coal straight to wind and solar would enable the country to make use of its own natural resources to provide its people with an economically secure source of energy given its considerable wind and solar potential.

Vietnam has exceptional natural endowments – wind speed and solar power potential - to generate renewable energy among Southeast Asian peers. However, key barriers to financing to flow into the energy transition is the bankability of power purchase agreements (PPA), and to transportation transition is the pace of the transition, which in turn is a result of an absence of any regulatory push and limited availability of charging infrastructure.

Unlocking possibilities

Vietnam JETP bears the potential to represent a turning point in the climate finance agenda. One of the three goals at its core is to mobilize private sector capital to finance decarbonization efforts.

Bankability and recovery in case of distress would be the first main aspects to present to lenders if businesses are to explore sustainable finance opportunities. They should be prudent with their business case, and better build in a buffer in their sensitivity analysis, for instance, curtailment, operational and maintenance cost, hike in interest rate, volatility in FX and so on.

Second, lenders like HSBC will pay much attention to greenwashing risk. Indeed, mitigating this risk is wired into our strategy. When providing green or sustainability-linked facilities, it’s important for us to “green proof” the investment or the use of proceeds by proper certification, monitoring and audit. We typically demand such certification/audit to come from a qualified third-party organization to obtain independent assessments, meet international standards and maintain consistency across markets.

Moreover, our green loans must comply with the Green Loan Principles issued by the Loan Market Association and our green bonds must comply with the International Capital Market Association’s Green Bond Principles.

A key benefit for Vietnam in a JETP is to attract greener FDI and to become a champion in clean energy. The Vietnamese government has been focusing on high-quality FDI, including green FDI. Like-minded partners attract each other, and therefore to attract investors who are serious about green development, the country needs to profile itself accordingly, from green policy, infrastructure to supply chain ecosystem. And JETP, backed by the G7 governments, is a very strong platform to make such aspirations of the country known to international communities.

As a bank supporting inbound FDI flows, we saw this with our own eyes. Right after Vietnam announced its net-zero commitment at COP26, Lego announced its plans to build the first carbon-neutral factory in Binh Duong province in the south, marking its second investment in Asia. HSBC is proud to support such flows and we believe that any member of JETP and GFANZ would be a champion echoing the “Vietnam green effects” to the international investor communities via our own network.

An artist's impression of the Lego manufacturing facility in Binh Duong, southern Vietnam, Photo courtesy of the company.

An artist's impression of the Lego manufacturing facility in Binh Duong, southern Vietnam, Photo courtesy of the company.

Finally, experts are looking into the possibility of applying the JETP model to other sectors beyond energy if Vietnam and other countries can prove JETP a successful approach for delivering climate finance. It, of course, will take time to see the results but it's an opportunity not to be wasted to make a leap forward for realizing decarbonization goals.

Comments (0)
  • Read More
Vietnam manufacturing sector sees 35% increase in Q3 job orders: Adecco

Vietnam manufacturing sector sees 35% increase in Q3 job orders: Adecco

Vietnam’s manufacturing and sourcing sectors saw a substantial 35% year-on-year increase and a 52% quarter-on-quarter increase in Q3/2024 job orders, global workforce solutions provider Adecco said in a reseach report released Thursday.

Economy - Sun, November 3, 2024 | 9:00 am GMT+7

Construction majors to continue capitalizing on public investment projects

Construction majors to continue capitalizing on public investment projects

Vietnamese construction giants are expected to continue capitalizing on public investment projects for the remainder of this year after delivering strong performances in the third quarter, analysts say.

Companies - Sun, November 3, 2024 | 8:00 am GMT+7

Former Government Office chairman receives $7,900 bribe from property project

Former Government Office chairman receives $7,900 bribe from property project

Mai Tien Dung, former Minister-Government Office Chairman, received a bribe worth VND200 million ($7,900) from Nguyen Cao Tri, owner of the Dai Ninh eco-resort and urban area project in Lam Dong province.

Society - Sat, November 2, 2024 | 9:13 pm GMT+7

Thai food giant CP enters public-private partnership to promote food system transformation

Thai food giant CP enters public-private partnership to promote food system transformation

Thai-invested C.P. Vietnam Livestock JSC and the Partnership for Sustainable Agriculture Vietnam (PSAV) signed a memorandum of understanding Friday on working together to advance sustainable agriculture in the country.

Companies - Sat, November 2, 2024 | 7:16 pm GMT+7

Central Vietnam province Quang Ngai to begin work on new VSIP industrial park next year

Central Vietnam province Quang Ngai to begin work on new VSIP industrial park next year

Vietnam’s central province of Quang Ngai will work with the investor to have construction of VSIP II Quang Ngai, a facility based on the Vietnam-Singapore Industrial Park (VSIP) model, begin in August 2025.

Industrial real estate - Sat, November 2, 2024 | 3:47 pm GMT+7

Vietnam likely to grow 6.5% in 2024-2025: VinaCapital

Vietnam likely to grow 6.5% in 2024-2025: VinaCapital

VinaCapital, among the biggest foreign-run asset managers in Vietnam, has forecast the country’s economy to achieve 6.5% growth in both 2024 and 2025, with the composition of the expansion to change to more domestically driven factors next year.

Economy - Sat, November 2, 2024 | 2:00 pm GMT+7

Major Vietnamese developer Novaland appoints new CEO

Major Vietnamese developer Novaland appoints new CEO

Duong Van Bac, who joined Novaland as chief financial officer in August 2023, has been appointed general director, starting Friday.

Companies - Sat, November 2, 2024 | 10:24 am GMT+7

Vietnamese conglomerate Bamboo Capital posts 36-fold profit growth in Q3

Vietnamese conglomerate Bamboo Capital posts 36-fold profit growth in Q3

Ho Chi Minh City-based Bamboo Capital Group recorded an after-tax profit of VND331.2 billion ($13.1 million) in the third quarter of 2024, an astounding 36-fold expansion year-on-year.

Southeast Asia - Sat, November 2, 2024 | 9:41 am GMT+7

ThaiBev to bag $54 mln from Sabeco’s upcoming dividend payout

ThaiBev to bag $54 mln from Sabeco’s upcoming dividend payout

Vietnam Beverage, wholly owned by Thai Beverage (ThaiBev) will rake in VND1,374 billion ($54.26 million) worth of dividend from Ho Chi Minh City-based top brewer Sabeco.

Companies - Sat, November 2, 2024 | 9:13 am GMT+7

Steel heavyweight Hoa Phat pours over $2 bln into central Vietnam complex

Steel heavyweight Hoa Phat pours over $2 bln into central Vietnam complex

Leading Vietnamese steelmaker Hoa Phat had invested more than VND52.5 trillion ($2.08 billion) in its Dung Quat Iron and Steel Integrated Complex (Dung Quat 2) in the central province of Quang Ngai as of Q3/2024.

Industries - Sat, November 2, 2024 | 8:00 am GMT+7

Vietnam becomes Australia’s fastest-growing inbound market

Vietnam becomes Australia’s fastest-growing inbound market

The number of Vietnamese tourists to Australia has grown significantly after the Covid-19 pandemic, with nearly 178,000 reported in the 12 months to August 2024, according to a Friday press release by the Australian Minister for Trade and Tourism’s Office.

Southeast Asia - Fri, November 1, 2024 | 10:02 pm GMT+7

Study finds shift in Thai consumers’ spending patterns

Study finds shift in Thai consumers’ spending patterns

Consumers in Thailand are shifting their spending focus to experiences and investments, according to the latest ASEAN Consumer Sentiment Study (ACSS) by United Overseas Bank (UOB).

Southeast Asia - Fri, November 1, 2024 | 10:00 pm GMT+7

Energy security, digitalization key to Indonesia's economic growth

Energy security, digitalization key to Indonesia's economic growth

The Indonesian government is prioritizing long-term economic growth through energy security, digitalization, and natural resource industrialization, according to Deputy Minister of Finance Thomas Djiwandono.

Southeast Asia - Fri, November 1, 2024 | 9:58 pm GMT+7

Vietnam PM's Middle East tour creates breakthroughs in economic, trade, investment cooperation: FM

Vietnam PM's Middle East tour creates breakthroughs in economic, trade, investment cooperation: FM

Prime Minister Pham Minh Chinh’s freshly ended six-day trip to the UAE, Saudi Arabia and Qatar has produced important outcomes, demonstrating the growing relations between Vietnam and the three Middle-East countries, Deputy Prime Minister and Foreign Minister Bui Thanh Son told the Vietnam News Agency.

Politics - Fri, November 1, 2024 | 9:25 pm GMT+7

Vietnam, Qatar look to tap potential for energy, oil & gas collaboration

Vietnam, Qatar look to tap potential for energy, oil & gas collaboration

Vietnam and Qatar have recognized the significant potential for further collaboration in multiple sectors such as energy, oil and gas, especially LNG, agriculture, Halal industry, and banking.

Politics - Fri, November 1, 2024 | 9:02 pm GMT+7

Thailand bans export of raw palm oil until December

Thailand bans export of raw palm oil until December

Thailand's Department of Internal Trade has temporarily banned the export of raw palm oil due to reduced production caused by drought and plant diseases.

Southeast Asia - Fri, November 1, 2024 | 8:31 pm GMT+7