Green bonds in particular and green credit in general are a tool to mobilize capital for green projects, environmentally sustainable projects. This is a way to mobilize capital for long-term sustainable development.
The World Bank Group’s recently released Country Climate and Development Report for Vietnam predicts that without appropriate adaptation and mitigation measures, climate change is estimated to cost Vietnam between 12% and 14.5% of its GDP per year by 2050 and one million people will fall into extreme poverty by 2030.
Climate change will cost Vietnam about 12% to 14.5% of its GDP each year by 2050.
According to the report, climate change has become an extremely urgent issue for Vietnam. Therefore, it is necessary to develop many policies and public-private investments to reduce the carbon intensity of growth.
The World Bank estimates that Vietnam may need to invest an additional $368 billion by 2040, equivalent to 6.8% of GDP each year. Of this, about $254 billion will be invested in resilience and an additional $114 billion in carbon treatment as committed to the international community.
To fulfill its commitment, Vietnam will need large investments in the coming years. While state resources can only meet part of the green finance demand, the development of green finance and carbon credit markets is essential to meet the capital mobilization needs of businesses in the green transition process.
In particular, after the Government's commitment to a clean "zero" start by 2050 at the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26), the issue of attracting energy sources for green growth has become one of the important contents for the process of implementing this goal.
However, the development of green financial mechanisms in Vietnam still faces many difficulties and challenges.
To solve this problem, experts say it is time to develop green credit, especially green bonds to protect the environment.
According to Dr. Ho Quoc Tuan (University of Bristol, UK), green bonds are bonds issued by the Government, local authorities, or businesses to raise capital for green projects, environmentally sustainable projects, and to transition to a low-emission economy. These bonds are issued with special terms on debt repayment mechanisms, recourse or non-recourse from the issuer.
Green bonds in particular and green credit in general are a tool to mobilize capital for green projects, environmentally sustainable projects and provide a transition to a low-emission economy. This is a way to mobilize capital for long-term sustainable development. In addition, this is also a source of capital to provide services to transition to lower-emission technologies.
According to the Climate Bonds Initiative (CBI), in 2020, about 2,000 billion USD of green bonds were distributed, using 5% of the value of the global debt market and is expected to reach 5,000 billion USD by 2025. Green bonds mainly invest in the fields of renewable energy, carbon-free transportation, waste treatment, etc.
Globally, approximately $2.4 trillion in Green Bonds have been issued to date. In the US, $400 billion in Green Bonds have been issued.
Meanwhile, in Vietnam, there are only 3 enterprises issuing Green Bonds with a very modest issuance quantity. Not to mention how many investors have bought this type of bond. There are no green bonds on the stock market, only issued on the individual bond market.
Green bonds are a potential source of investment capital for renewable energy in Vietnam. (Illustration photo)
Dr. Nguyen Tri Hieu, an economic expert, said that for green bonds to be popular in Vietnam, issuers must pay attention to four issues including how to use capital, for what project; that project must be closely defined; issuers must let consultants know how to manage capital flows to have a source to repay bonds; reports from issuers, auditing companies, and functional companies must be truly transparent.
From there, Dr. Nguyen Tri Hieu proposed that the Ministry of Finance and the Ministry of Natural Resources and Environment should set criteria and standards for green bonds for issuers.
This expert believes that if Vietnam moves slowly, in the next 3-5 years, green bonds will probably just be “for fun” and difficult to implement in reality. Because even the conventional bond market in Vietnam is facing difficulties, let alone the green bond market.
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