As expected, Vietnam needs about 21.2 billion USD in the next 10 years to reduce net emissions to "zero" by 2050. Accordingly, developing green bonds is an effective solution for green transformation projects.
Great demand
Green bonds are bonds issued by the Government, local authorities, and businesses following the law on bonds to mobilize capital for environmental protection activities and investment projects that bring environmental benefits. This will be an effective capital mobilization channel to solve capital bottlenecks for green transformation projects, which, according to the World Bank (WB), is estimated to require 368 billion USD by 2040 to reach Net zero by 2050.
Vietnam has issued nearly 1.16 billion USD in green bonds from 2019 to 2023. Up to now, the green finance market in Vietnam has been built on three components: The green credit market, stock market green securities, and the green bond market. The Ministry of Finance has coordinated with relevant agencies to complete the legal framework for green bonds.
There are Government bond products, Government-guaranteed bonds, and local government bonds for "green" projects and works such as irrigation, environmental protection, wind power, and solar energy.
Solutions for green transformation projects
The National Climate and Development Report for Vietnam (CCDR, 2022) said that Vietnam lost about 10 billion USD in 2020, equivalent to 3.2% of GDP, due to the impact of climate change. The report estimates that climate change will reduce Vietnam's GDP by 3.5% by 2050 without appropriate adaptation and mitigation measures.
In 2021, Prime Minister Pham Minh Chinh committed to achieving net zero emissions (zero carbon) by 2050 at the United Nations COP26 Climate Change Summit. To achieve this goal, the German International Cooperation Organization (GIZ) believes that Vietnam needs about 21.2 billion USD for the next 10 years.
In fact, the process of green transition and emission reduction to meet Vietnam's Net Zero commitment is still a long way, with countless difficulties and challenges. Sustainable growth projects often require large investment capital, long capital recovery periods and contain many risks, making it difficult to attract investment capital, especially capital from the private sector.
Green bonds are an effective capital mobilization channel for investors interested in sustainable development, creating conditions to attract large amounts of capital from society to implement green and sustainable growth in the future.
In order to encourage the development of the green bond market, the Ministry of Finance has issued a circular directing issuers and investors of green bonds to take advantage of the 50% discount on green bond service prices in the stock market.
Vietnamese Banks joined in
On October 25, the Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) became the first bank to successfully issue Green bonds according to the domestic market's Green Bond Principles of the International Capital Market Association ( ICMA).
This is the first time Vietnam's capital market has witnessed a domestic bond issuance with a Green bond framework rated by the international credit rating organization Moody's. BIDV has achieved the very high rating that Moody's has given to the Green Bond Framework of credit institutions, thereby confirming compliance and high-level transparency in project selection and appraisal. , lending, management, and reporting regimes of BIDV.
BIDV's bond issuance is also the first Green bond issuance in Vietnam with a structure without collateral, no secondary debt, and no need for payment guarantees, demonstrating a high level of credibility in terms of the capacity and reputation of the issuing organization. Accordingly, all investors participating in the transaction are insurance companies and fund management companies belonging to the world's leading insurance groups.
Ms. Carolyn Turk, World Bank Country Director in Vietnam, emphasized that this activity was meaningful before COP28 to support Vietnam's climate goals. The World Bank is pleased to support Vietnam in its efforts to achieve its net zero carbon emissions goal by 2050. Issuing Green bonds by commercial banks is an essential step to achieving the goal. With this Green Bond, BIDV will inspire other corporations and commercial banks to join in greening the economy.