Green finance contributes significantly to sustainable development
Green finance contributes significantly to sustainable development

Make extensive use of resources to develop green financial markets

In the current context, Vietnam is increasingly concerned about environmental issues and climate change. The State has identified green finance development in Vietnam as the right direction to mobilize capital for the green economy, with a strong commitment to the international community on the "zero" economy of greenhouse gas emissions by 2050 at COP26.

Following the publication of the National Action Plan on Green Growth in 2014, Vietnam's legal system on green finance has received attention and development. The Ministry of Finance (MoF) and the State Bank (SB) of Vietnam have issued several decrees and circulars to encourage the development of green finance so that green finance is truly a channel for channeling capital and regulating resources for green development and sustainable development. The policy mobilizes resources from the public financial sector, large financial institutions, and the private sector, microfinance institutions.

However, the development of green finance is a long process, because the awareness of society and the business community about green finance is quite limited. Policies and laws that truly encourage and incentivize the development of green finance, as well as green financial products, are gradually improving. At a recent seminar, Dr. Tran Van, Deputy Chairman of the Finance and Budget Committee of the 13th National Assembly, stated that raising awareness and understanding of green finance, as well as identifying opportunities and challenges in green finance, are critical to moving from awareness to voluntarily prioritizing the use of green products and technologies.

In reality, the green transition and emission reductions to meet Vietnam's Net Zero commitment are a long way off, with numerous difficulties and challenges. Finance Minister Ho Duc Phoc stated that, in addition to public resources, Vietnam has recently mobilized resources from the private sector and international organizations through the formation and development of green financial markets.

According to statistics, Vietnam has issued $1.157 billion in green bonds between 2019 and 2023. Until now, the green financial market in Vietnam has been built on three components: the green credit market, the green stock market, and the green bonds market. The MoF has collaborated with relevant agencies to finalize the legal framework for green bonds. On the market, there are Government bond products, guaranteed Government bonds, and local authorities bonds for "green" projects/works such as irrigation, environmental protection, wind power, and solar energy.

To encourage the growth of the green bond market, the MoF has issued a circular directing green bond issuers and investors to take advantage of a 50% discount on the service price of green bonds on the stock market.

Prioritize the development of a carbon market

With the green finance legal framework promulgated nearly ten years ago, ministries and branches have gradually built and completed regulations on different types of tools such as green bonds, green shares, and green credit to create favorable conditions for businesses to mobilize domestic and international green capital.

According to the SB of Vietnam report, by the end of 2022, credit balances for green projects have reached nearly 500,000 billion VND (accounting for approximately 4.2% of total outstanding loans to the economy). Credit institutions have lent to green projects such as green agriculture, renewable energy, clean energy, and environmental sanitation.

Concerning green bonds, the Hanoi Stock Exchange developed a scheme to develop the green bond market at the end of 2015. The MoF approved the scheme of pilot issuance of green bonds by local authorities in 2016. The vast majority of green bonds have been issued by the Government and local authorities.

In particular in 2018, Ho Chi Minh City issued approximately 3,000 billion VND in green bonds for 34 green projects in the fields of sustainable water management, climate change adaptation, and sustainable infrastructure works.

Nevertheless, the development of green finance still has flaws and limitations, and it will need to make a breakthrough in the near future. Indeed, the growth momentum of Vietnam's green financial market from 2015 to now has resulted primarily from the policy orientation of regulatory agencies such as the MoF and the SB of Vietnam, rather than market forces.

In the upcoming months, the MoF will actively collaborate with relevant ministries and branches to investigate solutions for mobilizing private resources and international organizations for the development of green financial markets. The development of a green financial market and a carbon market must be a top priority. As a result, the policy focuses on developing green and sustainable financial instruments, encouraging municipalities and businesses to issue green bonds, and attracting institutional and individual investors to invest in green financial instruments./.