Greater green finance measures can entice investors

Dr. Can Van Luc, chief economist of BIDV Training School, highlighted these barriers and more at a conference on green finance practices in Vietnam last week.

“Without a clear legal framework, it becomes difficult for financial institutions to align their products and services with green finance principles. The shortage of skilled professionals in green finance hampers effective risk management and assessment. A more cohesive set of incentives is necessary to encourage financial institutions and businesses to engage in green finance,” he said.

Green projects often have long terms of up to 20 years and require large investment costs, while the funding sources from credit institutions are typically short- to medium-term. The mismatch between the long-term nature of green projects and the short-term funding available is a significant barrier, Luc added.

“Raising awareness about the benefits and importance of environmental, social, and governance (ESG) standards is crucial for the widespread adoption of green finance. Many listed companies have not proactively incorporated this into their business strategies and corporate governance. The issuance of green shares is almost non-existent, and sustainable development reporting remains limited,” he explained.

Greater green finance measures can entice investors, illustration photo/ Source: freepik.com

Meanwhile Vu Chi Dung, director of International Cooperation at the State Securities Commission, stated that the legal framework for developing the green capital market in Vietnam was still being finalised.

“A comprehensive legal framework is crucial for the development of a robust green capital market, as businesses must recognise the long-term advantages of adopting sustainable practices.”

Dung pointed out that there were limited incentives for companies to issue and for investors to purchase green financial products. Additionally, there is a lack of active participation from independent assessment service providers before and after issuance.

Dung also proposed several measures to boost the green capital market, such as completing the legal framework through close coordination between ministries, collaborating with the Ministry of Finance to research and complete supportive policy frameworks for the green capital market, and attracting both domestic and international investors.

“International cooperation and comprehensive legal frameworks are key to a successful green capital market, and aligning with international green growth practices will attract more investors,” he added.

Nguyen Ba Son, deputy director of Capital and Monetary Business at BIDV, said that Vietnam’s green taxonomy had not yet been issued. Consequently, the green transition among businesses is limited.

“The absence of a green taxonomy hinders businesses from fully engaging in green transformation,” Son said. “Issuing regulations for green classification and ensuring alignment with international standards is critical, and investor incentives and comprehensive environmental data systems will support the green transition.”

Businesses should also be encouraged to adopt green transformation practices, maintain and expand cost support mechanisms for issuance and technical consultation, and lead the issuance of ESG bonds suitable for their development stages.

“Leading the issuance of ESG bonds and embracing green transformation practices will set a precedent for other companies. Building a robust green transformation strategy and leveraging support from experienced organisations will be crucial,” Son said.

Tran Anh Dao, deputy general director of Ho Chi Minh City Stock Exchange, advised businesses to raise awareness of ESG and sustainable development through training programmes, enhance corporate governance and ESG management capabilities, and adhere strictly to environmental regulations, including greenhouse gas inventory and emissions reduction.

“Businesses must prioritise ESG training and strict adherence to environmental regulations,” Dao advised.

Luc of BIDV Training School suggested establishing a refinancing fund and green credit packages with preferential interest rates to promote green credit. “Creating dedicated green credit packages with lower interest rates can stimulate investment in green projects,” he said.

He also recommended that credit institutions develop dedicated assessment procedures for green credit, create suitable products and services for different sectors, and enhance awareness and training for staff on ESG, renewable energy, and green production and consumption.

Constructing a comprehensive green transformation strategy and seeking support and advice from experienced domestic and international organisations were also recommended.

Opportunities to unlock in Vietnam’s green finance arena In recent years, financial institutions have pivoted from solely emphasising green finance to investing in businesses that both adapt to and mitigate climate risk impacts.

Green finance discord to be addressed Establishing a detailed green classification system and independent evaluation are recognised as key elements for steering Vietnam’s green finance sector in line with international standards.

Experts tackle nation’s sustainable reporting International organisations and associations are working with banks to arrange green finance for the business community, including agriculture, and simultaneously support them to access these crucial capital resources.