IFC’s record climate financing in Vietnam supports green transition

IFC’s record climate financing in Vietnam supports green transition. Photo: baodautu.vn

The new commitments aim to bolster Vietnam's shift towards a low-carbon economy while enhancing private sector resilience and competitiveness.

The IFC’s total commitments in Vietnam reached over $1.6 billion, including more than $750 million in long-term finance, in the fiscal year ending June 30. Notably, a total of $310 million in new long-term financing was committed to projects that will help address climate change and marine plastic waste, a record for Vietnam. The country received the highest volume of the IFC's own-account climate financing in fiscal year 2024 in East Asia and the Pacific.

Investment and advisory programmes in the country also addressed other core development challenges, from food security and trade facilitation to manufacturing competitiveness. Notably, the IFC provided $896 million in short-term trade and supply chain finance to local companies to boost trade flows, helping them grow their businesses and create more jobs.

The IFC supported Vietnam’s first blue bond and green bond issued by SeABank, which will help promote a sustainable ocean economy and increase climate resilience. SeABank was also the first private bank to issue a green bond in the country with the IFC’s support. The IFC also facilitated the Asian Infrastructure Investment Bank (AIIB) to invest $75 million in SeABank climate bonds, alongside the IFC’s own investment.

Setting a precedent, the IFC facilitated the issuance of the country’s first local currency sustainability-linked bonds, issued by BIM Land JSC and its subsidiary, Thanh Xuan JSC, which will help to foster a more sustainable tourism sector. Alongside the financing, in partnership with the Australian government, the IFC supported client banks and companies in the development of sustainable finance frameworks, laying the groundwork to scale up climate investments.

To promote greening the banking sector, in partnership with the Swiss State Secretariat for Economic Affairs (SECO), the IFC supported the State Bank of Vietnam in issuing environmental risk management regulations, which will create a level playing field and help local banks enhance their management systems to mitigate financial risks related to the environment and climate. Additionally, the IFC, along with other development partners, is working with regulators to develop a green taxonomy for Vietnam.

“As a global leader in climate finance, the IFC is well positioned to introduce innovative climate financing instruments to the local market as an alternative source of capital for climate-smart projects,” said Thomas Jacobs, IFC country manager for Vietnam, Cambodia, and Laos. “The IFC's funding will signal the viability of a climate-finance market in Vietnam, encouraging banks to tap into this new segment and pushing real sector investors to align their interests with responsible investment and mobilise funding from sustainable capital markets, supporting the country's low-carbon growth model."

In the real sector, IFC advised agribusinesses on sustainable-rice farming and manufacturers in hard-to-abate industries on adopting greener solutions. With the IFC’s support in the improvement of Vietnam's legal framework for carbon markets, a revised decree on GHG emissions mitigation and the development of carbon markets is expected to be issued soon. Efforts are also focused on promoting GHG reduction measures in the livestock sector and facilitating Vietnamese livestock companies to participate in the carbon market after adopting carbon emissions mitigation.

Supporting small- and medium-sized enterprises, including women-owned businesses, the backbone of Vietnam's economy, the IFC partnered with VPBank to set up a $30 million supply-chain finance facility to back local importers and exporters. A $60-million platform, co-funded by the IFC and Welcome Financial Group, aims to help financial institutions resolve their non-performing loans, freeing up capital for new lending and allowing defaulted borrowers to rebuild their creditworthiness.

“As Vietnam advances on its path to becoming a high-income economy, the private sector has a critical role to play in driving sustainable economic growth,” Jacobs added. “The IFC’s robust programme in the last fiscal year is a testament to our commitment to supporting Vietnam in building a more resilient and greener economy that can navigate both global and domestic challenges.”

The IFC committed a record $12.2 billion to 123 projects in Asia-Pacific in fiscal year 2024, an 11 per cent on-year increase. The IFC’s projects delivered significant impact across the region, addressing pressing development challenges, including climate change, gender inequality, food security, and financial inclusion, while creating jobs and improving services.

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