Improving legal framework, ensuring accessibility to green bonds

VCN - This is the recommendation of Mr. Nguyen Tung Anh (photo), Head of Credit Risk Research and Sustainable Financial Services (FiinRatings) in an interview with Customs Magazine reporters about green bond market development in Viet Nam.
Capital market suffers from difficulties, businesses expect to access new capital mobilization channels Capital market suffers from difficulties, businesses expect to access new capital mobilization channels
Many obstacles and bottlenecks for the green credit market, green bonds in Vietnam Many obstacles and bottlenecks for the green credit market, green bonds in Vietnam
Việt Nam Việt Nam"s second largest green bond issuer in 2021
https://haiquanonline.com.vn/hoan-thien-khung-phap-ly-dam-bao-de-tiep-can-trai-phieu-xanh-184949.html

Could you tell us about the current development situation of green bond in Vietnam?

- In the world, green bond issuers implement principles according to two main standards: Climate Bond Standards (CBS) of the Climate Bond Initiative (CBI) and Green Bond Principles of the International Capital Market Association (ICMA). In particular, CBI's CBS is considered the most prestigious and popular standard in the world in certifying green bonds.

With the characteristic of clearly defining the purpose of capital use, green bonds play an important role in sustainable development. Green assets and projects such as renewable energy, afforestation, waste treatment, etc. are long-term in nature and require the participation of the private sector to reduce the burden on public investment. This is also the characteristic of bonds, so when combining with impact investment factors from domestic and foreign investment funds and institutions, the above projects and assets can receive stable investment at a reasonable cost, reducing credit risk and increasing project success.

Green bonds in Vietnam are counted as bond batches issued in VND in the domestic market, meaning there are also pioneers in issuing green bonds and borrowing green loans but they are in foreign countries while domestically, so far only more than 3,650 billion VND of green bonds have been issued by EVNFinance and BIDV. Thus, currently there are only two batches of green corporate bonds according to international standards issued in the domestic market. However, many credit institutions and businesses have begun to pay attention and devote resources to attracting attractive and potential green capital flows. An issue raised is ensuring the transparency and effectiveness of green bonds as well as building a transparent image with the international market, so the application of international certification standards is an inevitable trend.

In your opinion, why is the volume of green bonds issued still modest?

- Vietnam's green bond market is still facing many challenges. Main barriers include lack of legal framework as well as market incentive policies, limited information and data and lack of understanding of stakeholders about green bonds. Up to now, only FiinRatings (in 2022) has become the first Vietnamese organization authorized by the CBI to certify green bonds according to international standards. This event marks an important milestone, opening up an opportunity for Vietnamese businesses to access green capital from domestic and foreign investors.

To promote the development of the green bond market in Vietnam, raising awareness and understanding of green bond standards or principles in the business and investor community is extremely necessary. Along with that, the Government and management agencies also need to build a clear and consistent legal corridor, creating favorable conditions for the application of international standards in Vietnam.

To promote the development of the green bond market, what are the bottlenecks that need to be removed first, sir?

- Even though it is a certification activity according to international standards, businesses in Vietnam still tend to wait for the Government's orientation and recommendations so that when implementing, they will not be entangled with regulations in the future. Many potential green bond issuers say they want to participate in the green finance market, but still want to wait for the issuance of the Green List so that they are confident in bond issuance, because otherwise they can still mobilize capital from other sources, rather than issuance of green bonds.

Therefore, the most important recommendation currently is to improve the legal framework on green bonds, clarify the concepts, criteria and certification process of green bond in accordance with international practices and domestic conditions. This is not a simple task, because the rules must be both strict enough to avoid "greenwashing" and accessible and clear so that the market is not afraid of increasing resources and costs for preparation work. Vietnam needs to develop a classification list of green projects eligible for bond issuance according to environmental criteria in accordance with international standards and the country's practical situation. This list will be an important basis for issuers, investors and regulators to identify, evaluate and monitor projects funded by green bonds, ensuring greenness and positive impact on the environment.

After taking initial steps such as the Green List, the Government may need to have preferential policies on tax and fees for green bond issuance and investment activities, creating motivation for the market. developments such as: reducing corporate income tax, reducing depository fees, listing fees, transaction fees for green bonds according to domestic and international standards. However, this is also an issue that needs to be carefully researched, because the role of the independent certifying party will play an important role in determining whether issuers of green financial instruments will have access to preferential policies or not.

Could you detail more about solutions to encourage green bond investment in Vietnam?

- Bonds that comply with international standards will be the subjects of support and encouragement to create a premise for developing the green bond market in Vietnam. Solutions include financial and non-financial solutions.

Regarding financial solutions, along with incentive policies on taxes and fees, it is necessary to consider supporting the costs of building a Green Financial Framework and the costs of green bond certification according to international standards; require/encourage banks to allocate their credit norms to green projects and buy green bonds to boost supply; provide interest subsidies for green projects financed by green bonds.

Regarding non-financial solutions, it is necessary to honor and recognize pioneering businesses and financial institutions in the field of green finance and issuing green bonds; recognize and encourage green bond batches that comply with regional and international standards and principles; improve transparency in information disclosure, clearly distinguish and record green bond lots compared to conventional bonds

With synchronized efforts from the Government, management agencies, businesses and other stakeholders, it is expected that the green bond market in Vietnam will grow, becoming an effective green capital mobilization channel, contributing to the country's energy transition and low-carbon economic development.

Thank you Sir!

By Thu Hien/ Huyen Trang

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