Vietnam needs comprehensive regulatory framework to attract green financing

Vietnam needs a clear regulatory framework and solutions to promote the green finance market and encourage private capital flows into green fields, experts have said.

Speaking at the 2024 Green Finance Forum held by Thoi bao Tai chinh Viet Nam (Vietnam Financial Times) in Ho Chi Minh City on July 22, they pointed to the fact that green credit, or sustainable finance, has become a crucial element of the global financial system.

It contributes to resolving environmental challenges and enhancing resilience to climate change.

The delegates said in Vietnam green finance is an imperative to achieving sustainable development and net zero emissions by 2050 as committed by the Government.

Dr Can Van Luc, a member of the National Financial and Monetary Policy Advisory Council, said as of March 31 this year outstanding green credit was 637 trillion VND (24.9 billion USD), or 4.5% of total banking loans outstanding.

Referring to green bonds, he said the country issued 1.16 billion USD in the 2019-2023 period, just a fraction of the 20 billion USD demand annually.

Globally, sustainable bonds totalled 939 billion USD in 2023, he said.

Commenting on the opportunities in Vietnam, he said green finance is an inevitable trend and the legal framework for green credit, stocks, bonds, and investment funds is gradually being made comprehensive.

He emphasised that the country would need huge funding for energy conversion, reducing carbon emissions, waste management, and other tasks needed to achieve net zero emissions.

Credit institutions need to develop an appraisal process specifically for green credit, and have appropriate products and services for borrowers’ various needs, he said.

Vu Chi Dung, director of the State Securities Commission’s International Cooperation Department, said the inadequate legal framework and businesses’ failure to fully understand the long-term benefits of sustainable development and know about green finance are among the hurdles to developing the green capital market in Vietnam.

There is also a lack of policies and mechanisms to encourage businesses to sell green financial products, there are few investors in this sector and there is no active participation by independent assessors, he added.

Promoting the green capital market needs a comprehensive legal framework and policies to create favourable conditions for issuance organisations and attracting investors, he said.

Sustainability is an inevitable trend, and businesses must change to integrate environmental, social and governance factors into business operations because it would help them increase their competitiveness and access to green capital, he said.

Echoing Dung, Tran Anh Dao, deputy general director of the Ho Chi Minh Stock Exchange’s executive board, said to mobilise green finance businesses need to raise awareness about ESG and sustainable development.

Meanwhile they need to strictly comply with environmental regulations such as greenhouse gas inventories and mitigation of emissions, she added./.