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Vietnam ranks second in ASEAN in terms of green debt development

14:07 | 28/06/2022

VCN - The Climate Bonds Initiative and HSBC have just released the ASEAN Sustainable Finance - State of the Market 2021 report, with many figures showing the strong growth of the sustainable debt capital market across ASEAN and Vietnam in particular.

HSBC is one of the banks that actively participates in the development of a sustainable financial market for Vietnam
HSBC is one of the banks that actively participates in the development of a sustainable financial market for Vietnam

Accordingly, the issuance volume of ASEAN's sustainable debt capital market is growing strongly, setting a record in 2021. In particular, the green, social and sustainable (GSS) segment reached US$24 billion, an increase of 76.5% compared with US$13.6 billion in 2020, and sustainable links reached US$27.5 billion, increasing by 220% compared to US$8.6 billion in 2020.

In Vietnam alone, the total value of GSS reached US$1.5 billion in 2021, increasing nearly five times compared to US$0.3 billion in 2020 and maintaining stable growth for three consecutive years. The majority of green bonds and loans in Vietnam in 2021 came from the transportation and energy sectors.

According to the report, Vietnam is the second largest source of green debt issuance in ASEAN, reaching US$1 billion, after Singapore. The two largest transactions that account for the majority of Vietnam's total GSS value are US$425 million in sustainable bonds with stock options in Vinpearl's Vingroup, and a US$400 million green loan from VinFast. This is the value at the time of the transaction announcement in December 2021. The transactions have received great interest from the market, helping to increase the loan size to US$500 million when the transaction closes.

In the bond issuance transaction of Vinpearl, HSBC played the role of a sustainable structure consulting bank and also supports Vingroup in building a sustainable financial framework. In the green loan transaction for VinFast, HSBC acts as a sustainable financial advisor and co-guarantor, arranging capital and bookkeeping, structuring and providing competitive financial solutions for both Vingroup and VinFast.

The report showed that Vietnam's bond market has grown to over US$70 billion in 2021. More than 80% of the issuance is government bonds, while development banks are the second largest issuer group. At the end of 2020, the National Assembly of Vietnam passed the Law on Environmental Protection 2020 with some important amendments. The innovation points including the supplement of definitions, general requirements for green bonds and the incentives applicable to issuers following the regulations will be specified in the documents issued together with the Law. Vietnam is developing a Classification System that will be enacted into law. The new law is expected to be promulgated this year.

2021 is also the year when a number of ASEAN countries announced their emissions reduction commitments and set new emission balance targets. Specifically, Vietnam announced its commitment to achieving the emission balance target by 2050 at COP26. This ambitious commitment will contribute to a stronger push to mobilize capital through sustainable financial markets to accelerate carbon reduction.

HSBC Vietnam General Director Tim Evans said HSBC is actively participating in the process of developing a sustainable financial market for Vietnam. In particular, the bank has supported Vinpearl - a member of Vingroup, to issue US$425 million in sustainable bonds with the option to receive shares of Vingroup. This is the world's first sustainable bond that has the right to choose stock.

According to Mr. Tim Evans, all forms of sustainable finance are geared towards the common goal of helping Vietnam realize its goal of achieving carbon neutrality by 2050, according to Vietnam's commitments announced at COP26. Although sustainable financial markets are growing in Vietnam and ASEAN, the need of deploy funding to mitigate and help countries adapt to climate change remains very high. The financial mobilization will support the transition to a low-carbon economy that is essential to achieving the Paris Agreement goals, as well as mitigating the severe impacts of climate change in the ASEAN region and worldwide.

By Nguyễn Hiền/Thanh Thuy