Untying the knot for green finance

Attracting green capital provides TTC AgriS with additional resources for its sustainable development goals. In the photo: TTC AgriS's raw material area in Tay Ninh. Photo: TL

Green resources for businesses

As an agricultural exporter to the international market, TTC AgriS has always identified a "green" business strategy as its guiding principle since its inception, maintaining and strengthening it for over half a century. Currently, the company has nearly 72,000 hectares of green material areas across four countries: Vietnam, Laos, Cambodia, and Australia. The company also diversifies its product value chain from crops to utilize resources and minimize waste and byproducts during production.

Speaking at the "HCMC - Removing Obstacles for the Green Economy" forum held in Ho Chi Minh City last weekend, Ms. Dang Huynh Uc My, Chairwoman of TTC AgriS, stated that due to this green strategy, many financial institutions have invested heavily in TTC AgriS, with hundreds of millions of USD. Thanks to this "green" resource, Ms. My affirmed that Vietnamese agriculture has the opportunity to implement green standards and thereby meet the requirements for entering demanding export markets. TTC AgriS has set a target to achieve Net Zero by 2035.

To achieve carbon neutrality and green growth, developing green finance is one of the government's priorities. This is reflected in numerous legal documents creating a legal framework for green finance development, such as Government Decree 06/2022/ND-CP, Prime Minister's Decision 01/2022/QD-TTg, and Decision 1009/QD-TTg of 2023.

According to the State Bank of Vietnam's report, during 2017-2023, outstanding green credit balances continuously grew at an average rate of over 22% per year. As of March 31, 2024, 47 credit institutions had outstanding green credit balances totaling nearly VND 637,000 trillion, primarily focused on renewable and clean energy sectors. Vietnam also issued USD 1.157 billion in green bonds between 2019 and 2023.

In recent years, from 2022 to 2024, many Vietnamese companies have successfully issued green bonds. For instance, in 2022, Electricity Finance Joint Stock Company (EVNFinance) issued USD 73.7 million in green bonds. In 2023, BIDV successfully issued VND 2.5 trillion in green bonds following the International Capital Market Association (ICMA) Green Bond Principles. In late November 2024, Vietcombank successfully issued VND 2 trillion in green bonds to finance environmental protection and environmentally beneficial projects.

An IFC report estimates that Vietnam's climate investment opportunities could reach USD 757 billion by 2030, focusing on energy, transportation, and green building.

Early completion of the legal framework

Despite these initial positive results, Ms. Nguyen Thi Viet Ha, Acting Chairwoman of the Ho Chi Minh City Stock Exchange (HoSE), believes that green finance still faces many obstacles. Regarding policy mechanisms, a green classification list hasn't been issued, and green classification criteria lack consistency. Tax and fee incentives for green financial products remain incomplete. Operationally, there's a shortage of dedicated ESG personnel and industry experts for green project evaluation and appraisal. Businesses have limited awareness and haven't prioritized sustainable development, greenhouse gas inventories, or transparent and accurate emissions disclosure.

Regarding the lack of green classification standards, Dr. Bui Duy Tung from RMIT University Vietnam cited a Ministry of Finance report indicating that over 50% of financial institutions face difficulties in determining the risks and potential of green projects, primarily due to a lack of detailed guidance.

According to Dr. Tung, the impact of this missing legal framework and classification standards is substantial. Businesses and banks face higher credit risks due to the inability to accurately identify truly green projects. This not only reduces capital allocation efficiency but also increases the risk of "greenwashing," eroding trust in the green finance ecosystem.

There's also a lack of diversity in green financial products, including green bonds, green credit, and other sustainable financial instruments. Outstanding green credit only accounts for about 4.2% of the economy's total outstanding credit during 2017-2022. This indicates that Vietnam's green finance market is still nascent and unable to meet the enormous capital demand for achieving the 2050 net-zero emissions target.

While some initiatives have been implemented, such as Ho Chi Minh City issuing VND 3 trillion in green bonds for 34 projects, the scale remains small compared to the total investment needs in renewable energy, sustainable transportation, and waste management.

"Many financial institutions hesitate to participate in the green finance market due to a lack of personnel and skills, while businesses lack the motivation to improve their management capacity and ESG integration. This slows down the development of green finance in Vietnam and creates dependence on traditional capital, which is more expensive and less sustainable," Dr. Tung shared.

Based on these realities, to unlock green finance, Ms. Ha suggests that the government should promptly complete the policy framework and implement policies promoting sustainable finance. This includes strengthening training, raising awareness, encouraging businesses to disclose information and practice ESG, promoting green transition, and publishing information in English. Proactively improving human resources in terms of awareness and ESG risk assessment is also essential.

Regarding HoSE, Ms. Ha stated that they would improve the stock selection rules for the sustainable development index to ensure that green and sustainable assessment criteria align with national and international standards, making it a preferred index for investment funds targeting green businesses. They will also enhance training and awareness for listed companies, encouraging ESG information disclosure and practice, green transition, and English language reporting.

Dr. Tung also emphasized the urgent need to establish a green classification standard system based on international best practices to ensure transparency and practicality. Vietnam also needs to enhance its ability to mobilize international capital to finance large-scale green projects. The government should focus on developing model projects that meet international standards and utilize technologies like blockchain for tracking and transparency.

Regarding the legal framework, Mr. Nguyen Duc Lenh, Deputy Director of the State Bank of Vietnam in Ho Chi Minh City, stated that the State Bank would issue preferential interest rate policies for green loans, encouraging banks to increase lending in this area. They will also develop a credit guarantee mechanism for green projects to mitigate risks for banks and establish a robust monitoring system to ensure that green loans are used effectively for their intended purposes.