People are not only seeking clean air and water but also demanding products and services that uphold environmental integrity. Responding to this imperative, the financial market has swiftly embraced the concept of green and sustainable development, introducing a range of corresponding financial instruments.
The Challenges Arising from Awareness
In 2007, the European Investment Bank (EIB) marked a turning point by issuing the inaugural batch of EUR 600 million in green bonds, dedicated to investments in renewable energy. Subsequently, in 2008 and 2010, the World Bank (WB) and the International Finance Corporation (IFC) entered the scene, issuing fixed-interest bonds tailored for environmentally-conscious investors.
According to the Climate Bonds Initiative (CBI), the issuance of green bonds had reached a staggering USD 2.334 billion by 2023, constituting 5% of the global debt market value. Predictions suggest this figure could surge to USD 5 trillion by 2025. These green bonds predominantly funnel investments into renewable energy, zero-carbon transportation, waste management, and related sectors. Notably, the United States, China, France, Germany, and the Netherlands lead the charge in green bond issuance.
Apart from green bonds, a variety of other bond types have emerged, encompassing climate, social, and environmental objectives, as well as sustainable development and projects focused on nature conservation, societal advancement, and public governance (ESG).
Vietnam's Vulnerability and Commitment
Vietnam, acutely susceptible to climate change, faces the possibility of losing 5% of its land area should sea levels rise by 1 meter. Erosion along riverbanks and coastlines, coupled with subsidence, are becoming increasingly dire. Data from the Ministry of Natural Resources and Environment over a decade (2012-2022) reveals that subsidence in the Mekong Delta is outpacing sea level rise by 3 to 10 times, a result of both land subsidence and rising sea levels. Experts warn that a temperature increase of 1.5ºC and 2ºC globally could inflict direct GDP losses of 4.5% and 6.7% on Vietnam, respectively, potentially escalating to 30% in indirect losses by 2050.
Amid this landscape, Vietnam has amplified its focus on environmental and climate issues, pledging at COP26 to transition to a greenhouse gas-free economy by 2050. Consequently, the country has identified the advancement of green finance as a pivotal strategy to harness capital for sustainable growth. With the establishment of the National Action Plan on Green Growth in 2014, Vietnam has begun to foster the legal framework for green finance. The Ministry of Finance and the State Bank have issued a series of decrees and circulars to promote green finance, aiming to channel funds towards sustainable development and eco-friendly initiatives, spanning public financial sectors, major financial institutions, and microfinance entities.
Nevertheless, awareness about green finance within Vietnamese society and the business community remains relatively limited. Existing policies and laws have yet to offer substantial incentives for green finance, and the availability of green financial products is somewhat restricted. Moreover, these products have not comprehensively supported green projects and eco-friendly goods. Nurturing awareness, understanding, and recognition of green finance's potential is critical for the transition from awareness to active adoption of green technologies and products.
Empowering Ho Chi Minh City's Resolution 98
Vietnam's green growth strategy for 2011-2020 and its vision for 2050 center around three core objectives: reducing greenhouse gas emissions, promoting clean and renewable energy, fostering eco-conscious production, and encouraging sustainable consumption. In line with this, Ho Chi Minh City is ambitiously crafting itself into a green growth metropolis, leveraging the guidelines set by Resolution 98/2023/QH15 of the National Assembly. This directive enables the city to initiate projects that mobilize local government green bonds and encourage businesses to issue green corporate bonds aligning with eco-friendly goals, programs, and projects meeting stringent green development criteria.
For instance, Ho Chi Minh City can take the lead by issuing local government green bonds to partially or wholly fund various projects, including investments in renewable energy like offshore wind farms in the Can Gio sea area and solar panels on rooftops across industrial zones, as well as supporting initiatives to transition to green and clean energy sources. Public lighting powered by renewable energy, envisaging a twofold increase in city illumination over a decade, holds immense promise. This extends to artistic lighting for historical landmarks, bridges over the Saigon River, and canal-side areas, contributing to enhanced safety, tourism, and nighttime economic activities.
The management of waste is another promising area. As the city witnesses a forecasted surge in daily domestic waste from 10,000 to 15,000 tons by 2030, there's a shift toward waste-to-energy generation as opposed to conventional burial practices. With the community's active involvement in waste segregation and the city's policy to establish waste-to-energy projects, including public-private partnerships, the potential is substantial.
Infrastructure, particularly in the realm of transportation, demands green investment. Initiatives range from expanding public passenger transportation systems, incorporating electric and hydrogen-fueled buses and taxis, to developing light rail systems that integrate with the Long Thanh International Airport and urban metro lines.
Efforts are also needed in architectural and civil engineering, promoting sustainable design practices that minimize greenhouse gas emissions and energy consumption. This involves green space planning and innovative infrastructure integration, including underground commercial spaces, parking facilities, and parks that double as flood regulation zones.
Additionally, supporting the production and consumption of eco-friendly products and services, enhancing urban greenery and forest cover, and wisely managing land and water resources for both agriculture and urban development are crucial components of the green finance strategy. Encouraging technological innovation and facilitating the upgrade of waste management facilities, emission controls, wastewater treatment, and pollution-mitigation equipment must not be overlooked.
The Path Forward for Ho Chi Minh City
For the comprehensive deployment of green finance, Ho Chi Minh City must lay down mechanisms, policies, and legal frameworks that nurture the green bond and stock market. This will stimulate participation from individuals and businesses, all while upholding the principles laid out in the 15th National Assembly's Resolution 98. To achieve this, reference to relevant legal provisions like the Law on Planning, the Law on State Budget, the Law on Public Investment, the Law on Public Debt Management, and the Law on public-private partnership investments is imperative. This collective approach ensures meticulous, reasonable, and lawful planning, garnering widespread social support.
As central budget contributions to investment expenses are projected to decrease to around 20% by 2022, from 40% seven years earlier, the significance of local government involvement is heightened. With approximately 80% of public investment directed through local governments in the period of 2017-2022, Ho Chi Minh City's initiative becomes increasingly pivotal.
The city's endeavors can commence with the publication of a comprehensive list of green projects, complete with investment particulars and assessments by financial institutions, independent consultants, and governmental bodies concerning adherence to green standards, capital mobilization, interest rate determination, and debt repayment terms. This groundwork facilitates capital mobilization through green government bonds or bonds issued by project-specific enterprises. Significantly, the receptivity of the populace and the business community towards green development, underpinned by a commitment to safeguarding the environment and combating climate change, stands as a cornerstone for active involvement and meaningful impact.
