Green bonds are also a debt tool for raising capital like other types of bonds, but the proceeds from green bond issuance must be used for green projects. This will be an important capital attraction channel for investors interested in sustainable development factors, especially in the context of climate change, floods … recent complicated developments, creating conditions to attract large capital from society to implement green growth, sustainable growth in the future.
If in the early stages of the emergence, the popularity of green bonds is not widespread, then now investors’ interest in green bonds is growing rapidly, because they understand that the process of climate change is a new variable in investment returns, That needs to be taken into account. More and more investors are starting to include risk assessments of climate change in their investment strategies.
Green bond trends in the world
According to the International Energy Organization (IEA), to halve global emissions by 2050, the world will need $46 trillion, or $1 trillion a year. In this context, green bonds (TPX) are seen as a new channel of capital attraction and an effective solution, which can help raise hundreds of billions of dollars a year for the development of a green and sustainable economy.
As defined by the Climate Bond Initiative (CBI), TPX is a bond issued to raise capital for climate change solutions issued by the government, bank, locality or business, labeled TPX as a debt securities including securitization, issued individually, secured bonds,… as well as green-labeled loans that comply with the Green Bond Principles (GBP) or green loan principles (GLP). The CBI categorizes TPX by eight sectors: energy, buildings, transport, water, waste, naturally sourced assets, industry and information technology (ICT).
TPX market development mechanisms and policies in Vietnam
According to research by international organizations and Vietnamese authorities, Vietnam is a country that can suffer losses of about 15 billion USD per year due to climate change, equivalent to about 5% of GDP and 20% of the population affected by the increase of variable water levels, the area of cultivation is reduced due to flooding and mangroves. According to estimates by the German Organization for International Cooperation (GIZ), Vietnam needs about $30.7 billion by 2020 and needs about $21.2 billion over the next 10 years to drive sustainable economic growth. It can be seen that the demand for capital for green growth is very large, while it is expected that only about 30% of the capital comes from NSNN (including the central budget, provincial budget and informal development aid), the remaining 70% will come from the private sector. Therefore, the capital market, especially the bond market with the TPX highlight is being seen as a new and effective capital attraction channel to realize the green growth and sustainable development goals.
Over the past time, the Government has issued many policy mechanisms oriented to the development of the TPX market. In particular, the National Strategy on Green Growth in the period of 2011 – 2020 and the vision to 2050 (Decision No. 1393/QD-TTg dated September 25, 2012 of the Prime Minister), the National Action Plan on Green Growth (Decision No. 403/QD-TTg dated September 20, 2014 of the Prime Minister) have been determined since 2012, Vietnam has been oriented towards green finance and green financial products for Vietnam’s stock market to create financial resources for green growth.
On the basis of Resolution No. 24-NQ/TW dated June 3, 2013 of the 11th Central Committee on proactively responding to climate change, strengthening resource management, health insurance and the national strategy on green growth, on October 20, 2015, the Ministry of Finance issued Decision 2183/QD-BTC approving the action plan of the financial sector to implement the National Strategy on Growth. Green until 2020. Accordingly, the Decision clearly states the development and completion of the financial policy framework, in order to develop green capital markets and green financial products, including: Establishing a green financial framework for activities in the capital market such as promulgating regulations and conditions when listing stocks (green listing), reports (in sustainability reports) and monitoring (according to green financial criteria); mobilize investment capital for green growth through capital markets for green businesses, projects and products, list and issue TPX for green projects, programs and sectors… Along with the above documents, the Prime Minister’s Decision No. 1191/QD-TTg dated August 14, 2017 approving the roadmap for bond market development in the period of 2017-2020, the vision to 2030 has created an important legal basis for the development activities of the TPX market in Vietnam. According to this Decision, mechanisms and policies on TPX market development are developed in the direction of facilitating TPX capital mobilization entities to implement green projects.
Recently, in the Government’s Decree No. 163/2018/ND-CP dated December 4, 2018 on the issuance of corporate bonds, the concept of “Green corporate bonds are corporate bonds issued to invest in environmental protection projects in accordance with the Law on Environmental Protection” as well as the principle of issuance and use of TPX capital; publishing information before the release, periodically publishing information,… In addition, according to the provisions of Decree No. 95/2018/ND-CP on issuance, registration, depository, listing and trading of government debt instruments on the stock market, TPX is a type of government bond issued to invest in projects related to environmental protection activities as prescribed in the Law on Environmental Protection (green projects) and is included in the Law on Environmental Protection (green projects) and is included in the list of projects shall be allocated public investment capital in accordance with the Law on Public Investment and the Law on State Budget.
TPX development solutions for renewable energy projects
The International Finance Organization (IFC) forecasts that Vietnam’s total investment potential in climate-related projects could reach US$753 billion between now and 2030, of which US$59 billion will be invested in renewable energy and US$80 billion in green building projects. So the space for TPX is huge. In order to develop the TPX market in general and promote the issuance of capital-raising bonds for renewable energy projects in particular, it is necessary to focus on implementing some of the following solutions:
First, continue to finalize the legal framework on TPX. In China’s experience, enacting policies to perfect the regulatory environment for the official development of the TPX market is really necessary. Therefore, the Central Bank of China has issued a Directive on TPX which stipulates some basic contents such as the concept of TPX, the list of industries that are raised capital from TPX, the subject is allowed to issue TPX, the issuance procedures, principles in the process of using and managing revenues from TPX … Therefore, the Government continues to have more specific guidelines on TPX. In which: (i) complete the project of government bonds, green local government bonds clarifying TPX criteria, development roadmap, industry/investment sector. The development of green local government bonds to invest in green projects/programs or soft infrastructure under the task of SSNN expenditure is a trend used by many countries around the world in the early stages of building the TPX market; (ii) guidance on mechanisms for reporting and publicizing information on the issuance and management of the use of bond capital for green projects and mechanisms for issuance, management and supervision of capital sources using TPX; (iii) to study and finalize the provisions of the securities law on products of the green capital market, the requirement for publication of ESG related to corporate governance, the set of criteria for information disclosure of green projects, the list of green projects prioritizing the use of TPX … to be transparent and improve the responsibilities of issuers; (iii) construction and development of TPX market, investment certificates for green projects, construction of green index sets…; (iv) promulgate the Code of Investment for Responsibility to request listed companies to provide comprehensive reports on the company’s social and environmental activities and risks, as a basis for investors to identify the main sectors that meet the funding and investment standards from TPX…
Secondly, continue to implement financial policies to encourage enterprises to mobilize investment capital for green growth through the issuance and listing of bonds and green stocks. At the same time, it is necessary to have mechanisms to encourage and support enterprises and investment funds in procedures and investment mechanisms favorable when issuing bonds and investment fund certificates for green projects, programs and sectors. In addition, in order to promote liquidity for TPX, there should be a mechanism to accept the use of TPX in open market operations with a higher discount rate than other bonds of the same type; allow credit institutions to use TPX (government-guaranteed bonds…) as mandatory reserves.
Thirdly, to further study preferential policies for TPX issuance such as (i) researching incentive mechanisms, supporting enterprises, investment funds on procedures, favorable investment mechanisms when issuing TPX such as simplifying bond issuance procedures, shortening the approval period for TPX issuance… (ii) applying interest rate support policies to TPX based on specific criteria on issue value and term; (iii) study tax and fee policies to encourage enterprises to mobilize investment capital for renewable energy projects through the issuance and listing of TPX; (iv) study the mechanism for accepting the use of TPX in open market operations at a higher discount rate than other bonds of the same type; allow credit institutions to use TPX (government-guaranteed bonds…) as mandatory reserves to increase liquidity for TPX.
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