Many concepts of green finance
Speaking at the Workshop "Unblocking green credit flows" organized by Lao Dong Newspaper in coordination with the State Bank of Vietnam on the afternoon of April 25, Mr. Nguyen Ba Hung, Chief Economist in Vietnam, Asian Development Bank (ADB) - said that currently, the concept of green finance is very common, sometimes inconsistent.
Green finance must come from finance, in addition to adding some concepts related to the environment and climate (reducing CO2 emissions, adapting to climate change). Next is the social factor related to gender or the interests of groups related to difficulties in society. Sustainability criteria combine green and social, the governance factor tends to be broader in ESG.
Next is the energy transition, businesses prioritize emission reduction, aiming to reduce emissions by 0. However, for industries that use a lot of fossil energy, immediate conversion is very difficult. Therefore, businesses can switch to intermediate forms of energy, although it is still fossil energy, but at a lower rate. This is not a destination but a step of energy transition.
Assessing the green financial market, Mr. Nguyen Ba Hung said that each subject plays a different important role. A very important subject is finance - banks and financial institutions, but the green factor is still new. Previously, when finance had not discussed the green factor, most credit institutions considered the ability of businesses to do business effectively and repay debts.
The difference between green finance and regular finance is that credit institutions (CIs) must know what credit is used for and whether the activities meet green standards or not. This is a new factor for credit institutions. The production activities of enterprises themselves must be green and enterprises must prove this based on general criteria and conditions.
20 years ago, Vietnam's emissions/GDP ratio was the lowest in the region. However, in recent years, Vietnam has been among the highest countries in the region. This shows that our time of industrialization is increasing very rapidly. However, the industrialization process uses more energy emissions, leading to an increase in emissions/GDP units. Meanwhile, other countries in the region are showing a downward trend.
For emissions/energy consumption units, about 20 years ago, Vietnam was also the lowest in the region. However, in recent years, it has been one of the highest rising countries in the region. Vietnam is in the upward trend, countries in the region are tending to decrease. Green conversion in Vietnam is not subjective wishes but has become an objective requirement ” - Mr. Nguyen Ba Hung emphasized.
Vietnam has not yet finalized the legal framework for green finance
More information about the green financial market in the world, Mr. Nguyen Ba Hung said that the green financial market has many different products such as green credit, green bonds, social loans, sustainable loans ... The first time of green finance in the world mainly goes from green bonds. However, recently, green credit products have caught up with green bonds.
Europe is still a leading region in green finance. Next is Asia Pacific. ASEAN+3 countries have tended to grow green finance in recent years very dynamically, higher than the world average growth rate.
Countries in the ASEAN+3 region have issued a relatively legal framework on green finance, but Vietnam has not yet finalized it for promulgation. Therefore, Vietnam needs to quickly complete the legal framework on green credit and develop green classification criteria.
Currently, financial institutions around the world have 2 different ESG assessment frameworks. From a market perspective, when looking at the green financial and sustainable finance markets, they clearly assess the financial and green aspects. Assessing financial credit is easy because there are clear profit and debt collection assessment indicators. However, in the green and sustainable part, organizations are also gradually introducing ESG assessment indicators for assessment" - Mr. Hung said.
According to Mr. Nguyen Ba Hung, green finance is an inevitable development trend, not only an option but an urgent requirement to ensure a sustainable future. The green finance market in the world is very vibrant. Surrounding countries have also gradually introduced measures to assess green finance. This transformation is driven by the combination of economic, social and environmental factors, creating a strong driving force for restructuring the global financial system.
Mr. Hung said that Vietnam needs to unify how to be green and what does green transformation mean. Outstanding green credit last year accounted for 4%, this is not a large number but the increase trend is relatively steady, it is expected to increase faster. In addition to this green credit, there is also 21% of total outstanding loans with an ESG risk assessment. Vietnamese credit institutions have gradually assessed production and business activities as contributing to the environment and society of enterprises.
In the coming time, Vietnam needs to complete the legal framework for green credit and improve the capacity of financial institutions. Raising awareness and participation of businesses and people. Credit institutions cannot decide whether a green project is or not, so businesses must prove that they are green.
Vietnam needs to continue to attract and exploit international green capital. In the country, investors do not focus much on green, while the world has a lot. Finally, it is necessary to prioritize key areas and risk management" - Mr. Hung recommended.
