On the path of innovation, we are transforming growth models in depth, quality and efficiency. However, green finance remains a major concern.
Big challenge in capital
Vietnam has been facing many challenges of climate change due to the increase of a series of extreme climate phenomena, natural disasters, epidemics... in recent years. From the very beginning, our Party and State had profound awareness in setting out policies and orientations for green growth and sustainable development to respond to climate change.
However, Vietnam, like many other developing countries, is facing the challenge of lacking financial resources to address climate change. Green credit has been disbursed in some areas but only accounts for 4.5% of the total outstanding debt of the entire economic sector. Green bonds have issued about 1.16 billion USD of green bonds in the period 2019-2023, this number is still quite modest.
According to estimates by the Ministry of Planning and Investment, the capital demand to implement the National Strategy on Green Growth for the 2021-2030 period could reach about 872 billion USD.
Need to promote investment in climate change mitigation and adaptation activities
In the topic "The role of climate finance in emerging markets" conducted by Ms. Truong Thi Hanh (Faculty of Business Administration, Foreign Trade University), the author outlined a series of policies to promote investment in climate change mitigation and adaptation activities that countries around the world are implementing:
First, targeted lending. Banks are required to allocate a portion of their credit to priority sectors such as agriculture or clean energy. This policy aims to ensure that finance goes to sectors with a major impact on the climate.
Second, green bonds are another financial instrument issued to raise capital for projects that have a positive impact on the environment and climate. They attract the attention of investors who want to support green initiatives. Green bonds are essentially debt issuances in which the issuer commits to using the proceeds to finance sustainable projects.
Third, government-provided loan guarantees are also an important measure, committing to provide guarantees in the event of borrowers defaulting on their loans due to the impacts of climate change. This helps reduce risks for financial institutions and encourages them to invest in climate projects.
Fourth, weather index insurance is a type of insurance that provides payments based on measurable weather conditions, such as drought, to compensate for losses in agricultural production. This insurance works by using specific weather indicators, such as rainfall or temperature, to determine insurance payouts rather than relying on the actual losses suffered by the insured. This policy helps farmers and agricultural businesses mitigate risks related to climate change.
Fifth, the preferential purchase price policy for renewable energy projects provides a fixed price for total electricity consumed per kWh or a fixed surcharge on the retail electricity price for renewable energy projects, ensuring that renewable energy projects can compete with traditional energy sources.
Sixth, national development banks (NDBs) are supported by the Government to promote low-carbon development. NDBs play a key role in providing long-term financing for renewable energy projects, sustainable infrastructure and emission reduction initiatives. By providing concessional loans, credit guarantees and technical assistance, NDBs help reduce financial risks for green projects and encourage private sector participation.
Seventh, national climate funds are funds established by governments to mobilize, distribute and manage finance to address climate change. These funds focus resources on important and priority projects of the country, aiming to mitigate the impacts of climate change and promote sustainable development. National climate funds play a coordinating and financial support role for climate-related initiatives and programs, helping to ensure that financial resources are used effectively and focused on the country's strategic goals.
Eighth, the disclosure policy requires businesses to report on activities related to the environment and climate change. This policy aims to enhance transparency and accountability of businesses, ensuring that investors and the public have sufficient information to make investment decisions.
This disclosure includes not only the environmental impacts of business operations but also the measures the business has taken to reduce emissions and adapt to climate change. By promoting transparency and accountability, this policy contributes to building trust and promoting sustainable business practices.
