Vietnam green capital market capability building event

In July 2021, GuarantCo, through The Private Infrastructure Development Group (PIDG) Institute, organised a two-day virtual Vietnam green capital market capability building event, funded by PIDG Technical Assistance and facilitated by Climate Bonds Initiative. The capacity building event brought together fifty stakeholders from Vietnam interested in raising debt from green and climate capital markets to deliver infrastructure projects in the country.

The need for sustainable infrastructure in Vietnam is rapidly growing. The Government of Vietnam made strong public commitments to clean energy increasing the energy mix towards renewables in its latest national Power Development Plan. With the demand for sustainable infrastructure, green and climate instruments are critical to mobilise capital at the scale and speed needed to satisfy this financing need. Yet, despite interest in recent years, green and climate financing remain in a nascent stage of development in Vietnam with most of the attention on sovereign and quasi-sovereign levels. There has been little or no commercial scale onshore issuance by government, quasi-government, or private sector entities.

At the same time, not only are international investors faced with mandates to increase their portfolio allocation to sustainable assets, investors are also seeking greater line-of-sight on the use of proceeds of their investments. Greenwashing has become an issue of concern. Investors are closely examining the verification and certification provided by international accredited organisations. Alternatively, they are evaluating against their own internal standards to ensure that these standards remain rigorous and adequate.

Whilst the conditions are ripe for the growth of green and climate instruments in the country, local stakeholders, including companies, banks, financial advisers, and arrangers, continue to have reservations about its necessity. This is to be expected given the nascency of such instruments and aversion to ‘first mover’ risk. Companies are interested in having greater clarity on the direct commercial benefits, as well as the requirements to be adhered to during the verification and certification processes. These factors motivated GuarantCo to organise the two-day event to help address such concerns and demystify this new proposition for stakeholders in Vietnam and make green financing successful to the benefit of the country and its people.

Nishant Kumar, Managing Director at GuarantCo

“International investors are becoming more and more conscious about green asset investments because they have the increased mandate from their stakeholders to increase their portfolio allocation to sustainable assets. In Vietnam, we are seeing an increasing interest for green infrastructure assets, where credit is given due consideration by GuarantCo, and this is really been very encouraging for us. However, green financing is still a fairly new development globally, and much more so for Vietnam hence us organising the Vietnam green capital market capability building event to address concerns and demystify this new proposition to help stakeholders better understand the direct benefits, costs and changes that need to be made to make green financing happening.”

Joywin Mathew, Partner Capital Markets and Structured Investments at DLA Piper

“The event was extremely novel in many ways. We all have understood and realised that infrastructure financing is key for the next stage in Vietnam’s development. My main reflection was that Vietnam as a country, and businesses in Vietnam are at an inflection point as far as financing and sources of financing are concerned and green bonds as a product is going to play a very important role in how issuers from Vietnam or borrowers from Vietnam are going to be unlocking funding from the global fixed income markets. Green bond issuances, as we know, has crossed one trillion dollars globally.”

Marika Stocker senior manager, sustainable finance solutions at Sustainalytics

“We see that investments in ESG projects are rising and investors are increasingly seeking green projects to invest in. So, we have to match these two sides to maxmise the potential that the green finance market has in Vietnam. The event has shown that capacity building is crucial and that providing guidance from parties such as GuarantCo, Climate Bonds Initiative, etc is very important to overcoming hurdles when you are at the beginning of your green finance journey.”

Rahul Gosh, Managing Director at Moody’s ESG

“Looking at Moody’s analytics, we find that Southeast Asia has amongst the highest exposure to flooding globally by 2040. We find that nearly 50 percent of agricultural area in Cambodia, Vietnam, and Laos will be exposed to severe flooding over the next couple of decades. So really the need for low carbon climate resilient infrastructure has never been more urgent and events like this are really critical to share expertise, to build capacity and ultimately to demystify the practical elements of issuing green bonds.”

Marco Serena, Head of Sustainable Development Impact at the Private Infrastructure Development Group

“Vietnam’s 2020 national determined contribution talks about nearly 1 billion USD losses per year in Vietnam between 1995 and 2017 due to the effect of climate change. And the plan has very ambitious targets for renewables. We know that there is huge potential in solar, for example, for low carbon transport efficient manufacturing. This will all require very significant investment. We know that there is a deep international capital pool that is looking for opportunities with strong sustainability and green credentials. In the event, we have learned that the regulator is supportive that frameworks have been updated at national and provincial level to provide better incentives.”

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