![]() This bullishness is worth caveating, however, by noting market volatility and investor sentiment affect the greenium. ![]() 3 Yevheniia Antoniuk and Thomas Leirvik, “Climate Transition Risk and the Impact on Green Bonds,” Journal of Risk and Financial Management, Volume 14, Number 12, December 10, 2021. Research also suggests green bonds slightly outperform their conventional peers (for both municipal and corporate bonds). 2 Julio Suarez, “Q4 20 Full Year ESG Finance Report: European Sustainable Finance,” AFME, February 23, 2022. First, banks will not lose fee income because they choose to issue green bonds-in fact, green bonds enjoy a slight premium (a “greenium”) compared with their conventional equivalents because of their “green” nature. Benefits of ESG finance products for banks and investorsīanks and investors need to be confident they will not lose out by creating and investing in these products. Wind and solar assets will be commissioned to meet these targets-and these projects will need to be funded, creating more opportunity for a green-financing market to develop. Furthermore, at the 2021 UN Climate Change Conference (COP26), the Vietnamese government pledged to reach net-zero CO 2 emissions by 2050, and its targets for renewable-energy-generation capacity have grown consistently. 1 IJGlobal Project Finance Deals.īased on market momentum and the renewables targets set in the latest draft of Vietnam’s Power Development Plan, demand for financing these projects should continue to grow exponentially. Offshore wind is the largest segment driving demand in this area, with photovoltaic solar also a large contributor. Demand for the financing of renewable-energy projects has led this growth, which totaled more than $10 billion annually from 2018 to 2020 and $21 billion in 2021. In Vietnam, project finance has grown year over year, from around $3 billion in 2018 to $38 billion in 2021, spanning energy, transport, telecommunications, and water projects (Exhibit 2). In a separate report, we estimated that a significant increase in capital expenditure on physical assets, in part through project financing, is required to reach net zero worldwide by 2050. This, in turn, fuels demand from borrowers seeking ESG and renewables finance to fund their projects. Governments, organizations, and individuals are increasingly prioritizing sustainability, spurred on by severe global weather events and the narrowing opportunity to limit the increase in global temperatures. Demand for financing of projects with environmental benefits While the first three preconditions already exist to a certain extent in Vietnam, banks have not yet fully created the capabilities to participate in the green-bond market. Our observation is that four preconditions lead to the growth of green-bond markets: demand for the financing of projects with environmental benefits, such as renewable-energy and green infrastructure projects ensuring ESG finance products benefit banks and investors building a legal framework and banks responding to the first three points proactively to creatively establish a market. Driving Vietnam’s development of the green-bond market In this article, we detail four preconditions that can enable Vietnamese banks to make the shift toward green bonds, as well as six core areas of their business that Vietnamese banks may need to address. We know from regional examples that banks acting early have led their local ESG finance markets, which means those that do not act could soon be left behind. ![]() With renewed urgency and improved regulatory guidance, Vietnam’s banks can catch up to peers in the region. So what obstacles remain between Vietnamese banks and this prize? And how can banks move past them? We estimate Vietnam’s financial institutions could earn about $1.7 billion in revenue by 2025 from issuing bonds to finance ESG projects-with $1.5 billion coming from transition finance and green bonds, funding the shift from carbon-intensive to green industries. The ASEAN Capital Markets Forum also established ASEAN green-bonds standards in 2017, announcing the Association of Southeast Asian Nations (ASEAN) will take other widely used green-bond taxonomies into consideration. Reporting on the investments must occur at least annually.Proceeds must be included in a subportfolio.The issuer must share their decision-making process to decide if an investment is eligible for green certification. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |