Lecturer Ho Quoc Tuan
Lecturer Ho Quoc Tuan of the University of UK-based Bristol talked about one aspect of green finance, which is green bonds. In fact, green bonds are also a debt instrument like other bonds that businesses issue but green bonds are oriented towards the cash flow from the issuance of green bonds, they will be invested in projects that create positive effects on the environment. But two factors must be taken into account.
Firstly, Vietnam has made commitments to participate in the agreements including the 2015 Paris Agreement, which commits to reducing or controlling temperature rise to 2 percent or less and the Climate Change Summit (COP26) with the goal of giving a 1.5 percent temperature increase.
That means Vietnam ought to reduce carbon emissions, which means that manufacturing industries must now consider greening because in production the emissions are too large. Moreover, Vietnam - a developing country – only reduces emissions, it can have opportunities to call for donors’ capital to implement projects.
Secondly, infrastructure innovation and public investment are required for economic growth. For example, the Mekong Delta region needs to upgrade infrastructure because it is forecasted that the region will be greatly affected by climate change, so the region needs a huge investment capital from international sponsors. That forces the country to participate in new green projects to attract capital, and green bonds are a favorable instrument with lower interest rates.
It is the time when most of the countries in the world are racing to green the economy. The fact that many developing countries have mobilized several billions of US dollars from the EU and the US to continue investing in infrastructure right after committing to climate change agreements proved the necessity of greening the economy.
Therefore, it is a pity that Vietnam is slow in greening the economy. In other words, if Vietnam does not carry out a green project, it will not receive investment capital from international organizations, and more importantly, the country’s environmental factor will be underestimated.
In his opinion, Ho Chi Minh City has the advantages and potential for the development of green bonds and the carbon credit market. However, if businesses raise capital by issuing green bonds for the implementation of green projects classified as environmentally sustainable including reducing emissions, businesses must also have money to repay debts.
However, if an enterprise has a green project, which can generate carbon credits, it will have a source of income is selling carbon credits generated from green projects in addition to traditional revenue from selling products. Moreover, the government at the same time can measure the impact on emissions produced by the enterprises. If the firm performs well, it can obtain additional carbon credits for its outstanding benefit.
This is a significant point why the country needs to have a carbon credit exchange. When a business without credit can buy while businesses with abundant credit can sell. This means that the green bond market itself must go hand in hand with the carbon credits market, a parallel market that supports each other.
He said as far as he know, a carbon credit market has formed in 2022 without an exchange. Many businesses have invested in green projects and issued credits for sale on the world market while many domestic enterprises must buy these credits in the world market to export goods. Domestic enterprises need a plan to inventory or measure greenhouse gas emissions, and well-performed enterprises will have a surplus of credits. FDI enterprises can bring these credits to the parent company in a multinational corporation when they meet the criteria.
The financial market today has seen a very attractive market for trading carbon credits. Some days, trading underground carbon credits with each other is even as exciting as stocks on the stock market.
Therefore, if there is a carbon credit trading floor, not only Vietnamese enterprises buy and sell credits with their Vietnamese peers but also Vietnamese enterprises make transactions with foreign enterprises.
He revealed Vietnam has so far had its carbon credits. Furthermore, according to some media figures, it has reached 30 million carbon credits. Some environmental organizations in Vietnam estimate that if Vietnam’s reforestation meets the standards, the Southeast Asian country can earn US$40 million from the sale of carbon credits each year.
As far as he knows, the Ministry of Finance and the Ministry of Natural Resources and Environment are also doing studies on green bonds and the carbon credit market. But the Ministry must be quick or else Vietnam will miss the opportunity as some banks in Singapore disclosed that they are planning to go to Vietnam to buy carbon credits and sell them in Singapore.
According to him, Ho Chi Minh City has the advantage of setting up an exchange because the southern metropolis is working on an international financial center project and enjoying the specific mechanism of the Resolution 98; plus, the city - a financial center of the country - has a large stock exchange in the country. Many international organizations are measuring carbon credits in HCMC.
Regarding the question of what Ho Chi Minh City should do at this time to attract green businesses abroad to invest, lecturer Tuan said that city leaders should have meetings and talks with businesses
To his knowledge, many businesses have spontaneously converted to green. Garment and textile enterprises wanting to export to the EU have to pay a tax on carbon credits like EU enterprises.
Thus, Ho Chi Minh City needs to gather all businesses in all fields and find out what the export market's needs are asking of businesses. In other words, Ho Chi Minh City needs a green business association to connect all firms and develop a policy.
By Tran Hai – Translated By Anh Quan