Page 12 - Green Finance 2024

compared to previous years, this is a promising indication amidst the temporary decline

in the worldwide market, demonstrating increased interest from environmentally

conscious investors in the area.

However, Vietnam’s green finance market is still quite limited, mainly focusing on green

loans. During the period from 2015 to 2022, the outstanding balance of green credit

increased (SDLink, 2023). However, the proportion of green credit in the total credit
outstanding in the economy remained modest. International capital sources with lower

interest rates, prioritized disbursement, and the allure of green credit have become

attractive. An increasing number of banks are offering green loan packages. By the end

of 2022, the outstanding balance of credit provided for 12 green projects established by

the State Bank of Vietnam since 2015 reached nearly 500,000 billion VND (accounting
for about 4.2% of the total credit outstanding in the economy).

Sustainability-Linked Bonds

Sustainability-linked bonds (SLBs) are a newer form of green finance instruments.
Based on IEEFA’s calculations and Environmental Finance Data, SLBs issuance in

Europe decreased in two consecutive years from its peak in 2021, although the level is

still materially higher than in 2020 before it skyrocketed. By comparison, green bond

issuance in Europe reached a record high in 2023 (IEEFA, 2024). Unlike green bonds,

which are earmarked for specific projects, SLBs are general-purpose bonds tied to the
issuer’s achievement of specific sustainability targets. The interest rate of the bond is

often linked to the issuer’s performance against these targets, creating a direct financial

incentive for sustainability performance (Uzsoki, 2020). SLBs represent an innovative

approach to aligning corporate financing with broader sustainability goals. They have

been hailed for their flexibility and potential to attract a broader range of issuers and
investors (Zerbib, 2019).

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