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Can Vietnamese banks seize the green-bond opportunity? (Part 3)

 

                                  Source: Dealogic: MCKinsey Global Banking Pool

But the timing of this opportunity must be somewhat nuanced. In another Southeast Asian market, sustainable finance grew rapidly in the first years of the market as investors rushed to claim the most lucrative, easiest opportunities. That growth is now expected to slow because the opportunities that remain are more complicated to implement. Vietnam’s sustainable-finance market may follow a similar pattern: explosive early growth while easy opportunities are available, followed by a more gradual scale-up as opportunities grow in complexity. Regardless of the precise market timing, we expect this market to develop.

3. Building a legal framework

In 2015, Vietnam’s government tasked the state bank with furthering green financing tools, passed supportive green finance regulation, and in 2018 declared all banks must take internal steps to consider environmental risk by 2025. For example, the Green Financial Policy Framework tasked the Ministry of Finance with creating incentives for green capital. Most recently, in its National Strategy for Climate Change, the Vietnamese government urged the review of “policies to create favorable conditions to attract investment capital flows to respond to climate change.”

It is not recommended banks do this single-handedly. Instead, having several institutions or industry players collaboratively create this market helps drive market momentum. Banks will need to create a dialogue with regulators to identify where additional regulatory guidance may be useful. They can begin to do this by issuing green financial products to see where regulations are sufficient and where they could be clearer (Exhibit 4).

Source: Mc. Kinsey

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