Can Vietnamese banks seize the green-bond opportunity? (Part 4)

4. Creating the green-bond market

Borrowers and investors are hoping to leverage green financin – or are, at least, increasingly attracted to it. Yet local Vietnamese commercial banks are only in the early stages of developing green-bond products and projects. Vietnam-based banks now have an opportunity to take full ownership of their role. Today, the number of green financial instruments and the level of sophistication is low; a recent survey suggests 40 percent of Vietnamese banks had no green investment projects in their portfolio. Yet it is still possible to move quickly to grasp this opportunity.

In Indonesia, for example, the Financial Services Authority issued regulations for the issuance and terms of green bonds in 2017 and 2018.Th ere was sufficient demand within the market for green financial products, which prompted banks to act. With the help of the International Finance Corporation (IFC), within months, Bank OCBC NISP became the country’s first commercial bank to issue green bonds. IFC provided know-how and the proper funding to help OCBC NISP make the first move. This helped kick-start the local market. Indonesia’s top eight banks in 2018 launched the Indonesia Sustainable Finance Initiative; Citibank, HSBC, Dubai Islamic Bank, and Standard Chartered then issued green bonds; and by 2021, half of the banking industry had pledged to boost funding for green projects. Members of the early-movers group now make up four of the five market leaders in green bonds in Indonesia.

Source: McKinsey