The International Finance Corporation (IFC), in partnership with the Swiss State Secretariat for Economic Affairs (SECO), is scaling up its support to the Vietnamese government to promote sustainable finance and spur private sector investment, as part of efforts to help the country implement its climate commitments. Vietnam is adopting a low-carbon growth model and targeting carbon neutrality by 2050.
A new memorandum of understanding with the State Securities Commission of Vietnam (SSC), announced on November 11, will support the government’s efforts to leverage the capital market to tackle climate change through green and sustainable finance.
With IFC’s assistance, SSC will promote the adoption of environmental, social and governance (ESG) standards and practices – as well as enforce ESG requirements – among market players. This will help strengthen the sustainable finance framework, encouraging innovative financial products such as green bonds, transition bonds and sustainability-linked bonds to attract international investors, who are looking for sustainable assets.
“Capital markets have a big role to play in Vietnam’s transition to a climate-resilient and low-carbon economy, helping mobilize green capital,” says Vietnam’s deputy minister of finance Nguyen Duc Chi.
SSC vice-chairman Pham Hong Son adds: “Promoting green and sustainable finance is a long-term priority for the SSC. IFC’s continued efforts to encourage the adoption of ESG standards and practices among public companies will help scale up green finance, creating a sustainable capital market in Vietnam.”
These efforts are part of a new initiative between IFC and SECO – the Integrated ESG Programme – to help regulators, investors, companies and partners in Vietnam manage ESG risks and bottlenecks by promoting effective decision-making and environmental and social (E&S) risk management.
Werner Gruber, head of the Swiss Cooperation Office in Vietnam, says strengthening ESG capacity is critical to achieving the climate commitments and the Sustainable Development Goals (SDGs). “Failure to consider ESG risks can lead to poor and unsustainable investment decisions. Our work with IFC aims to improve ESG standards and practices in Vietnam to guide financial flows towards sustainable investments for a more inclusive and sustainable economic development,” he points out.
Using IFC’s ESG standards – its Performance Standards and Corporate Governance Methodology – the integrated ESG approach addresses critical ESG topics, including effective E&S risk management and systems, disclosure and transparency, climate risk and mitigation, and gender.
“Greening the capital markets with a focus on improved ESG standards is a priority as Vietnam aims to unlock private investment to achieve its twin goals of becoming a high-income and carbon-neutral economy by 2050,” says IFC regional director for East Asia and the Pacific Kim-See Lim. “IFC is excited to deepen its partnership with SSC and SECO to help spur a conducive environment for private sector climate investment, which is vital for supporting sustainable and resilient growth in Vietnam.”
As one of the most vulnerable countries to climate change and natural disasters and also one of the most carbon-intensive economies in Asia, the government of Vietnam aims to decarbonize the economy and achieve carbon-neutral status by 2050 as committed at the 2021 United Nations Climate Change Conference (COP26). This will require huge investments over the next 30 years with state resources meeting only part of the financial need.