Signs of renewal amid diverse issuances in green bond market

Since the start of the year, four green bond issuances have been recorded, marking renewed activity in this segment.

The resurgence of green, social and sustainable bonds in Việt Nam is a notable highlight in 2024, as the market evolves with more diverse bond issuances.

Since the start of the year, four green bond issuances have been recorded, marking renewed activity in this segment.

A recent report by FiinRatings, on the primary bond market for October 2024, revealed a significant slowdown in bond issuance value compared to the previous month.

Total issuance reached VNĐ33 trillion (US$1.3 billion) across 38 transactions, representing a 41.4 per cent decrease month-on-month, but a slight 1.6 per cent increase year-on-year.

This marked the lowest monthly issuance value since July, attributed largely to reduced activity among credit institutions, traditionally the primary issuers in the market.

In September, these institutions accelerated bond issuances to meet regulatory safety ratios for the State Bank of Việt Nam (SBV)’s third-quarter requirements.

Cumulatively, the total bond issuance for the first ten months of the year reached VNĐ348 trillion, up 60 per cent over last year.

While credit institutions continued to dominate the market with a 58 per cent share of total issuance in October, their proportion has declined significantly from over 80 per cent in previous months. This shift reflects the growing participation of non-financial corporations, such as VinFast, Vinhomes and Vietjet, which issued bonds worth VNĐ6 trillion, VNĐ2 trillion and VNĐ2 trillion, respectively, during the month.

Bond repurchase activities also saw notable trends, with VNĐ17.5 trillion in corporate bonds repurchased in October, down 14.5 per cent from the prior month.

Non-financial corporations doubled their repurchase values, though banks still accounted for 72 per cent of the total.

The rise of green bonds

As of November 20, four green bond issuances valued at VNĐ6.87 trillion were completed under the International Capital Market Association’s (ICMA) Green Bond Principles.

These accounted for approximately two per cent of the total market issuances during the period. Notably, an October issuance of VNĐ1 trillion by IDI International Development & Investment Corporation, a seafood sector player, marked the first green bond from a non-financial corporation.

This issuance, guaranteed by GuarantCo, underscores the growing role of international organisations in supporting Việt Nam’s green finance initiatives.

Since 2016, Vietnam has issued approximately $1.1 billion in green, social and sustainable bonds, a modest figure compared to neighboring markets like Thailand and Malaysia, where such instruments constitute up to seven per cent of the total bond market activity.

Việt Nam’s share remains at 1.8 per cent, highlighting the need for further development in this segment.

The recent uptick in green bond issuances signals positive momentum, bolstered by a foundational legal framework and market participants’ voluntary compliance.

The country is currently drafting a classification framework for green bonds and green credit, which is expected to formalise and expand the segment.

However, challenges remain. The requirements of the draft amendments to Securities Law, which emphasise secured assets or credit guarantees, could impact supply if enacted without accommodating international credit guarantees.

Current market success stories, such as bonds backed by international entities like the Asian Development Bank’s Credit Guarantee and Investment Facility (CGIF) and the Private Infrastructure Development Group (PIDG)’s GuarantCo, demonstrate the potential for growth if regulatory adjustments are inclusive.

Nevertheless, FinnRatings believes that recent green bond transactions have been progressively enhancing the quality of goods in the corporate bond market.