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.

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 VND33 trillion (US$1.3 billion) across 38 transactions, representing a 41.4% decrease month-on-month, but a slight 1.6% 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 Vietnam (SBV)’s third-quarter requirements.

Cumulatively, the total bond issuance for the first ten months of the year reached VND348 trillion, up 60% 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% in previous months. This shift reflects the growing participation of non-financial corporations, such as VinFast, Vinhomes and Vietjet, which issued bonds worth VND6 trillion, VND2 trillion and VND2 trillion, respectively, during the month.

Bond repurchase activities also saw notable trends, with VND17.5 trillion in corporate bonds repurchased in October, down 14.5% from the prior month.

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

The rise of green bonds

As of November 20, four green bond issuances valued at VND6.87 trillion were completed under the International Capital Market Association’s (ICMA) Green Bond Principles.

These accounted for approximately 2% of the total market issuances during the period. Notably, an October issuance of VND1 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 Vietnam’s green finance initiatives.

Since 2016, Vietnam has issued approximately US$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.

Vietnam’s share remains at 1.8%, 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.