Regulations on green credit and bond according to the Law on Environmental Protection 2020 in Vietnam

Regulations on green credit and bond according to the Law on Environmental Protection 2020 in Vietnam (Internet image) 

Regarding this issue, LawNet would like to answer as follows:

1. Regulations on green credit according to the Law on Environmental Protection 2020 in Vietnam

Regulations on green credit according to Article 149 of the Law on Environmental Protection 2020 are as follows:

- Green credit is the credit granted to the following investment projects:

+ Efficient use of natural resources;

+ Adaptation to climate change;

+ Waste management;

+ Pollution remediation and environmental quality improvement;

+ Natural ecosystem restoration;

+ Nature and biodiversity conservation;

+ Creation of other environmental benefits.

- Lending by credit institutions and foreign branch banks in Vietnam to investment projects must comply with regulations of law on management of environmental risks in lending.

- Credit institutions and foreign branch banks in Vietnam are encouraged to finance and grant concessional loans to the projects in Clause 1 of Article 149 of the Law on Environmental Protection 2020.

- The Governor of the State Bank shall provide guidelines for management of environmental risks in credit extension by credit institutions and foreign branch banks in Vietnam.

- The Government shall introduce a roadmap for grant of green credit and mechanisms for encouraging grant of green credit.

2. Regulations on green bonds according to the Law on Environmental Protection 2020

Regulations on green bonds according to Article 150 of the Law on Environmental Protection 2020 are as follows:

- Green bonds are bonds issued by the Government, local authorities and enterprises in accordance with regulations of law on bonds to raise capital for environmental protection activities and investment projects that offer environmental benefits.

- Revenues from issuance of green bonds must be recorded and monitored in accordance with regulations of law on bond issuance and used for executing investment projects involving environmental protection and investment projects offering environmental benefits, including:

+ Renovation and upgrading of environmental protection works;

+ Replacement of technologies towards application of best available techniques;

+ Application of circular economy and green economy, and reduction of carbon emissions;

+ Prevention and reduction of environmental pollution;

+ Environmental remediation after environmental emergency;

+ Efficient use of natural resources, soil resources, energy saving and development of renewable energy;

+ Construction of multi-purpose and environmentally-friendly infrastructure;

+ Efficient management of water and treatment of wastewater;

+ Climate change adaptation and investment in development of natural capital;

+ Other investment projects.

- Issuers of green bonds must provide information about environmental impact assessment and environmental licenses of investment projects, and use capital raised from issuance of green bonds to investors.

- Issuers and investors purchasing green bonds are entitled to the incentives in accordance with regulations of the Law on Environmental Protection 2020 and other relevant regulations of law.

3. Regulations on Environmental protection funds in Vietnam

Regulations on the Environmental protection funds according to Article 151 of the Law on Environmental Protection 2020 are as follows:

- Vietnam Environment Protection Fund and provincial environment protection funds are state financial agencies established at the central level, in provinces and central-affiliated cities to grant concessional loans, receive deposits, donations, assistance and financial contributions for environmental protection.

The State encourages enterprises and entities to establish environment protection funds.

- The power to establish an environment protection fund:

+ The Prime Minister shall decide on the establishment, organizational structure and operation of the Vietnam Environment Protection Fund;

+ A provincial People’s Committee shall decide on the establishment, organizational structure and operation of the provincial environment protection fund;

+ An organization, enterprise or individual shall establish its/his/her own environment protection fund and operate it as prescribed by law.

- The Government shall prescribe operating funding of the Vietnam Environment Protection Fund and provincial environment protection funds.

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