What are green bonds? The positive impacts of green bonds on investors and businesses

In the context of sustainable development and climate change response becoming increasingly urgent, green bonds are emerging as a preferred financial instrument. This tool both provides funding for environmental protection projects and plays a vital role in building sustainable infrastructure.in the context of a green economy. So what exactly are green bonds? Let's find out!

1. What are green bonds? Principles of green bonds

Green bonds are debt instruments issued to attract investment capital to fund environmentally sustainable projects and activities. According to international practice, including the World Bank's Green Bond Framework, this funding is directed towards projects such as renewable energy, emission reduction, and waste management.

Green bonds play a crucial role in the capital structure for sustainable growth.

In Vietnam, at Clause 1, Article 150 of the 2020 Law on Environmental Protection, the regulations define green bonds as a financial instrument issued by the State, local governments, or corporate organizations to achieve ecological protection and sustainable development goals.

The International Capital Markets Association (ICMA) stipulates that green bonds must adhere to four fundamental principles to ensure their safety. Ensuring transparency, effectiveness, and sustainability. Furthermore, ICMA recommends that issuers should have an independent external review unit to increase the transparency and reliability of bonds. The core principles include:

• Purpose of using the raised capital: Funds from green bonds can only be allocated to projects that generate specific environmental benefits, such as renewable energy, waste treatment, or natural resource conservation.
• Project selection and evaluation criteria: Projects must undergo a detailed evaluation process and meet clear environmental standards. The issuing entity must be transparent in its project selection process to increase credibility.
• Capital management mechanism: The funds raised need to be monitored separately to ensure that spending is properly directed. Issuers typically establish dedicated accounts or transparent monitoring systems.
• Information disclosure regime: The issuing organization must publish periodic reports that fully disclose information on the deployment of funds, implementation progress, and environmental impact of the funded projects. These reports must be transparent and accountable.

2. Benefits of green bonds

Green bonds are not simply a means of financing sustainable initiatives; they also create significant practical value for the environment, businesses, and communities. Below are two of the most important benefits that green bonds offer.

2.1. Benefits for investors

Green bonds not only open up investment opportunities linked to sustainable development goals but also offer a level of safety equivalent to conventional bonds, because this level of safety depends on the financial capacity of the issuer, not the 'color' of the bond.Some specific values ​​include:

• Invest in sustainable, eco-friendly projects that deliver long-term value.
• Diversifying portfolio risk through financial instruments has a positive impact.
• Enhance your company's reputation and brand by contributing to environmental goals.
• Benefit from preferential policies or financial incentives within sustainable development programs.

Green bonds offer significant benefits to investors.

2.2. Benefits for the issuing company

Issuing green bonds not only helps businesses raise capital but also brings many important benefits to their business operations and sustainable development strategies. Specifically:

• Attracting significant capital from investors focused on sustainable development.
• Enhance brand reputation and image through commitment to environmental standards.
• Access to financing at a more favorable cost of capital compared to conventional financing methods.
• Gain a competitive advantage by meeting environmental and social responsibility requirements.

3. Discover green bonds - investing in a green future at SeABank

SeABank sets the goal of "Sustainable Development" in its development strategy, based on compliance with Circular 96/2020/TT-BTC dated November 16, 2020, and is committed to accompanying businesses on their journey towards sustainable development.

SeABank is committed to sustainable growth linked to the prosperity and well-being of the community and the longevity of the environment.

A solid governance foundation and international investment provide the Bank with additional resources for green and sustainable growth, focusing on promoting climate finance and inclusive finance. The report clearly outlines SeABank's goals and plans to "green" its portfolio and direct capital flows into environmentally friendly sectors, while reducing the "brown" component of its portfolio through its Environmental and Social Risk Management System (ESMS).

In 2024, SeABank issued the first blue bond in Vietnam and the first green bond by a private commercial bank.total value $150 million expanding funding for sustainable projects. Details at: https://www.seabank.com.vn/tin-tuc/tin-seabank/news/seabank-cong-bo-bao-cao-phat-trien-ben-vung-khang-dinh-cam-ket-kien-tao-gia-tri-ben-lau

Besides, SeABank also provides preferential credit for green building projects and "tailored" financial solutions such as Green Loans for textile and garment businesses under the sustainable lending framework.

This contributes to mobilizing resources for environmentally friendly projects, supporting sustainable development goals, responding to climate change, and conserving natural resources. In Vietnam, with the strong growth trend of sustainable finance, many banks have participated in issuing green bonds, with SeABank being one of the pioneers.

Through its commitment to supporting businesses and investors, SeABank not only provides effective financial solutions but also contributes to promoting Vietnam's transition to a green and sustainable economy.