VPBank secures IFC’s first green loan in Vietnam
US$212.5 million five-year loan will help boost financing for climate-friendly projects
VIETNAM Prosperity Joint Stock Commercial Bank (VPBank) has secured a financing package amounting to US$212.5 million to help expand its lending to small and medium enterprises (SMEs) and boost financing especially for climate-friendly projects.
The five-year loan, announced on January 14, comprises US$50 million from the account of International Finance Corporation (IFC), US$37.5 million from the multi-investor Managed Co-Lending Portfolio Programme (MCPP) managed by IFC, and US$125 million in syndicated loans from Bank of Communications, Industrial and Commercial Bank of China, KEB Hana Bank, Kiatnakin Bank, German DEG – Deutsche Investitions-und Entwicklungesellschaft and multilateral International Investment Bank.
This is IFC’s first green loan to a bank in Vietnam, where most of the near-term multimillion-dollar climate investment potential is in renewables and infrastructure. The loan will qualify as per the Green Loan Principles – a widely accepted set of voluntary guidelines that specify the use of proceeds, monitoring, and reporting. VPBank will also establish a management system to track, manage and report on the use of proceeds of a loan for dedicated green projects through third party verification.
IFC financial institutions group director for Asia-Pacific, Rosy Khanna, says IFC’s loan to VPBank addresses its strategic objective of increasing financing for climate-smart initiatives to boost environmentally sustainable development in emerging markets with high potential of greenhouse gas emissions reduction such as Vietnam. “Participation of regional and international lenders in this financing package shows the high interest of institutional and private investors in climate finance in Vietnam, facilitating a new source of capital while helping the country tackle climate change at the same time,” she adds.
Vietnam, in terms of greenhouse gas emissions, is one of the most carbon-intensive countries in the world, ranking only after China and Mongolia in the East Asia and Pacific region. While reducing greenhouse gas emissions has been a national target to mitigate climate change impact, it presents a US$753 billion climate investment opportunity for Vietnam between 2016 and 2030, according to an IFC study. However, the current share of climate financing – as a percentage of total bank financing – in Vietnam is just about 5% or US$10.3 billion, indicating a significant climate finance gap. Against this backdrop, IFC says, about one-third of the financing package will be earmarked for climate-friendly projects, creating new options for businesses to obtain green financing at a favourable interest rate.
IFC country manager for Vietnam, Cambodia and Lao People’s Democratic Republic, Kyle Kelhofer, says the IFC support will help VPBank become the first financial institution in Vietnam to adopt an international comprehensive standard in green lending, sending a positive signal to the market as well as to international investors. “Strengthening the green lending market is crucial to help Vietnam shift to a low-carbon growth model and to mitigate the adverse impact of climate change,” he points out.
IFC has been actively facilitating the development of a climate finance market in Vietnam by supporting regulators to develop sustainable finance policies and tools to promote responsible lending practices in the banking sector, implementing a green buildings programme and financing renewables projects.
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