Vietnam’s Green Finance Landscape: Charting the Path to Sustainable Growth
As Vietnam steps into a new era focused on green growth and aims for net-zero emissions by 2050, conversations surrounding green finance have gained unprecedented urgency. These discussions are crucial for the nation’s sustainable development, as they prepare the groundwork for a more environmentally conscious economy.
Building the Compliance Carbon Market
At the recent Vietnam Business Forum (VBF), Van Ly, co-founder and CEO of Raise Partners, shared insights on the progress Vietnam has made toward establishing a compliance carbon market. With over 2,000 enterprises identified for mandatory greenhouse gas (GHG) inventories, the government has laid what she termed the “skeletal structure” required for this market.
Ly emphasized the importance of training programs and international collaboration, which have started in 2023 to equip large emitters for emission reporting and reduction planning. The upcoming pilot phase of the carbon market, slated for 2025-2026, aims to further enhance this transition.
Addressing Implementation Gaps
However, despite these efforts, significant implementation gaps remain. The roadmap for GHG reduction lacks clarity, and current definitions and procedures for carbon credit registration and trading are inconsistent. The drafting of national standards is underway, yet without detailed guidelines, companies might struggle to meet emissions targets and execute long-term green projects effectively.
Regulatory Framework for Green Growth
Vietnam has made strides in recent years to create a regulatory framework conducive to green growth. The issuance of decrees focused on GHG mitigation and the approval of national carbon market development schemes have laid a policy foundation for green finance to thrive. The carbon market is considered a powerful tool for businesses aiming to transition to low-carbon operations, fueled by substantial domestic emissions and burgeoning international partnerships.
Four Priority Actions for the Future
Experts from the VBF have put forward four priority actions that could advance Vietnam’s green finance goals. These include recognizing carbon as a tradable asset, developing high-quality carbon credit projects that adhere to international standards, enhancing market liquidity through international collaborations, and preparing for a mature market where emission allowances are publicly auctioned nationwide by 2029.
Ly noted that building a robust carbon market would facilitate emission reductions while attracting both domestic and foreign investments to green projects.
The Role of ESG in Global Supply Chains
Ko Tae Yeon, CEO of Heesung Electronics Vietnam, underlined the increasing importance of environmental, social, and governance (ESG) considerations within global supply chains. He argued that blending South Korea’s advanced clean technologies with Vietnam’s vibrant manufacturing sector could position both nations as a frontrunner in eco-friendly production in Asia. Nonetheless, this vision necessitates stronger incentives and supportive mechanisms for ESG-compliant enterprises, along with improved access to green finance.
The Financial Imperative: Mobilizing Investment
Denzel Eades, chairman of the British Chamber of Commerce in Vietnam (BritCham), highlighted the financial challenges faced in achieving Vietnam’s energy goals. With over $136 billion needed for power and grid infrastructure through 2030—far exceeding public budget capabilities—mobilizing private investment through green loans, sustainable bonds, and blended finance mechanisms is essential.
The Just Energy Transition Partnership presents an opportunity for significant funding for clean energy initiatives. However, Eades pointed out several barriers, including a lack of comprehensive green finance classification systems. This void leaves banks uncertain about which projects are eligible for funding.
Recommendations for Improvement
BritCham has recommended that the government establish a clear green finance classification, develop credit guarantee or risk-sharing funds, and expand incentives for projects focused on the circular economy and green credit. These measures would create an enabling environment for sustainable practices and investments.
Innovative Financial Tools for Sustainability
Bruno Jaspaert, chair of the European Chamber of Commerce in Vietnam (EuroCham), echoed these sentiments by stressing the necessity of developing innovative financial mechanisms. Green trade credit insurance and sustainable trade finance could provide the much-needed access to resources that companies require to decarbonize their operations. Encouraging banks to create products like green loans and ESG-linked credits could make sustainability financially viable and appealing.
Additionally, adapting finance frameworks is vital. Establishing a national climate adaptation finance framework and considering a national green investment bank aimed at climate-resilient projects could further mobilize support for initiatives in agriculture, coastal infrastructure, and urban development.
Public-Private Dialogue as a Cornerstone
Across various business associations, a consensus has emerged about the critical role of effective public-private dialogue in realizing green finance goals. This collaboration must evolve from mere consultations to actionable initiatives that include building transparent emission databases, standardized ESG reporting systems, and targeted training programs designed for small and medium-sized enterprises.
Jaspaert pointed out that access to green funding and ESG capacity-building should not be limited to big corporations; smaller businesses must be included in this vision to ensure their continued participation in global supply chains.
Vietnam’s Vision for Green Manufacturing
Vietnam is increasingly recognized as a leader in the Asia-Pacific region for green growth initiatives. However, maintaining this position requires a comprehensive national strategy that encompasses legal frameworks, financial incentives, and robust implementation capabilities. Ko Tae Yeon emphasized that with swift and decisive action from both the government and businesses—coupled with equitable access to green finance—Vietnam has the potential to emerge as Asia’s green manufacturing hub.