Green Finance for Net Zero Goals - Part 1: Getting Ahead of Financial Sources

To achieve this goal, green finance plays a key role in focusing resources and directing capital flows into activities that reduce emissions, protect natural resources, enhance adaptability to climate change, and move towards sustainable development.

Photo caption — Pilot model of high-quality, low-emission rice cultivation at Phat Tai Agricultural Cooperative (Thanh My commune, Chau Thanh district, Tra Vinh province). Photo: Thanh Hoa/VNA

Lesson 1: Get ahead of financial resources

In recent times, in order to achieve the goal of net zero emissions by 2050, in Vietnam, many organizations have provided green finance for businesses to implement green projects and sustainable development projects. However, up to now, the amount of green finance mobilized and disbursed has not met the needs of the economy , posing many challenges for both state management agencies and businesses.

Dr. Tran Minh Hai, Vice Principal of the School of Public Policy and Rural Development, one of the seven experts compiling the Project on sustainable development of 1 million hectares of high-quality, low-emission rice and green growth in the Mekong Delta, said that there are currently many sources of green finance in Vietnam.

Specifically, on the foreign side, the World Bank (WB) is providing preferential loans to Vietnam to implement green projects and sustainable development projects. Of which, it supports Vietnam with 263.9 million USD to implement the green recovery project and is completing procedures to lend Vietnam 360 million USD to implement the above-mentioned 1 million hectare rice development project. The International Finance Corporation (IFC) has supported SeABank to issue 150 million USD of green bonds and provide financial support to the private sector to implement green projects.

Some foreign banks such as Standard Chartered have also planned to deploy and sign financial packages with partners worth 1.5 billion USD. HSBC Bank has committed to providing 12 billion USD by 2030 to help Vietnamese businesses transition to energy. BNP Bank provides green finance loans focusing on forestry and wood processing. UOB Bank provides green finance loans for organic agricultural production.

Some diplomatic missions such as the Embassies of Canada, Japan, Germany, etc., and foreign organizations such as GIZ, JICA, KOICA, Oxfam, ADB, GCF, etc. also have green finance programs in Vietnam.

Domestically, the Environmental Fund and banks such as Vietinbank, BIDV, Vietcombank, SeABank, MBBank, and Nam A Bank are also providing green finance. Specifically, Vietinbank has deployed loans for green projects worth nearly VND27,000 billion. BIDV has issued USD104 million in green bonds and has invested and lent nearly USD2 billion to develop green projects, etc.

However, the amount of green finance is still very modest compared to the actual demand. Mr. Nguyen Tuan Quang, Deputy Director of the Department of Climate Change, Ministry of Agriculture and Environment, said that according to the WB's calculations, to achieve net zero emissions, from now until 2040, Vietnam needs about 360 billion USD, while Vietnam's GDP last year only reached about 475 billion USD. That is, the amount of money Vietnam needs to achieve Net Zero is a very large number, requiring support from green finance sources from international financial institutions.

According to Mr. Quang, after the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26), about 450 financial institutions from 45 countries have committed to shifting investment flows to green finance with a total value of up to 130,000 billion USD. If Vietnam can access these green financial sources, it can achieve its Net Zero commitment by 2050.

Mr. Quang said: The Law on Environmental Protection and guiding documents have mentioned green finance, but other concepts that make up green finance such as green investment funds, green mortgages, green certificates, green guarantees, green insurance, etc. have not been mentioned yet, so the legal corridor needs to be completed so that businesses can access green finance sources.

Mr. To Tran Hoa, Deputy Director of the Market Development Department, State Securities Commission, Ministry of Finance said: The banking system cannot shoulder the entire mobilization of the above 360 billion USD. Because this is an impossible task. Therefore, to solve this problem, green bonds are considered a mobilization channel accompanying the bank credit market. However, this market currently has many limitations. In 2024, organizations only mobilized about 8,000 billion VND of green bonds, accounting for only 1% of the total amount of bonds mobilized.

Explaining the reason, Mr. Hoa said that although Vietnam has had a legal framework for green finance since 2017, it is only an orientation. Vietnam's green capital market does not have a set of standards for green classification for credit and corporate bonds. Businesses have yet to see the benefits of issuing green financial products.

Mr. Hoa cited that BIDV Bank has allocated a relatively large amount of capital for green credit loans, but the criteria have not yet been established. Enterprises are in dire need of a set of criteria for green classification, both to help enterprises orient their development of green projects and to reduce risks for the banking system and investors.

Along with the above green financial instruments, Vietnam is also accelerating the development of the carbon market (greenhouse gas emission trading market) to have more green financial resources to achieve the Net Zero target.

Mr. Pham Nam Hung, representative of the Carbon Market Department, Department of Climate Change, Ministry of Agriculture and Environment, said that the carbon market is divided into two groups, including mandatory markets (such as greenhouse gas emission quota trading systems) and voluntary markets (including domestic and international credit exchange and offset mechanisms).

According to the World Bank's 2024 report, the trend of applying carbon pricing tools, in which greenhouse gas emission quota markets and carbon credit trading mechanisms are the most effective financial mobilization channels and greenhouse gas emission reduction tools to date.

Vietnam is pursuing a double-digit economic growth target, while growth always comes with greenhouse gas emissions. Therefore, according to Mr. Hung, the risk of this issue is that if green financial instruments, especially carbon market instruments, are not soon completed and synchronized, we may find it difficult to achieve the target of emission reduction commitments under the business-as-usual scenario.

Mr. Hung added that at the COP29 Conference held in Azerbaijan at the end of last year, leaders of the World Bank, the European Central Bank (ECB), the Financial Times, etc. said they would have solutions for the world carbon market to operate with a larger role for financial institutions. That shows that major banks have participated deeply in the carbon market. If Vietnam is not well prepared to receive those financial resources, it will be difficult for our domestic carbon market to attract investors and develop.

Final article: Perfecting comprehensive institutions

Source: https://doanhnghiepvn.vn/tin-tuc/tai-chinh-xanh-cho-muc-tieu-net-zero-bai-1-don-dau-cac-nguon-tai-chinh/20250622021553862