Major financial sources are moving away from traditional energy projects to focus on renewable energy investments

In Vietnam, green growth is a major policy initiative of the Party and the State, evidenced by the 2012 Green Growth Strategy and, more recently, the 2021-2030 Strategy with a vision to 2050. Vietnam's goal to achieve net-zero by 2050 is ten years earlier than countries like Indonesia and China, making the preparation timeline more urgent. However, while many countries already have synchronized legal frameworks, Vietnam is still in the process of institutional refinement.

Alongside the Green Growth Strategy, the Government has issued a series of strategies, master plans, and action plans aimed at facilitating green transition. These include the National Climate Change Strategy to 2050, the National Green Growth Action Plan, the Sustainable Forestry Development Program, and Power Development Plan 8.

Le Xuan Sang pointed out that green development is not only a strong commitment from the nation but also a market-driven imperative. Consumers increasingly demand greener and safer products, while developed countries and financial institutions require businesses to be more environmentally responsible. As such, the green transition is a key trend that businesses must adapt to.

To accelerate the green transformation of the economy, green finance is viewed as an important tool, receiving attention from numerous countries. In Vietnam, a foundation for green finance has already been established with three main components: the green credit market, green stocks, and green bonds. However, Vietnam’s legal framework for green finance remains incomplete and lacks synchronization. Specific regulations to implement and operate the market are still under research; notably, policies regarding green bonds are still at an experimental stage.

Dr. Pham Thi Hoang Anh, Deputy Director of the Banking Academy, noted that green credit still accounts for a small proportion of total credit within the system. By the end of 2023, green credit comprised only 4.5% of the economy's total outstanding loans, up from 3.33% in 2018. Most green credit is concentrated in the green agriculture sector (around 40%), followed by renewable and clean energy, which makes up 30% of the total green credit. This indicates substantial potential for further growth.

Nguyen Ba Hung, Chief Economist at the Asian Development Bank (ADB) in Vietnam, shared that during ADB’s efforts to support the green finance market’s development, several key challenges for green credit emerged. Green projects typically require significant capital, long investment timelines, low financial returns, and entail considerable risks, leading to difficulties in the appraisal, assessment and supervision processes.

Experts suggested that specific mechanisms and policies are needed to promote green financial products. For example, Hanoi conducted a pilot issuance of green bonds in the fourth quarter of 2016 to fund green projects, with issuance conditions similar to standard bonds but with an additional certification requirement from the Ministry of Natural Resources and Environment (MoNRE) for qualifying green projects.

The ADB also recommends strengthening the legal framework for green and sustainable finance. Vietnam should proactively seek international funding sources through bilateral partnerships and international financial institutions, accelerate the issuance of carbon certificates, and establish a domestic carbon market to connect with the global carbon market. The government should take the lead in issuing green bonds, supported by a budget management system specifically for green expenditures.

Echoing these recommendations, Dr. Nguyen Thanh Nga, Deputy Director of the Institute of Financial Strategy and Policy (Ministry of Finance), proposed a review and enhancement of the legal framework and green classification criteria. To promote green credit growth, Vietnam should diversify green credit incentives, such as lowering interest rates, extending loan terms, and providing tax and fee incentives for green bond issuance and investments. Facilitating the participation of green investment funds and green financial institutions is essential to the development of this market.