A wind farm in Sóc Trăng Province. International institutions and banks are eager to fund green projects in Việt Nam, but the country still has work to do to leverage green capital fully. — VNA/VNS Photo Trung Hiếu

HÀ NỘI — The growing availability of green funds in the world has exposed the need for a professional institution in Việt Nam to take charge of the green money granted to the country.

Phạm Xuân Hòe, former head of the Banking Strategy Institute, said that green funds to Việt Nam would be more abundant in the next few years on the back of the Just Energy Transition Partnership launched in December 2022.

At least US$15.5 billion initiated by the partnership will come in the form of preferential loans for three to five years to support the country's energy transition. The EU and the UK also got in on the act with committed assistance of $7.8 billion.

Given the growing availability of green funds, the former head called for a professional institution to manage the green money delivered to the country. Such an institution, he believed, will act as an intermediary that would improve domestic firms' access to green capital.

"The professional institution will ensure the effective implementation of the green funds granted to Việt Nam," said Hòe.

In the long term, the former head urged the establishment of an up-to-international-standards financial taxonomy that works in line with other financial systems, including taxation and carbon credit.

Professor Vũ Sỹ Cường at the Academy of Finance opined that the transition to green growth in Việt Nam requires vast investments. Between now and 2040, the country would need an annual amount of finance equivalent to 6.8 per cent of the GDP to improve its resilience against climate change.

International institutions and banks are willing to dig deep into their pockets to fund the country's effort on 'going green'. However, the availability of green funds is one story, and the absorbability of the funds is another.

The absence of a climate bond taxonomy and a legal framework for the bond in Việt Nam has stymied those who want to finance green projects in the country. On top of that, the low awareness of ESG (Environmental, Social, and Governance) among firms has made scores of firms slip through the cracks.

To unlock the full potential of green funds, the professor called for establishing a carbon credit market and granting financial assistance to firms cutting back on stranded fossil-fueled assets.

According to DARA International, Việt Nam would incur an annual cost of $15 billion (5.0 per cent of the GDP) in the next years owing to climate change. If the country fails to take early action, the cost could soar to 11 per cent of the GDP by 2030.