The growing availability of green funds in the world has exposed the need for a professional institution in Vietnam to take charge of the green money granted to the country, according to insiders.

Former head of the Banking Strategy Institute Pham Xuan Hoe said that green funds to Vietnam will be more abundant in the next few years on the back of the Just Energy Transition Partnership launched in December 2022.

At least 15.5 billion USD 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 USD.

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

"The professional institution will ensure the effective implementation of the green funds granted to Vietnam," said Hoe.

In the long term, he 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 Vu Sy Cuong at the Academy of Finance opined that the transition to green growth in Vietnam requires vast investments. Between now and 2040, the country will need an annual amount of finance equivalent to 6.8% 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 the country 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, Vietnam will incur an annual cost of 15 billion USD (5% of the GDP) in the next years owing to climate change. If the country fails to take early action, the cost can soar to 11% of the GDP by 2030./.