Vietnam Investment Review on December 4 hosted a conference themed “Lighting the Path for Green Financing” in Hanoi, attracting executive representatives from foreign financial institutions, the State Bank of Vietnam (SBV), domestic banks, and experts in the field.

The event comes as leaders take part in the COP28 climate summit in Dubai to reinforce their net-zero goals and offer up new solutions and ambitions to mobilise financial resources for the transition process.

Tran Thi Khanh Hien, head of Research at MB Securities JSC, said that green finance is becoming an inevitable trend worldwide with the participation of international institutions and governments as well as the financial systems of countries around the world gearing towards sustainable economic development.

“As one of the 150 countries committed to achieving net-zero emissions by 2050, Vietnam has taken immediate actions,” Hien said. “It approved tasks and solutions to expedite the country’s commitments made in 2021 and approved the national strategy on climate change. At the same time, it provided a comprehensive roadmap to realise the committed climate goals by creating a legal corridor, promoting and supporting the business community, industries, and localities to jointly take responsibility for reducing net emissions.”

Vietnam’s commitments also promote demand for green finance, providing a great opportunity to develop green credit, bonds, and capital.

The World Bank estimates that Vietnam needs to invest an additional $368 billion by 2040, equivalent to 6.8 per cent of GDP per year, to adapt to climate change implications. Of which, investment in resilience is about $254 billion along with $114 billion for the decarbonisation journey, according to commitments with the international community.

While many banks have strongly participated in the transformation journey and harvested initial inspiring results, it is also deemed necessary to have the participation and close cooperation from international financial organisations with their commitment for support provision.

According to Pham Thi Thanh Tung, who is deputy general director of the SBV’s Department of Credit for Economic Sectors, the deployment of solutions from the banking sector would orient credit investment flow into environmentally friendly projects, from there playing a part in realising the national strategy on green growth and sustainable development.

“The SBV has proactively integrated the monetary policy in the management process, building solutions and programmes in credit and banking activities, contributing to supporting the economy in transforming the growth model in a sustainable manner and responding to climate change,” Tung said.

The SBV has crafted a green banking development orientation through integrating related measures into the sector’s development strategy for the rest of this decade. It aims to help increase awareness and social responsibility of the banking system in protecting the environment and gradually greening banking operations.

According to Nguyen Tung Anh, head of Green Finance Services at FiinRatings, Vietnam has recorded significant progress with green credit. From 2017 to 2021, outstanding green credit debt showed an average annual growth rate of over 25 per cent, higher than the overall credit growth rate of the economy.

“But despite this positive trend, the proportion of green credit is still relatively modest, accounting for only 4.3 per cent of the total outstanding debt of the entire economy, indicating that there is still much room for it,” Anh said. “Although the green finance market and related bonds have been promoted plenty in recent times, many limitations still persist.”