On September 19, 2024, the “2024 Sustainable Development” forum was held in Ho Chi Minh City under the theme “Accelerating the Economy Towards Net-Zero Emissions.” Experts from the financial sector, government departments, and academia gathered to discuss the opportunities and challenges Vietnam faces in achieving its 2050 carbon neutrality goal.

Darryl James Dong, Chief Country Officer and Head of Ho Chi Minh City Office at the International Finance Corporation, pointed out that Vietnam has committed to incorporating high-income growth into its net-zero emissions trajectory to achieve carbon neutrality by 2050. However, realizing this goal requires massive investment. World Bank data shows that by 2040, Vietnam will need $368 billion to fund its transitional infrastructure, new technologies, and social programs.

Currently, climate finance in Vietnam remains limited. Dong stated that only 4.5% of local bank funds are directed towards green credit. This figure highlights the challenges Vietnam faces in climate finance while also revealing enormous development potential.

Lim Dyi Chang, Head of Commercial Banking at United Overseas Bank Vietnam, emphasized at the forum that the global momentum for a low-carbon economy is growing stronger, and Vietnam is no exception. He noted, “As we face the urgent need to mitigate climate change, the role of green investments in promoting low-carbon industries has never been more important.” Lim defined low-carbon industries as those that minimize greenhouse gas emissions and focus on sustainable practices, including renewable energy, circular economy, sustainable agriculture, green transportation, green buildings, and waste management.

Achieving a low-carbon transition requires a massive scale of investment. Citing data from the Power Development Plan VIII, Lim pointed out that from 2021 to 2050, power transition alone will require approximately $650 billion to expand renewable energy capacity, upgrade energy transmission infrastructure, and support R&D investment in new green technologies.

Banks will play a crucial role in this transition process. Lim stated, “As gatekeepers of capital, banks have the ability to channel funds into sustainable projects rather than high-carbon industries. Green finance initiatives such as green bonds and sustainability-linked loans can mobilize broader private sector participation in low-carbon projects.”

However, channeling funds into low-carbon industries is not without challenges. Lim pointed out that these challenges include a lack of clear green taxonomy frameworks, insufficient green investment incentives, and financial risks associated with new technologies. Moreover, there’s often a mismatch between the long-term nature of green investments and investors’ short-term financial expectations. Overcoming these challenges requires coordinated efforts from policymakers, financial institutions, and the private sector.

Dong emphasized that Vietnam needs to raise hundreds of billions of dollars in the next decade. He noted, “But unless we set stages to define what is green, reduce reliance on fossil fuels, neutralize intensive industrial sectors, and unlock commercial solutions, private capital will not evolve at the speed we need.”

To unlock financing potential, Dong proposed four key factors: clear regulations, bankable projects, blended finance or pooling of blended finance (i.e., pooling of concessional and commercial capital), and climate capacity. He stressed that climate markets won’t develop if guidance is scarce or confusing. “If you build a good regulatory climate framework, then investors and financiers will come.”

To drive more profitable projects, Dong suggested that banks need to step up their game and refine their market approach to identify green projects and work with eco-clients to make them bankable. He also pointed out that blended finance is an attractive de-risking tool that can mobilize climate finance and unlock difficult deals.

Dong emphasized the importance of building green capacity in Vietnam’s financial system: “We need to mobilize climate-smart credit in banks and green principles in capital markets. To do this, it’s important to build the necessary skills and capabilities to identify climate opportunities, assess credit quality, design financing solutions, and measure impact.”

Trần Minh Hùng, Editor-in-Chief of the Saigon Times, stated that Vietnam is implementing many measures and policies related to reducing greenhouse gas emissions, promoting renewable energy and environmental protection, reflecting its firm commitment to addressing climate change and achieving net-zero emissions by 2050.

Dr. Nguyễn Quốc Việt, Deputy Director of the Vietnam Institute of Economics and Policy Research, pointed out that the business community is also actively involved in the green transition process, with many companies practicing ESG (Environmental, Social, and Governance) principles and committing to green growth. However, to accelerate the transition, new actions are needed from both the government and businesses.

Dr. Nguyễn suggested measures including: completing the carbon reduction policy framework; developing regulations for carbon markets, carbon pricing, and green certification; and introducing and implementing supportive policies for businesses adopting green production practices.

During the forum, executives from manufacturing companies, infrastructure, and sustainability experts also shared their experiences in the greening process and initiatives to reduce greenhouse gas emissions. These practical experiences provided valuable references for attendees, contributing to promoting Vietnam’s broader green transition.

News Summary:

• Vietnam commits to achieving carbon neutrality by 2050, requiring massive investment.
• Currently, climate finance in Vietnam is limited, with only 4.5% of local bank funds directed towards green credit.
• Power transition alone requires approximately $650 billion in investment by 2050.
• Banks play a crucial role in channeling funds towards sustainable projects.
• Experts propose four key factors: clear regulations, bankable projects, blended finance, and climate capacity.
• Vietnam is implementing multiple emission reduction policies, with businesses actively participating in the green transition.
• Experts recommend refining the carbon reduction policy framework and developing regulations for carbon markets and green certification.