Financial “leverage” for green transformation businesses

In the current context, green transformation is no longer a choice but a “vital” requirement for sustainable development. However, many Vietnamese enterprises are facing many challenges, requiring a comprehensive and comprehensive policy to support enterprises in this process.

Lack of financial resources

Vietnamese small and medium-sized enterprises are currently facing many challenges in the process of implementing green transformation. A 2024 survey by the Private Economic Development Research Board (Board IV) showed that up to 50% of enterprises face financial difficulties when making green transformation (only 5.9% said there were no difficulties in capital), 48.6% face difficulties in specialized personnel; 44.2% face difficulties in technical solutions and over 36% of enterprises face difficulties in building green transformation strategies.

Mr. Nguyen Duc Hung, Director of Global Food Import-Export Joint Stock Company, shared: “More than 90% of enterprises in Vietnam are small and medium-sized enterprises, so green transformation is both a catalyst that brings opportunities and also puts pressure on enterprises. Meanwhile, the resources for enterprises, mainly small and medium-sized enterprises, are not large. Therefore, to carry out green transformation or participate in the green market is a huge pressure because most of this process must start from changing technology, while the investment value to change technology is a huge number, it is difficult for enterprises to easily implement or participate”.

Continuing a 2024 survey by Board IV on the readiness and difficulties of businesses in green transformation, only 48.7% of businesses assessed green transformation as necessary; 16.9% assessed it as very necessary. However, 17.4% still assessed it as unnecessary/very unnecessary and 33.9% assessed the necessity of this transformation at only a normal level. Notably, up to 64% of businesses said they were not prepared for the green transformation process.

The International Finance Corporation (IFC) in 2023 pointed out that over 50% of Vietnamese small and medium enterprises do not clearly understand what the green transformation process is, about 70% of enterprises do not have a specific action plan for green development goals and only 18% of enterprises have long-term plans for sustainable development and climate change. These figures show that the green transformation mindset of enterprises is still slow, many enterprises are even "indifferent" and stand outside this process, this also comes from the reason called "financial difficulties".

Transformation starts with the smallest actions of using recycled materials. (Photo: Nhan Dan Newspaper)

Chairman of LuxGroup, Dr. Pham Ha, acknowledged: “On the green journey, businesses are facing many challenges, of which economics is a very difficult problem because when converting to green, businesses have to invest in energy-saving equipment, waste treatment, environmentally friendly materials, etc. This requires high costs and a long payback period. Meanwhile, we are lacking synchronous policies, for example, green businesses do not enjoy incentives in terms of tax, credit, product bidding or market access, which makes many businesses not “keen” on green conversion.”

The Government has approved the National Strategy on Green Growth with general and specific orientations for each industry and sector. However, the green classification list has not yet been issued, causing many businesses to be "obstructed" in accessing green capital, preferential interest rates as well as capital for sustainable development.

Mr. Nguyen The Chinh, Vice President of the Vietnam Economic and Environmental Association, commented: “The issuance of a set of green classification criteria needs to be done soon, because from 2026, the EU will officially apply the carbon border adjustment mechanism for imported goods in 6 sectors that emit a lot of carbon during the production process (cement, iron and steel, aluminum, fertilizer, electricity and hydrogen). If not done quickly, Vietnamese enterprises will be eliminated from the global playing field, which is not beneficial for the economy as well as export enterprises.”

Creating “leverage” from policy

According to Dr. Le Xuan Nghia, Economic Expert, to help businesses overcome difficulties in the green transformation process, there needs to be a Green Finance Fund and a green finance policy with preferential mechanisms such as: long-term loans, no need for collateral or loans with preferential interest rates.

“For a long time, we have been doing it simply by doing statistics. For example, a bank lending capital to develop wind power or solar power is accounted for as green credit, while the policy remains unchanged, the interest rate is still the same and collateral is required to borrow. So this cannot be called green credit in its true sense. True to its nature, green credit must be for the right beneficiaries, and the beneficiaries here are businesses that are making a green transition,” Mr. Nghia emphasized.

Illustration photo.

Green transformation requires huge financial needs. In 2022, according to World Bank estimates, Vietnam needs up to 368 billion USD in the period 2022-2040 to build resilience and reduce greenhouse gas emissions, of which adaptation accounts for 4.7% of GDP per year and decarbonization accounts for 2.1%. The private sector alone spends about 184 billion USD (equivalent to 3.4% of GDP per year). This is not a small number, while financial support for green growth in Vietnam is still low.

As of December 31, 2023, 47 credit institutions had green credit outstanding balances of nearly VND 621 trillion, an increase of 24% over the same period in 2022, accounting for about 4.5% of the total outstanding balances of the entire economy. As of September 30, 2024, only 50 credit institutions had green credit outstanding balances of over VND 665 trillion, mainly concentrated in a number of sectors such as renewable energy, clean energy (accounting for more than 43%) and green agriculture (over 30%). Thus, it can be seen that although the green credit ratio has increased, it is not significant.

Associate Professor, Dr. Do Phu Hai, Senior Lecturer at Hanoi National University, said: “The government needs to develop policies at the overall level, such as creating funds to support small and medium-sized enterprises to participate in green transformation. The state can promote the formation of business ecosystems, with links between businesses in participating in ESG to help businesses' strategies be fully implemented. Here, the role of banks is very important in providing credit, and financial instruments such as green bonds can be used.”

“Development funds around the world always reserve a certain proportion for sustainable development and credit for green development. Vietnam can completely access these capital sources to support green transformation activities of enterprises. However, to access them, the Government must have policies to attract FDI capital into this process,” Mr. Hai emphasized.

The new rules of the game in trade and investment today are to implement green economic goals. Professor Andreas Freytag, Friedrich Schiller University Jena, Germany recommends: “Transitioning to a green economy is one of the important solutions to neutralize the impact of climate change. Vietnam has just entered this process, so Vietnam's green policy needs to be designed in the most comprehensive way with a mechanism that facilitates businesses to convert smoothly, especially with effective support in science and technology to convert green energy in production and importantly, do not let businesses find their own way to convert.”

Building a green economy requires green businesses. On this journey, businesses need the support of the Government with specific policies, especially financial “leverage” so that businesses can feel secure and bold in implementing. Therefore, the Government needs a comprehensive and comprehensive policy system as well as strong policy actions to promote green finance that is “stuck” and remove difficulties for businesses.

According to Nhan Dan Newspaper

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Source: https://thoidai.com.vn/don-bay-tai-chinh-cho-doanh-nghiep-chuyen-doi-xanh-212788.html