Green finance demand is a huge wall, but capital flows are like a newly opened door

Textile and garment enterprises are making a green transition by increasing the use of electricity from renewable energy, producing clothing products from recycled materials... - Photo: NGOC HIEN

At the Green Economy Forum 2024 with the theme "Accelerating the Net Zero Economy" organized by Saigon Economic Magazine on September 19, Mr. Darryl J. Dong, senior representative in charge of the Ho Chi Minh City office of the International Finance Corporation (IFC), said that Vietnam must increase financial investment in combating climate change.

Mr. Darryl J. Dong said that according to World Bank estimates, Vietnam needs 368 billion USD by 2040 to finance infrastructure, new technology and social programs for the green transition.

In the next 10 years, Vietnam needs to mobilize hundreds of billions of USD to respond to climate change, but private capital will find it difficult to meet this demand.

Mr. Darryl J. Dong pointed out the current huge demand for capital and green finance for Vietnam and businesses.

However, access to capital in the climate finance sector is currently limited, with green credit from domestic banks accounting for only 4.5%, while banks should be the main source of capital.

Therefore, Mr. Darryl J. Dong likened the sad truth that the need for green finance and climate finance is like a giant wall, but the door for climate finance in Vietnam has only just opened a little.

To open this financial door, IFC experts believe that legal regulations are very important, the climate finance market cannot develop if the regulations are still vague, so it is necessary to build a good climate legal framework to attract investors and provide capital.

In addition, Mr. Darryl J. Dong also believes that it is necessary to implement a "blended finance" solution, which is a combination of concessional and commercial capital, thereby expecting to reduce total transaction costs, helping to balance the risks and profits of the project. At the same time, Vietnam must promote projects that are more accessible to banks...

Meanwhile, Dr. Nguyen Quoc Viet, deputy director in charge of the Vietnam Institute for Economic and Policy Research (VEPR), said that in the context of increasingly fierce competition and many challenges regarding barriers in the international market, businesses need to take action and practice ESG (environment, society, governance) to move towards green growth.

According to Mr. Viet, ESG is a set of standards to measure factors related to sustainable development and the influence and impact of businesses on the community.

However, many Vietnamese businesses, especially small and medium-sized enterprises, lack awareness and understanding of ESG practices. In addition, high investment costs are also a barrier for businesses.

Therefore, Mr. Viet believes that businesses need to enhance their capacity such as capital, technology, techniques, human resources, management as well as link with FDI enterprises to meet standards and overcome new barriers in international trade.

To support businesses in the green transformation process, Dr. Nguyen Quoc Viet said that the Government and state agencies need to provide and update information promptly and issue guidelines for implementing green transformation policy strategies.

In addition, it is necessary to soon complete the policy framework on carbon emission reduction such as promoting renewable energy, energy saving, building regulations on carbon market, carbon pricing, green certification. The State needs to design and implement policies to support businesses in green production.

Source: https://tuoitre.vn/nhu-cau-tai-chinh-xanh-la-buc-tuong-khong-lo-nhung-nguon-von-rot-ra-nhu-canh-cua-moi-he-20240919160436228.htm