Unlocking green capital calls for synchronized policies

Green financing grows, but financial instruments remain uneven

Green credit has expanded in Viet Nam, but a consistent policy framework and a diverse range of financial instruments are needed to ensure that capital effectively supports the green transition. Associate Professor Dr. Nguyen Phuong Le from the Faculty of Economics and Management at the Viet Nam National University of Agriculture highlighted this issue in a comparative study of green finance policies in China and Viet Nam.

At a recent academic seminar held as part of a series of scientific research activities celebrating the 70th anniversary of the Viet Nam National University of Agriculture and the 65th anniversary of its Faculty of Economics and Management, Associate Professor Dr. Nguyen Phuong Le outlined four dimensions for assessment: the legal framework, participating stakeholders, policy instruments, and implementation outcomes. The analysis offered insights into potential directions to improve Viet Nam's green finance policies.

The study found that Viet Nam has made significant progress in establishing a legal foundation for green finance. The 2020 Law on Environmental Protection, national strategies on green growth and green banking development, and regulations on green credit and green bonds have laid the groundwork for market development.

Meanwhile, green equities, green investment funds, and the carbon credit market are gradually emerging. However, development remains uneven across different financial instruments. Although opportunities to expand green capital flows have increased, the mechanisms supporting capital mobilization and allocation still require further improvement.

Through her comparative analysis, Associate Professor Dr. Nguyen Phuong Le identified a key difference between the two countries in the level of integration and maturity of their green finance systems. In Viet Nam, policies remain fragmented, while interagency coordination mechanisms are limited. Therefore, improving individual financial instruments must go hand in hand with integrating policies into a coherent framework.

Strengthening institutions and diversifying financing channels

China's experience highlights the importance of coordination mechanisms in developing green finance. The country has adopted a top-down governance approach, with coordination among multiple government agencies at the central and local levels.

Since 2016, China has gradually established a green finance system encompassing credit, bonds, securities, investment funds, insurance, and carbon markets. After 2020, the system was further expanded to support emissions reduction targets.

Green financial instruments have also become increasingly diverse, including investment funds and disclosure practices based on environmental, social, and governance (ESG) criteria. By the end of 2024, China's outstanding green credit had reached approximately CNY 36.6 trillion, highlighting the growing scale and importance of green finance in the country's economy.

Based on the comparative findings, Associate Professor Dr. Nguyen Phuong Le proposed four key policy directions for Viet Nam.

First, Viet Nam should continue improving its legal framework to ensure greater integration and consistency. This recommendation addresses the current fragmentation of policies and aims to establish stronger links among existing regulations and financial instruments.

Second, green financial instruments should be diversified, particularly through the development of green capital markets, green bonds, green investment funds, and carbon markets. As bank lending currently plays a dominant role, expanding alternative financing channels would help create a more comprehensive green financial system.

Third, Nguyen Phuong Le emphasized the coordinating role of central government agencies while calling for greater private sector participation. Coordination mechanisms should be strengthened alongside the legal framework, as effective implementation depends on cooperation among relevant stakeholders.

Finally, she recommended further developing the green taxonomy and ESG standards to improve information transparency and attract international capital. This represents a necessary next step following Viet Nam's adoption of regulations on environmental criteria and certification of projects under the green taxonomy.

These recommendations highlight the need for close coordination among institutions, financial instruments, and implementation mechanisms in developing green finance. For Viet Nam, the growth of green credit provides an important foundation. The next priority is to strengthen the overall financial system to mobilize a broader range of resources for the green transition.

$ 1 = VND 26,050 - Source: Vietcombank.