Green transition to close $20 billion annual investment gap

Green transition to close $20 billion annual investment gap

Vietnam has set ambitious climate commitments of net-zero by 2050, a 15.8 per cent reduction in greenhouse gas emissions by 2030, and a rapid shift towards renewable energy. On paper, the direction is clear. In practice, however, the transition requires annual investment equivalent to 6.8 per cent of GDP, approximately $368 billion cumulatively through to 2040, to build climate-resilience, far more than current green financing flows.

Harini Gopalakrishnan, director for Southeast Asia and Australia Alvarez and Marsal

Vietnam’s central challenge is not a lack of ambition, but a credibility gap. Investors and trade partners are looking for verifiable evidence that projects and companies are truly aligned with climate goals. Without this, capital will remain sidelined, and Vietnamese exporters risk penalties under emerging carbon tariffs and increasingly stringent supply chain traceability rules.

The government has already laid down a strong legal foundation through its green taxonomy, covering 45 green sectors. But rules alone are not enough to mobilise billions of dollars. Closing the gap requires advancing disclosure standards, de-risking investments, and cultivating a dynamic financial ecosystem.

Vietnam already mandates sustainability disclosures in listed companies’ annual reports. But these reports are often qualitative, focusing on corporate social responsibility activities or compliance statements, with little quantitative data that investors can evaluate.

That weakness carries financial and trade consequences. Investors are reluctant to fund projects without standardised environmental, social, and governance (ESG) metrics. Meanwhile, export markets are tightening rules. The EU’s Carbon Border Adjustment Mechanism, currently in transition, requires exporters of steel, cement, and aluminium to report emissions, with tariffs imposed on goods without credible data. Global buyers in apparel, electronics, and agriculture also demand full traceability for environmental impacts across supply chains.

For Vietnam, the path forward is to move from just narratives to verifiable, quantitative indicators such as carbon intensity per ton of product, renewable energy usage ratios, and water efficiency metrics. Alignment with global frameworks would make disclosures more credible and internationally comparable. A phased approach beginning with large, listed companies would balance feasibility with urgency, as seen in Singapore and India.

Leveraging digital ESG platforms could further standardise and verify disclosures, especially for small- and medium-sized enterprises. By embedding these practices, Vietnam can both build investor confidence and safeguard export competitiveness.

Even with stronger disclosure, Vietnam must address investor risk perceptions. Its cumulative green bond issuance, around $1.5 billion by 2024, is far behind peers like Indonesia with over $14 billion and Singapore with over $12 billion.

A dynamic ecosystem

Mobilising billions annually will require stronger risk-sharing mechanisms. Blended finance and public guarantees could help absorb first-loss risks, making projects more attractive to private investors, such as India’s solar programme offers a powerful precedent. Developing a centralised pipeline of investment-ready projects, complete with feasibility studies and taxonomy-aligned financial models, would also accelerate capital deployment.

Partnerships with multilateral development banks, including the World Bank, can add concessional finance and technical expertise to help structure viable deals.

Meeting Vietnam’s financing needs requires more than bonds and loans, it requires a broader, innovative financial ecosystem. Vietnam will need more diversified instruments such as sustainability-linked loans and transition bonds to channel domestic capital both to green leaders and to high-emission sectors transitioning towards cleaner technologies.

Drawing inspiration from Singapore’s Green FinTech Grant, Vietnam could also support startups building ESG scoring tools, digital credit platforms, and verification systems to reduce costs for smaller businesses.

Human capital development will also be critical. Training regulators, bankers, and corporate leaders in carbon accounting, climate risk assessment, and project finance can deepen market expertise and strengthen execution capacity.

Vietnam has the ambition, the legal framework, and growing private-sector appetite to make its green transition a reality. The priority now lies in execution, embedding standardised ESG metrics, reducing risks for investors, and fostering financial innovation. With a cumulative $368 billion in climate investment required by 2040, and more than $2 billion in annual exports to the EU exposed to carbon border measures, the stakes are significant.

By taking decisive steps, Vietnam can not only attract the capital it needs, but also secure its position as a green manufacturing hub and sustainable finance leader in Southeast Asia.

VIR