As published in Viet Nam Financial Times on 12 August 2025

Viet Nam stands at a critical juncture where ambitious development aspirations converge with urgent climate imperatives. As the country sets double-digit growth targets and pursues high-income status by 2045, it must simultaneously address its climate vulnerabilities. This dual challenge demands an integrated financing approach, one that places national priorities at the center. 

A Unified Strategy to Align Climate and Development Goals

At the recent Fourth International Conference on Financing for Development in Seville in July 2025, member states reaffirmed their commitment to catalysing investment for sustainable development, addressing rising debt crises, and reforming the international financial architecture for greater equity. Deputy Prime Minister Ho Duc Phoc also underlined the importance of these areas as he addressed the plenary, calling for the mobilisation of resources for green transition, circular economy, innovation, digital transformation, along with reforms to multilateral funding and increasing cooperation and knowledge sharing in key areas. These international commitments take on particular significance for Viet Nam, where development financing has shown steady growth, reaching 34.8 percent of GDP in 2020[1]. Yet this impressive figure masks a critical gap. The World Bank estimates that Viet Nam requires $368 billion[2] in cumulative funding by 2040 for climate mitigation and adaptation alone - a scale far beyond current development flows, underscoring the urgency of reforms needed in the country’s climate financing approach.

Viet Nam's remarkable economic transformation over recent decades has demonstrated the nation's capacity for strategic reinvention. However, achieving the ambitious goal of high-income status by 2045 while building climate resilience demands a fundamental shift in approach to development financing. Viet Nam needs a comprehensive plan that treats development and climate goals not as competing but complementary priorities. This must take into account what the total cost of climate action and green transition will be, how they can be mobilised and deployed to advance economic development, inequality reduction, other national development priorities, and at the same time, also addressing climate action. 

National Ownership is Key to Mobilizing Investment at Scale

Current climate commitments, including Nationally Determined Contributions, National Action Plans, Net-Zero pledge represent important foundational steps. However, these efforts, while highly commendable, have been driven significantly by external frameworks and compliance requirements rather than from the national development agenda. To unlock its full potential, Viet Nam must transition from externally driven climate action and financing to an integrated and comprehensive, nationally owned strategy that positions climate investments as drivers of economic competitiveness rather than mere regulatory obligations.

While Viet Nam has developed its NDC, it still lacks an accompanying financing strategy that incentivizes private and public investment for the implementation of NDC. The NDC also does not integrate social sectors, and national development goals. 

The Ministry of Industry and Trade estimates that for the power sector alone, Viet Nam needs to mobilize $142 billion for renewable energy and the electricity grid between now and 2030. To put this figure in perspective, total investment in Viet Nam was $117 billion in 2021.  The $15.5 billion Just Energy Partnership (JETP) between Viet Nam and the G7 is an important contribution to this effort, but even under the most optimistic scenarios would represent a small fraction of the financing required. 

80 Years of Progress

The 80th anniversary of Viet Nam's financial sector formation offers a strategic moment for reflection. The sector's evolution from supporting a centrally planned economy to facilitating market-based development demonstrates remarkable adaptability. Now, it must evolve once again to become a catalyst for green growth, channelling resources toward investments that simultaneously advance socioeconomic development and environmental sustainability.

Public Finance Must Lead, but Private Capital Is Critical

Integrated climate financing represents a paradigm shift that embeds climate considerations into national budgeting and financing systems, strengthens inter-ministerial coordination, and develops domestic capital markets capable of channelling funds toward long-term climate investments. 

Viet Nam has started laying some important groundwork for this integration. The State Bank of Viet Nam's development of a green taxonomy provides a classification system for sustainable investments, while green bond market development and climate risk assessment initiatives demonstrate growing institutional capacity. These achievements, however, require scaling and deeper integration across government institutions and the financial sector to realize their full potential.

Realizing this vision requires concrete action across several dimensions. First, Viet Nam must systematically embed climate considerations into annual budget processes, moving beyond project-based funding to climate-integrated fiscal policy. This transformation demands robust climate budget tagging systems and ensuring alignment between fiscal decisions and NDC targets, creating coherence between spending patterns and climate commitments.

Second, effective cross-sectoral coordination is essential to effectively mobilise and deploy climate finance at scale. A coordination mechanism with clearly defined governance structure, roles, responsibilities and accountability is needed. In Viet Nam, the Ministry of Finance, especially after the merging with the former Ministry of Planning and Investment, is well positioned to play the leading role in a multi-stakeholder coordination platform, stewarding public and private actors under strong political leadership to align and synergise on climate investments, unlocking greater development impact. Coordination must be accompanied by critical institutional capacity building across all relevant levels of government. 

Third, mobilizing private capital through innovative de-risking instruments and collaborative financing structures remains crucial. Public resources alone cannot meet Viet Nam's climate investment requirements. However, the domestic financial system is constrained in its capacity to mobilize capital on the scale required in a prudent, non-inflationary manner. The government must create an enabling environment and regulatory frameworks for private investment through guaranteed mechanisms, risk-sharing instruments, and blended finance structures that leverage public resources to attract private capital at scale. 

JETP exemplifies the potential of blended finance approaches to mobilize private sector investment. This landmark initiative, for which UNDP acts as a secretariat support agency, demonstrates how strategic public sector commitments can catalyse broader financing flows. By combining concessional public finance with market-based mechanisms, JETP creates a framework for attracting private investment in renewable energy infrastructure while ensuring just transition principles for affected communities and workers.

Fourth, Viet Nam should expand its sustainable finance taxonomy to ensure compatibility with international standards while reflecting national development priorities. This alignment will support market development and provide clear signals to investors about the country's strategic direction, facilitating cross-border investment flows while maintaining sovereignty over development choices.

Finally, robust regulatory frameworks should support public and private climate financing to align with Viet Nam's NDCs and green growth strategy. This requires removing regulatory barriers to innovative financing instruments, streamlining procedures for climate finance project approval, reducing transaction costs and accelerating the deployment of climate solutions. Additionally, regulatory reforms are needed on eligibility criteria for accessing concessional finance, to support Viet Nam in reaching its development goals. 

Viet Nam Can Lead The Way

With an estimated $4 trillion annual financing gap to achieve the Sustainable Development Goals globally, Viet Nam's success in demonstrating that integrated, country-led climate financing delivers superior development outcomes will provide valuable lessons for other countries navigating similar constraints and opportunities. An integrated national financing framework (INFF) for climate could set out the framework for this effort.

As Viet Nam embarks on this transformation, the path forward is clear: integrated climate financing driven by national priorities offers the most promising route to achieving both development ambitions and climate objectives. The question is not whether Viet Nam can afford to pursue this approach, but whether it can afford not to. The time for action is now. Viet Nam can lead the way in delivering triple win for people, planet and prosperity.