Green finance and circular economy as drivers of growth

Nguyen Viet Long, partner, Consulting, EY Vietnam

From the perspective of a sustainable development strategy consultant, how do you assess the current trends in mobilising capital for sustainable development in Vietnam?

From a market perspective, Vietnam’s green capital flows are clearly entering an acceleration phase. According to the State Bank of Vietnam, green credit maintained an average annual growth rate of around 21 per cent during 2017-2024 and reached $28.16 billion in the first quarter of 2025. This figure underscores the strong demand for capital in green projects across the country. Most green loans are directed towards the renewable energy and green agriculture sectors.

Regarding the capital market, FiinRatings statistics show that in 2024, the market saw a renewed rebound, with the total value of green, social and sustainability bonds issued in Vietnam reaching nearly $276 million, accounting for 1.5 per cent of all newly issued corporate bonds since the beginning of the year. The participation of banks and enterprises indicates that the ‘greening’ process has moved beyond slogans and is now being translated into concrete actions.

A noteworthy development is that the policy framework is setting the pace for green businesses, a shared understanding among regulators, enterprises, and investors has been established; while a roadmap has also been outlined for piloting a carbon market starting in 2025. This is a timely step, especially as many export markets, including the EU, begin enforcing carbon-related standards.

The policy framework is creating strong momentum for breakthroughs in green business development

Where does Vietnam currently stand in the regional race to attract green and sustainable finance?

Within ASEAN, Vietnam’s green bond market is considered as a fast mover but remains modest compared with its regional peers.

Vietnamese businesses face a number of challenges in accessing green finance. First is the lack of a green criteria framework in earlier years, which left many organisations uncertain about how to determine what qualifies as a ‘green project’. Second is high issuance costs for green bonds, while the organisational capacities of businesses remains uneven.

The third aspect involves fragmented environmental, social, and governance (ESG) data and a lack of independent verification, which pose difficulties for international investors and Vietnamese financial institutions to properly assess risks. Finally, there are high upfront investment costs for enterprises to transition to circular economy models, at a time when access to capital remains extremely limited.

For small and medium-sized enterprises, accessing this source of capital is even more challenging, particularly due to collateral requirements and the need to demonstrate project effectiveness. Meanwhile, circular models often require substantial investments in machinery, process improvements, and supply chain redesign.

In your view, what is the key issue hindering enterprises from transitioning to circular economy models?

From my experience working with businesses, the two biggest problems are the cost of capital, as mentioned above, and the mindset of business leaders. Many companies, particularly in sectors such as plastics and plastic packaging, still view extended producer responsibility merely as compliance cost rather than an opportunity to redesign products, expand markets, or optimise input material costs.

How do you assess the readiness of ESG data and information transparency among businesses, and do you see this as a key obstacle to attracting international finance?

ESG data and disclosure among local enterprises still have limitations, but there are also encouraging improvements driven by the finance-banking sector.

In recent years, credit institutions have advanced their sustainable development strategies through enhanced credit risk management, issuance of green bonds and development of sustainable finance products.

At the same time, banks have been publishing sustainability reports- an essential tool for measuring, disclosing, and monitoring the progress on ESG.

According to the Global Reporting Initiative (GRI), a standard sustainability report should include both quantitative and qualitative information on emissions, energy consumption, social policies, and corporate governance. Such reports serve not only as a key communication channel with investors but also function as an important benchmark for assessing an organisation’s ESG maturity.

By mid-2025, about 13-15 commercial banks had published sustainability reports, gradually aligning their disclosures with international standards such as GRI, the International Sustainability Standards Board, and various aspects of International Financial Reporting Standards.

This indicates that ESG reporting is gradually becoming a standard practice in the finance-banking sector. It is expected that ESG reporting would function as a catalyst for wider adoption for businesses, especially those that are clients of financial institutions.

Establishing common standards to measure circularity performance is essential. How is EY Vietnam supporting businesses in setting key performance indicators (KPIs) and reporting standards that not only meet ESG requirements but also build confidence among investors?

Vietnam currently lacks a unified standard for measuring circularity. Choosing the right framework must go hand-in-hand with setting KPIs, building data systems and disclosing information in alignment with corporate strategy and business objectives. This is pivotal, particularly for companies seeking access to green capital. In this context, EY Vietnam is supporting enterprises across key areas.

The first area is analysing circular economy and ESG standards available in the market and helping enterprises in selecting the framework that best aligns with their business orientation and objectives. Building on this foundation, we work with enterprises to develop KPIs with clear, quantifiable indicators that can be tracked over time and integrated into performance management systems.

These KPIs typically cover areas such as resource use efficiency, recovery and recycling rates, value chain emission intensity, as well as social responsibility and business ethics within the supply chain.

The next area is developing a circular economy and ESG governance framework based on materiality analysis across the value chain, including risks-opportunities mapping and the formulation of sustainability strategies tied to product life cycles, supply chains, and circular business models.

This approach ensures that circular economy objectives are embedded within enterprise management systems, enabling businesses to pursue long‑term sustainable‑development goals while still meeting short‑term profitability requirements.

The third aspect is standardising reporting in accordance with internationally recognised circular economy and ESG frameworks – particularly those endorsed by global financial institutions – while also designing and developing circular economy and ESG databases that are integrated with the enterprise’s overall data systems.

EY Vietnam, in collaboration with The Asia Foundation, has developed a handbook on ESG implementation and disclosure to provide guidance and reference materials that support Vietnamese enterprises in integrating ESG principles into corporate governance.

We are also supporting the Ministry of Finance to develop Vietnam’s circular economy criteria. This set of criteria serves as a foundation for the ministry to promote the transition towards a circular economy and provides a practical, voluntary guidance framework for enterprises and financial institutions in the country.

* The views reflected in this article are the views of the author, and do not necessarily reflect the views of the global EY organisation or its member firms.

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