Workshop calls for natural capital to anchor Vietnam’s economic policy

March 05, 2026 | 15:24

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As Vietnam seeks to align economic growth with environmental sustainability, policymakers and financial leaders are stepping up efforts to embed natural capital into macroeconomic planning.

The 'Finance for Nature' workshop, held in Hanoi on March 4, brought together policymakers, economists, environmental experts, and financial sector representatives to discuss integrating natural capital into macroeconomic decision-making and promoting ecological finance in Vietnam.

The event was co-organised by the Institute of Strategy and Policy on Agriculture and Environment, the University of Economics and Technology for Industries, Dragon Capital Vietnam, the United Nations Development Programme, and the United Nations Environment Programme (UNEP) World Conservation Monitoring Centre, highlighting cross-sector collaboration to advance ecological finance.

Workshop organisers introduced a report applying advanced economic-environmental modelling tools, including the Integrated Economic-Environmental Modelling (IEEM) framework and the Global Trade Analysis Project–Integrated Valuation of Ecosystem Services and Trade (GTAP-InVEST) platform, providing a rigorous foundation for integrating natural capital into policymaking.

“Finance for Nature” workshop spotlights natural capital in policymaking

For decades, traditional macroeconomic models based on Computable General Equilibrium (CGE) analysis and built on Social Accounting Matrices have focused solely on priced market transactions. In doing so, they have effectively assigned zero value to ecosystem services such as water regulation, carbon sequestration, pollination, and soil protection. As a result, growth projections often overlook the depletion or degradation of natural capital, leading to incomplete assessments of long-term economic performance and sustainability.

IEEM addresses this limitation by integrating data from the United Nations System of Environmental-Economic Accounting into the Social Accounting Matrix, creating an environmentally extended accounting framework.

Within this updated framework, physical flows such as water use, biomass energy, and greenhouse gas emissions are recorded alongside traditional monetary transactions. Natural capital is treated as an economic asset that can depreciate, be depleted, or be restored over time. This allows the model to assess the long-term impact of policies, including carbon taxation, agricultural subsidies, and land-use change, on GDP growth, trade balances, and social welfare.

The integration of IEEM with spatially explicit land-use and ecosystem service models creates the IEEM+ESM platform, which is applied globally through GTAP-InVEST. This closed-loop system operates in four stages. First, the CGE model estimates land demand by ecological zone.

Second, a spatial simulation allocates land-use changes at grid level. Third, ecosystem service models measure physical impacts, such as carbon loss or increased erosion. Finally, these changes are converted into productivity shocks and fed back into the economic model, allowing environmental impacts to directly influence economic outcomes.

The feedback mechanism shows, in measurable economic terms, that ecological degradation lowers agricultural productivity, drives up food prices, and in turn undermines macroeconomic stability.

The report further assessed the global state of finance for nature using the latest 2026 data from the UNEP, finding that financial flows with negative impacts on nature total approximately $7.3 trillion per year, equivalent to nearly 7 per cent of global GDP. By contrast, investment in nature-based solutions amounts to just $220 billion annually, the majority of which comes from the public sector.

The 30:1 imbalance indicates that the global financial system continues to channel substantial capital towards resource extraction, fossil fuels, and chemically intensive agriculture.

The workshop conducted an in-depth analysis of innovative financial mechanisms designed to reverse this trend, including the integration of natural capital considerations into sovereign credit ratings.

When risks related to land degradation, water scarcity, and deforestation are quantified and reflected in public debt risk assessments, borrowing costs adjust accordingly. Countries investing in ecosystem conservation and restoration may benefit from lower bond yields due to enhanced long-term stability, thereby creating direct economic incentives for sustainable resource governance.

Significant attention was devoted to the development of the carbon market and green taxonomy in Vietnam. The roadmap for operating the national Emissions Trading System under Decree 29/2026/ND-CP was recognised as an important step towards internalising the cost of emissions. The pilot phase from 2026 to 2028 focuses on thermal power, steel, and cement industries, with initial free allocation of allowances.

After 2029, auction mechanisms will gradually replace free allocations, sending clear price signals that encourage technological innovation and emission reductions at source.

In parallel, Decision No.21/2025/QD-TTg on the Green Classification List establishes technical standards for 45 project categories across renewable energy, low-carbon transport, green buildings, water management, organic agriculture, and environmental industries. Standardised definitions help commercial banks reduce legal risks when issuing green credit, limit greenwashing practices, and enhance market transparency.

The workshop concluded that integrating natural capital into the financial system represents a structural shift in development thinking, extending beyond a technical reform. Frameworks such as IEEM and GTAP-InVEST provide quantitative evidence of the intrinsic link between economic activity and ecological systems.

UNEP’s 2026 data underscores the scale of the imbalance, while emerging financial instruments offer opportunities to redirect capital flows towards nature-positive outcomes.

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By Thai An

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