IFC scales up support for Vietnam’s low-carbon economic growth

The World Bank’s investment arm International Finance Corporation (IFC) is ramping up support for the Vietnamese government to bolster sustainable finance and spur private sector participation, backing the country's climate adaption goals and driving sustainable growth.

IFC, the largest global development institution focused on the private sector in developing countries, pledged the latest support while Vietnam is transitioning to a low-carbon green economy with net zero emission targets by 2050.

The World Bank unit signed two memoranda of understanding (MoU) separately with Vietnam’s Ministry of Natural Resources and Environment, and the State Bank in the U.S. on May 11 to leverage private sector innovation and finance in the country's transition process. The deals were exchanged between signatories in Washington D.C. in the presence of visiting Vietnamese Prime Minister Pham Minh Chinh.

Under one of the two deals, the Ministry of Natural Resources and Environment will partner with the IFC to create a conducive environment for private sector climate investment.

Based on its ongoing support to the ministry to develop green project criteria, the IFC will also help develop and implement a policy and regulatory framework with an initial focus on key areas, including green procurement, green taxonomy, and waste management, especially plastic recycling and e-waste, among others.

"The strengthened cooperation between us will greatly contribute to the implementation of Vietnam's commitments in COP26 and other issues related to environmental protection and sustainable development," Tran Hong Ha, minister of Natural Resources and Environment, said in an IFC release.

Over the next five years, the finance corporation will scale up its support for Vietnam’s sustainable finance agenda led by the State Bank to facilitate green financial flows and align the banking sector with the Southeast Asian country's climate adaption goals.

State Bank of Vietnam Governor Nguyen Thi Hong said, "IFC's continued efforts to improve the ESG [environmental, social and governance] practices in the country's financial institutions will be of great help in greening the banking sector, scaling up green finance to its full potential to support sustainable economic growth."

The World Bank arm added it will, in partnership with the Swiss State Secretariat for Economic Affairs (SECO), further help the State Bank strengthen its sustainable finance framework in a range of areas, including ESG risks, climate risk management, and others, while continuing to help commercial banks build capacity in line with global sustainability and governance practices.

"Private sector investment is critical to achieving our climate change goals," said Stephanie von Friedeburg, IFC senior vice president, Operations.

"For Vietnam, which aims to become both a high-income and carbon-neutral economy in the next 30 years, private sector investment is doubly important. IFC will continue to work closely with the Government to ensure that the right policies and incentives are in place to help unlock this finance,” she said in the IFC release.

The government of Vietnam aims to decarbonize the economy and achieve carbon-neutral status by 2050 as committed at the 2021 United Nations Climate Change Conference (COP 26).

The efforts need huge investments over the next 30 years with state resources meeting only part of the financial need.