Unlocking impact investment flows for green growth

Global impact investment flows are expanding rapidly, creating major opportunities for developing economies. In Southeast Asia, Viet Nam is emerging as one of the leading destinations for this capital. However, to fully leverage these resources for sustainable development, significant barriers related to financing, institutions, and corporate capacity still need to be addressed.

Global capital shifting toward sustainable development

On March 10, the Ho Chi Minh City Investment and Trade Promotion Center (ITPC), the Impact Investment Exchange (IIX), and Global Affairs Canada (GAC) jointly hosted the forum “Connecting Impact Investment: Capital for Growth.”

Robert Kraybill, Chief Investment Officer at the Impact Investment Exchange (IIX), said global assets currently total around $471 trillion, with more than $30 trillion allocated under Environmental, Social, and Governance (ESG) criteria. The global impact investment market alone has reached roughly $1.6 trillion.

However, the Asia-Pacific region still faces a financing gap of about $1.5 trillion to achieve the United Nations Sustainable Development Goals (SDGs), particularly in areas such as climate action, sustainable economic growth, and marine ecosystem protection.

“As official development assistance and grant funding gradually decline, many countries, including Viet Nam must shift to new financing models, mobilizing private capital and blended finance mechanisms,” Kraybill said.

According to an IIX report, between 2020 and 2022 Vietnam attracted about $2 billion in impact investment, accounting for 30% of Southeast Asia’s total, surpassing Indonesia, Thailand, and the Philippines. Since 2017, total impact investment in Vietnam has exceeded $3.2 billion.

Most of this capital has flowed into energy and financial services. Notably, the International Finance Corporation (IFC) committed $310 million in climate financing to Viet Nam in fiscal year 2024.

Despite this progress, structural bottlenecks remain. About 68% of impact investment capital takes the form of loans, while equity investment accounts for only around 25–30%, reflecting the limited number of businesses that meet investment requirements.

At the same time, Viet Nam’s ecosystem of social impact businesses (SIBs) plays an increasingly important role in addressing social challenges, particularly in disadvantaged regions. Yet 92.8% of these enterprises are micro or small businesses, limiting their ability to access funding.

Estimates show that Viet Nam’s SME credit gap reaches approximately $24 billion annually, with 62% of financing demand unmet. Key obstacles include lack of collateral, limited management capacity, and the absence of suitable financial instruments.

“Viet Nam has set ambitious sustainability targets, including achieving net-zero emissions by 2050, expanding renewable energy, and building a circular economy,” Kraybill said.

ESG standards are also exerting increasing pressure on Viet Nam’s export sectors. Major industries such as seafood, textiles, and coffee must comply with stricter requirements on traceability and sustainable production from major markets.

Meanwhile, climate change could reduce Vietnam’s agricultural productivity by about 9.1% by 2050, forcing businesses to invest more heavily in technology and green transformation, he added.

New mechanisms needed to unlock capital flows

To address these challenges, Kraybill recommended three key solutions for Viet Nam to accelerate impact investment.

First, establish risk-sharing mechanisms that combine public funding with resources from development finance institutions to attract private investment.Second, develop flexible financial instruments—such as revenue-based financing and impact-linked loans to ease the burden of fixed debt repayments for businesses.Third, strengthen technical assistance and corporate governance capacity, while simplifying legal procedures so enterprises can access capital more easily.

“If these financing and institutional bottlenecks can be resolved, Viet Nam could become a regional hub for impact investment, supporting economic growth alongside sustainable development,” Kraybill said.

Jim Nickel, Canada’s Ambassador to Viet Nam, said Canada is working with IIX to implement the Impact Investment Readiness in Vietnam (IIRV) initiative, aimed at strengthening the capacity of domestic enterprises. The program has already mobilized CAD 17.5 million in private capital for Vietnamese businesses.

With its dynamic workforce and strong entrepreneurial spirit, the country has significant potential to become a regional leader in inclusive growth and impact investment, the ambassador said.

“When Vietnamese businesses grow through innovation, climate solutions, and gender-equality practices, they become potential partners for Canadian exporters, technology providers, and investors in sustainable supply chains,” Nickel said. He added that Canada is committed to expanding partnerships that help Vietnamese firms not only access capital but also broaden trade opportunities.

Through such cooperation, Vietnamese companies can gain access to Canadian clean technology, agriculture, food, and digital solutions, improving competitiveness and expanding market access.

At the local level, Nguyen Loc Ha, Vice Chairman of the Ho Chi Minh City People’s Committee, said the city’s development strategy to 2030, with a vision to 2045, aims to reinforce its role as Viet Nam’s economic engine and a regional center for finance, trade, science and technology, and innovation.

The city is prioritizing investment in green economy sectors, clean energy, high technology, innovation, and digital transformation, while strengthening its startup ecosystem to attract sustainable investment flows.