Green Finance for Sustainable Tourism Development in the Northern Mountainous Provinces of Vietnam: Current Situation and Policy Solutions

1. Introduction

In the context of increasingly severe global climate change and its profound impacts on natural ecosystems as well as socio - economic activities, the transition toward a green and sustainable growth model has become an inevitable global trend. Vietnam, with its commitment to achieving net-zero emissions by 2050 announced at the COP26 Conference, has actively implemented strategies and policies to accelerate this transition process, in which green finance has been identified as one of the key instruments.

Green finance not only plays a role in mobilizing resources for environmentally friendly projects but also contributes to directing capital flows toward sectors that generate positive impacts on sustainable development. Among these sectors, tourism - particularly ecotourism and community-based tourism - is considered to possess substantial potential for integrating economic growth, environmental protection, and social development. This is especially significant for the Northern mountainous region of Vietnam, which possesses abundant natural resources, rich biodiversity, and the unique cultural identities of ethnic minority communities.

However, tourism activities in Northern mountainous provinces such as Tuyen Quang, Cao Bang, and Lao Cai continue to face numerous challenges, including limited investment capital, underdeveloped infrastructure, weak management capacity, and increasing risks of environmental degradation. Although the National Green Growth Strategy for the 2021 - 2030 period emphasizes the role of green finance across economic sectors, its implementation in the tourism industry - particularly in disadvantaged regions - remains fragmented and insufficiently researched.

Furthermore, existing studies have primarily focused on green finance in sectors such as renewable energy, agriculture, and industry, whereas the relationship between green finance and sustainable tourism development, especially in mountainous areas, has not been adequately explored. This highlights the urgent need for in - depth studies aimed at assessing the current situation, identifying barriers, and proposing appropriate policy solutions.

Based on these considerations, this paper focuses on analyzing the current state of green finance for sustainable tourism development in three Northern mountainous provinces, thereby clarifying existing challenges and proposing policy implications to promote green, sustainable, and inclusive tourism development in the coming years.

2. Theoretical framework and research methodology

2.1. Theoretical Framework

This study is developed based on the integration of theories related to green finance and sustainable tourism development.

First, regarding green finance, according to UNEP (2011) and OECD (2020), green finance refers to the process of mobilizing, allocating, and managing financial resources to support economic activities that generate positive environmental impacts, including greenhouse gas emission reduction, efficient resource utilization, and ecosystem conservation. More recently, the concept of green finance has expanded into the broader framework of “sustainable finance,” emphasizing the integration of environmental, social, and governance (ESG) factors into investment decisions.

Second, sustainable tourism theory, according to UNWTO (2019), refers to tourism development that meets the needs of tourists and local communities in the present without compromising the ability of future generations to meet their own needs. This model is built upon three main pillars: (i) economic efficiency, (ii) social equity, and (iii) environmental protection.

Third, the study adopts an interdisciplinary approach that considers green finance as an intermediary instrument promoting the transition toward sustainable tourism. Under this perspective, green capital flows may influence tourism development through financing green infrastructure, supporting enterprises in adopting clean technologies, and enhancing local environmental governance capacity. This relationship can be explained through sustainable development theory and efficient resource allocation theory.

2.2 Research Methodology

The study employs a qualitative approach combined with secondary data analysis to comprehensively assess the current state of green finance for sustainable tourism development.

First, secondary data collection methods were applied through the synthesis of official reports from the State Bank of Vietnam, the Ministry of Finance, the Vietnam National Administration of Tourism, international organizations (UNEP, OECD, World Bank, ADB), and local authorities in the three selected provinces. The collected data include green credit, green bond issuance, tourist arrivals, and tourism revenue during the 2020 - 2025 period.

Second, analytical and synthesis methods were used to systematize theoretical foundations and evaluate green finance development trends in relation to sustainable tourism.

Third, descriptive statistical and comparative methods were utilized to analyze differences in green finance accessibility among the selected provinces and compared with the national average. This approach allows the study to identify development gaps and bottlenecks in mobilizing green capital.

In addition, policy analysis methods were applied to evaluate the effectiveness of existing legal frameworks related to green finance and tourism development, thereby proposing suitable solutions aligned with the practical conditions of the Northern mountainous region.

3. Current situation of green finance for sustainable tourism development in the northern mountainous provinces

The macroeconomic picture of green finance in Vietnam currently demonstrates strong growth in scale while simultaneously revealing serious imbalances in sectoral capital allocation. As of June 2024, the total outstanding green credit nationwide reached nearly VND 680 trillion, accounting for approximately 4.5% of total outstanding credit in the economy, and continued to increase to nearly VND 700 trillion by the end of 2024 (Can Van Luc, 2024). The average annual growth rate of outstanding green credit reached an impressive 22% during the 2017 - 2023 period. At the same time, the green bond market also recorded positive developments, reaching approximately USD 1.4 billion by mid-2024. However, a major paradox lies in the fact that approximately 75% of green credit has been concentrated in sectors such as renewable energy and clean agriculture.

In the Northern mountainous region, despite the significant potential of ecotourism and cultural tourism as core drivers of economic growth, the proportion of green credit allocated to the tourism sector in the three provinces of Tuyen Quang, Cao Bang, and Lao Cai is estimated to account for less than 1% compared to the national average. Investment drivers for tourism remain largely traditional, relying heavily on state budget funding, private capital, and international support funds.

A detailed analysis of tourism financial structures in the three representative provinces reveals several distinctive bottlenecks.

Lao Cai Province

As the fastest-growing tourism hub in the region, Lao Cai is projected to welcome approximately 10.5 million tourists in 2025, generating total tourism revenue of around VND 46 trillion (Lao Cai Department of Culture, Sports and Tourism, 2025). Although the province has developed exemplary green tourism models recognized at the regional level, such as Topas Ecolodge, these ecological tourism projects continue to operate mainly through self - financing and foreign direct investment rather than accessing green credit from the commercial banking system.

Cao Bang Province

Tourism development centered around the Non Nuoc Cao Bang Global Geopark generated approximately VND 2.531 trillion in revenue from over 2.5 million tourist arrivals during the first ten months of 2025 (Cao Bang Department of Culture, Sports and Tourism, 2025). Nevertheless, community tourism and “zero-waste tourism” models are currently financed almost entirely through local government budgets and international cooperation funds, with limited participation from commercial green credit sources.

Tuyen Quang Province

With its strategic orientation toward “green and identity - based tourism,” Tuyen Quang generated approximately VND 8.026 trillion in tourism revenue and attracted nearly 3 million visitors during the first nine months of 2025 (Tuyen Quang Department of Culture, Sports and Tourism, 2025). The most significant barrier lies in the limited access to capital among small enterprises and community-based tourism households due to the lack of collateral assets, environmental risks associated with mountainous regions, and complex appraisal procedures imposed by credit institutions.

Overall, the financial system in the Northern mountainous region has yet to develop appropriate risk assessment instruments, resulting in constrained capital flows due to the small operational scale and limited managerial capacity of tourism businesses. Moreover, credit institutions remain cautious because of high risks associated with complex geographical conditions and the seasonal nature of tourism cash flows. The severe absence of standardized criteria for classifying “green tourism” projects further limits banks’ ability to identify and finance eligible projects.

Systemic Barriers and Bottlenecks

The stagnation of green financial flows into tourism development in the Northern mountainous region is not merely a market issue but rather stems from systemic barriers that require comprehensive policy intervention.

Legal and Regulatory Gaps

The current financial system lacks standardized criteria and evaluation frameworks to clearly define what constitutes a “green tourism project.” This absence creates difficulties for credit institutions in identifying and classifying eligible projects, thereby weakening incentives for providing financial support to the sector.

Specific Credit Risks

From the perspective of banking risk management, financing projects in mountainous areas entails substantial risks due to complex topographical conditions, strong seasonality in tourism demand, and unstable repayment cash flows.

Limited Capital Absorption Capacity

Potential borrowers - primarily small enterprises and community tourism households - often operate on a very small scale, possess weak financial management capacity, and are unable to meet conventional collateral requirements imposed by banks.

Lack of Integrated Planning

At the local government level, green finance mobilization objectives have not yet been systematically integrated into provincial tourism development strategies and planning frameworks. The absence of integrated financial planning has resulted in fragmented capital mobilization efforts lacking long-term orientation.

4. Solutions to promote green finance for sustainable tourism development in the northern mountainous provinces

To unlock green financial resources and transform the Northern mountainous region into a model of sustainable and inclusive tourism development, it is essential to implement synchronized institutional reforms and region-specific financial mechanisms.

4.1. General Institutional and Financial Solutions

First, improving the legal framework for risk classification

The State Bank of Vietnam and the Ministry of Finance should promptly issue a standardized set of “green tourism” criteria to establish a transparent legal basis for credit institutions to evaluate, classify, and apply preferential interest rates to community - based and ecotourism projects.

Second, establishing regional financial institutions

A specialized green finance fund for the Northern mountainous region should be established using a blended finance structure that combines local government budgets, commercial bank capital, and financial resources from international institutions such as ADB and IFC.

Third, integrating synchronized planning mechanisms

Local governments should incorporate green finance criteria into provincial tourism development plans for the 2026 - 2030 period to ensure strong alignment with the National Green Growth Strategy.

Fourth, enhancing capacity and financial transparency

Awareness training programs on the benefits of green finance should be expanded for businesses and local authorities. At the same time, digital transformation should be promoted to improve transparency in loan disbursement and environmental impact assessment processes.

4.2. Province-Specific Financial Solutions

Lao Cai Province (Focus: Public–Private Partnerships and Large-Scale Ecological Credit)

Given its leading position with tourism revenue reaching approximately VND 46 trillion, Lao Cai should pioneer public–private partnership (PPP) models for developing green tourism infrastructure networks. The province should collaborate with banks to design specialized commercial green credit packages aimed at expanding high - end ecological tourism models similar to Topas Ecolodge, thereby reducing dependence on self-financing and foreign direct investment.

Cao Bang Province (Focus: International Funding Channels and Local Green Bonds)

To maximize the value of the Non Nuoc Cao Bang Global Geopark, the province should intensify efforts to attract international climate finance from global environmental funding institutions. These strategic resources should be directed toward upgrading border tourism projects and expanding “zero - waste tourism” models, thereby establishing alternative financing channels beyond traditional budget support.

Tuyen Quang Province (Focus: Green Microfinance and Innovative Collateral Standards)

To support small tourism enterprises in building a “green and identity - based tourism” ecosystem, Tuyen Quang must address environmental risk barriers and collateral constraints. The core solution lies in developing green microcredit packages in which banks simplify appraisal procedures and adopt more flexible collateral standards by evaluating borrowers based on actual tourism cash flows.

5. Conclusion and policy implications

This study clarifies the current state of green finance in supporting sustainable tourism development in Northern mountainous provinces such as Tuyen Quang, Cao Bang, and Lao Cai. The findings confirm that although development potential remains substantial, existing green capital flows have not yet fulfilled their leverage role due to numerous systemic barriers and region - specific challenges that require urgent resolution.

Therefore, the effective and coordinated implementation of the proposed policy solutions is critically important. Resolving financial bottlenecks will not only enhance the economic efficiency of local tourism industries but also play a key role in protecting natural ecosystems and preserving the diverse cultural identities of ethnic minority communities in the Northern mountainous region.

Based on practical evidence, the most significant and comprehensive policy implication is the necessity for close and systematic coordination among central government agencies and local authorities. Institutional synchronization is a prerequisite for establishing and operating a specialized green finance ecosystem specifically tailored to the tourism sector. Only by successfully creating such a financial ecosystem and removing barriers related to project evaluation and collateral requirements can tourism in the Northern mountainous region truly become a driving force for sustainable and inclusive green growth. This is also the key to positioning the region’s development strategy in alignment with the regional development goals envisioned through 2030.