context and issues
In recent years, Vietnamese enterprises have increasingly focused on green transformation, investing in clean energy, using environmentally friendly technology and applying sustainable production models to increase competitive advantages in the domestic and international markets.
In the context of Vietnam being one of the countries most severely affected by climate change, ranked 127/182 countries in terms of vulnerability, the need for green financial resources is becoming increasingly urgent.
The banking industry plays a pioneering role in leading this trend by providing green financial products such as preferential credit for renewable energy projects, issuing green bonds, financing sustainable supply chains and building an environmentally responsible credit portfolio.
Expanding green capital sources not only helps businesses transform their operating models, but also contributes significantly to sustainable economic growth and Vietnam's commitment to achieving net zero emissions by 2050.
At the COP 26 Conference, the Prime Minister made a commitment to Vietnam to achieve net emissions of "0" by 2050 using its resources, along with the cooperation and support of the international community, both in finance and technology transfer.
Vietnam recognizes the importance of green economic development and has implemented many programs and policies towards sustainable development.
The national strategy for green growth in the period of 2021-2030, vision 2050 was approved in Decision 1658/QD-TTg dated October 1, 2021, and the Prime Minister issued Decision No. 1055/QD-TTg dated October 27, 2020 issued a national plan to adapt to climate change in the period of 2021-2030, vision to 2050; Decision No. 888/QD-TTg dated July 25, 2022 approving the Scheme on the tasks and solutions to implement the results of the 26th Conference of the parties participating in the United Nations Framework Convention on Zhekhhhhhhhhhhhhhhhhhhhhhong; Decision No. 896/QD-TTg dated July 26, 2022 approving the national strategy on climate change to 2050; Decision No. 942/QD-TTg dated 5.82022 approving the plan to reduce methane emissions to 2030.
Accordingly, the green growth strategy or green economy according to the Vietnamese Government's view is a strategy to promote economic restructuring associated with growth model innovation, aiming to achieve economic prosperity, environmental sustainability and social justice; towards a green, carbon-neutral economy and contributing to the goal of limiting global temperature increase.
Vietnam's green growth strategy focuses on 4 main goals: Reducing greenhouse gas emissions on GDP; greening economic sectors through transforming the growth model according to the circular economy model, researching and applying advanced technology to make more effective use of natural resources; greening lifestyle and promoting sustainable consumption; greening the transition process on the principle of equality, inclusion, improving resilience.
In addition, the SBV approved Decision No. 1604/QD-NHNN dated 7.8.2018 Green bank development project in Vietnam, Decision No. 34/QD-NHNN dated July 7, 2019 promulgating the action plan of the banking industry to implement the Vietnam Banking Development Strategy to 2025, with the orientation to 2030, emphasizing the implementation of green banking activities, and recently, Decision No. 1408/QD-NH The banking industry has implemented the National Strategy on Green growth in the period of 2021-2030.
The strong commitments of the Vietnamese Government at COP26 along with the issuance of a series of strategies and action plans on green growth, climate change adaptation and green banking development have created a solid foundation to promote sustainable transformation.
In the context of the Vietnamese Government strongly promoting the green growth strategy and committing to achieving net emissions of "0" by 2050, the banking industry not only plays a key role in mobilizing and allocating financial resources for green projects, but also faces many opportunities and challenges.
Participating in green finance opens up many prospects for developing new products and services, but also requires banks to be fully prepared in terms of risk management, technological innovation and improving financial management capacity.
Developing banking products in a green economy: Opportunities and challenges
Potential opportunities
The banking industry, as the "refined" sector of the economy, holds an important position in the national green growth strategy for the period 2021 - 2030, with a vision to 2050, creating resources to help businesses invest in projects, programs, and infrastructure to reduce emissions and protect the environment. Enterprises in all fields need to be supported in the transformation process and increase capacity and access to sustainable financial products.
In the world, sustainable investment has become a popular trend. Accordingly, green bonds are the most popular debt instrument, followed by sustainable bond loans and sustainable bonds.
In the Vietnamese market, there has been an increase in the differentiation of sustainable financial products in recent years, but the scale is still relatively modest compared to the general trend in the world.
By the end of 2023, outstanding green credit in our country has only reached more than VND600,000 billion, accounting for a modest proportion of 4.4% of the total outstanding loans of the entire economy. For green bonds In the 2016-2024 period, the total issuance value of green, social and sustainable bonds in Vietnam reached nearly 33.5 trillion VND (more than 1.4 billion USD).
Meanwhile, businesses in Vietnam increasingly need to sponsor green CAPEX due to government orientation and efforts to participate in the global supply chain, especially for key industries such as energy (electricity, oil and gas); construction; transportation; industry and agriculture.
For large FDI enterprises such as Unilever, Nestle, Heineken... managed according to the regulations of the host country, where environmental regulations tend to be more advanced than in Southeast Asia, there will also be a very high demand for sustainable financial support from qualified banks.
Therefore, the green financial market still opens up many opportunities for banks to expand their customer base, diversify their product portfolio, and promote increased cooperation with the government and non-governmental organizations in the journey towards Vietnam's Net Zero commitment.
This is a new business opportunity that helps the bank expand its customer base to include green enterprises; international/ non-governmental organizations; individual customers interested in green finance; institutional customers interested in the environment as well as green investors/investment funds. This helps increase revenue, expand market share and attract new customer segments.
The green economic market with capital demand of up to 70 billion USD to achieve the emission reduction target of 2030 and 310 billion USD by 2050 and a diverse, multi-industry customer base requires banks to provide new green financial products in line with customers' green transformation journey. With the above market demand, Vietnamese commercial banks have the opportunity to access potential revenue sources, nearly 2 billion USD for the period 2025 - 2030 from providing sustainable financial products. Potential products for banks include:
Green credit: The main pillars of Vietnam's sustainable finance include: green loans, sustainable loans, sustainable joint loans, social loans, and combined finance.
Green Trade Center: Support businesses in the sustainable supply chain, promote circular economic development and provide preferential trade finance solutions for green transactions such as: green chain finance, green shopping malls, sustainable linkage shopping malls.
Green capital market products: Mobilizing capital for green projects/projects to shift from "brown" to green, helping businesses access long-term capital and move towards a sustainable development model. For example: Transition funding, Green bonds, Social bonds, Sustainable bonds/sustainable bonds; Green bonds.
Banking's additional services such as Business matching connect businesses that need to trade carbon credits, emission quotas; ESG consulting to accompany businesses in ESG strategies, enhance reputation and the ability to mobilize green capital, derivative services to help businesses manage financial risks related to climate change and the carbon market.
Capital mobilization and account products: Banks provide ESG-affiliated business accounts that contribute to creating conditions for businesses to integrate ESG into financial activities, receive incentives when achieving sustainability targets; or green deposit products - Help businesses invest in green projects, enjoy competitive interest rates and contribute to environmental protection.
Participating in the green finance market will create opportunities for strategic cooperation with international organizations such as Worldbank, IFC, ADB and global green finance funds; and receive support from the government through incentive mechanisms and legal regulations.
Participating in the green financial market helps banks elevate their brands, attract international investors and mobilize capital effectively. This improves credit rating, reduces capital costs and enhances competitiveness for banks. In addition, transparent disclosure of information on green finance helps banks build trust with international organizations, especially ESG investment funds.
The bank can improve the credit appraisal process by integrating customer environmental risk assessment, avoiding funding for projects with high environmental risks. This accurate risk assessment helps ensure a sustainable credit portfolio and take advantage of the benefits of green support policies.
Barriers and challenges
Although green finance has great potential in promoting sustainable development and solving environmental problems, the implementation and development of this field in Vietnam still faces many difficulties and challenges, specifically:
Firstly, the system of documents regulating sustainable development and green banking in Vietnam is not yet complete. Some important contents such as the green banking strategy framework, social risk management, environmental criteria and the process of confirming green credit projects still lack detailed instructions.
The lack of clear standards to classify green sectors/sectors makes it difficult for banks to select, appraise, and supervise green credit projects, as well as develop green credit products in accordance with environmental risk management requirements.
Second, regarding risk management, credit institutions (CIs) are making efforts to build a professional team to assess environmental and social risks. However, the knowledge and experience of banking officers on environmental and social issues are still limited. The lack of specialized departments in environmental risk management and specialized consulting units is also a major risk factor when banks assess projects with significant environmental impacts.
Third, regarding capital sources, green credit support policies have not solved the problem of capital sources for commercial banks. Green projects, especially renewable energy, often require long-term capital while the mobilized capital of banks is mainly short-term.
In addition, meeting environmental and social standards raises investment costs, reducing the short-term economic efficiency of the project, although beneficial to society. Therefore, there needs to be a preferential policy on loan time and costs, but there is currently no interest rate support for green credit in the country, while loans from international organizations have high interest rates and strict loan conditions.
Implementation experience at Vietcombank
Vietcombank is proud to be a pioneer in the banking and finance sector, always actively supporting economic growth and contributing to the implementation of strong commitments of the Vietnamese Government at COP 26. Vietcombank always puts ESG as a key factor in the Bank's long-term development strategy.
Vietcombank has greened its portfolio very early and gradually increased the proportion of credit capital for green projects. In the period from 2020-2024, Vietcombank's total green credit balance grew by an average of more than 4 times over the years, from more than VND 11,765 billion in 2020 to nearly VND 47,600 billion as of December 31, 2024 (CARG2020-2024 =42%).
In parallel with greening the portfolio, Vietcombank strives to access and prepare domestic and international preferential capital to finance green projects. With its reputation and position in the market, Vietcombank has been promoting negotiations and exchanges with many international organizations to seek loans with preferential interest rates to ensure foreign currency capital for green projects.
Typical programs include: Green projects sub-borrowed from loans from the Bank of Japan International Cooperative Bank (JBIC) and other sub-borrowed banks (500 million USD); renewable energy development project lending products and energy efficiency project lending products for Vietnam's industry (WorldBank - 250 million USD). Vietnam Foreign Trade Joint Stock Commercial Bank - VCBS (a 100% wholly owned subsidiary of Vietcombank) has successfully consulted on the issuance of VND 1,725 billion for the first green bond issuance of EVNFinance - Corporate bonds (CPDN) in Vietnam are identified as green bonds according to international standards.
In 2024, Vietcombank successfully issued VND 2,000 billion of green bonds. Accordingly, Vietcombank is the first bank in Vietnam to issue green bonds in compliance with Vietnamese law and voluntarily comply with the Green Bond Principle of the International Capital Market Association (ICMA). Even if there is no specific instructions on the list of conditions to meet green classification, Vietcombank has actively built a green bond frame to meet international standards. Consulted by the International Organization of the Global Green Growth Institute (GGGI), Vietcombank's green bond frame reached Medium ranking. This confirms Vietcombank's commitment in efforts to participate in the global green financial chain.
With experience in mobilizing green capital and a diverse product and service ecosystem, Vietcombank is ready to advise and help businesses identify green and sustainable conversion goals, seek funding sources and determine appropriate debt repayment sources. In addition, Vietcombank applies preferential interest rate programs to help businesses reduce financial costs.
At the same time, with the goal of For a green future, Vietcombank is always committed to accompanying customers on the green transformation journey, contributing to enhancing the brand image of the Enterprise and spreading sustainable development trends throughout the customer value chain.
Proposal for green economic development orientation in Vietnam
To effectively implement the green economic model, Vietnam needs to implement a series of synchronous and comprehensive solutions. Close coordination between government agencies, businesses, banks and international organizations is the key to achieving sustainable development goals. By perfecting the legal framework, raising awareness, promoting technological innovation and enhancing international cooperation, Vietnam can make the most of the potential and opportunities to develop a green economy in the future.
On the Government and state agencies side:
Based on the achievements in recent years, along with assessing the global economic context and Vietnam in the face of new opportunities and challenges, recommendations for developing green banking in the coming time need to continue to be considered:
In order to facilitate the shift to a green economy, the Management Agency needs to soon issue a Regulation on green taxonomy confirmation so that relevant units have a basis to implement incentive mechanisms and policies, invest and develop green projects.
In particular, reviewing and evaluating the similarities between Vietnam's green classification criteria and international standards to facilitate businesses in implementing projects, attracting domestic and foreign investment capital in the same standards system. At the same time, issue regulations related to the management and use of ODA and foreign preferential capital to facilitate quick access to green financial resources for sustainable development.
Completing the legal framework, policies and mobilizing resources for green and sustainable development, in which the SBV needs to provide more detailed instructions to credit institutions on green financial mechanisms, risk assessments, and funding procedures for green projects.
Build investment institutions to create a favorable environment, attract green investment for sustainable development while improving access to green finance, especially green investment incentives to promote green projects.
Build a green finance database system to improve market transparency.
On the bank's side:
Recognizing the important role in the green financial market and being a core link in the green economic development roadmap, banks need to seriously build a green banking strategy, review customer portfolios and diversify green financial instruments, perfect criteria and policies to direct credit flows to businesses using new technology, low carbon emissions, and competitive in the international market, etc.
Banks can specialize green SPDVs according to customers to suit each field and focus on developing hard supply chain financing products according to the business ecosystem.
Firstly, banks need to build a green banking strategy, internal regulations on environmental and social risk assessment, suitable for sustainable ESG and financial practice. The completion of the bank's sustainable green/financial framework should be in accordance with international standards and regulations in Vietnam because this will be the foundation for the implementation of lending activities, mobilizing green capital at home and abroad in the period of Vietnam is continuing to improve and promulgate regulations on green projects. In the coming time, when the management agency issues green classification criteria, the bank needs to constantly update and complete the internal regulations to conform to the bank's risks and taste.
Second, to maximize the potential of the green financial market, banks need to proactively review their customer portfolios to identify those who meet the green criteria, as well as businesses that need or are required to switch from the "brown" to "green" model.
At the same time, banks need to develop specialized financial products and services, designed to suit the characteristics of each field, optimizing customer needs. In particular, banks should focus on supply chain finance products and the corporate ecosystem, while building preferential financial packages to increase market share and bring comprehensive benefits to customers.
Third, it is necessary to promote training and development of specialized human resources on green finance, climate change and sustainable development to promptly meet market demand in the green transition process. Banks should develop in-depth internal training programs, combined with international financial institutions, research institutes, and universities to improve the capacity of staff.
In particular, it is necessary to provide specialized training for related departments such as credit, risk management, products, and investment to ensure the ability to accurately assess green criteria, manage environmental and social risks, and at the same time design financial products in line with sustainable development trends.
Finally, banks need to proactively participate in international forums such as the Green Climate Fund (GCF), the Green Financial Dialogue Conference (IDCS), as well as other global initiatives related to sustainable finance.
Strengthening cooperation with international financial institutions and financial institutions not only helps banks grasp market trends, goals and orientations, but also opens up opportunities to access preferential green capital sources, modern technology and management experience from previous countries. This will contribute to improving the bank's competitiveness in the context of the global economy strongly moving towards sustainable development.
