On the morning of November 19, Investment Newspaper organized the Workshop "ESG in the banking industry: Implementing to lead".
Thanks to ESG, credit flows grow dramatically
At the workshop, Deputy Governor of the State Bank of Vietnam (SBV) Dao Minh Tu said: "Sustainable growth is a key issue to improve national competitiveness as well as business competitiveness in the context of international integration, in which ESG (Environment - Society - Governance) is a set of standards to measure and evaluate sustainable development of businesses".
Regarding the banking industry, the Permanent Deputy Governor of the State Bank commented: "The banking industry has always been a pioneer in applying ESG standards."
Solutions, orientations, and guidelines related to ESG in the banking industry have been implemented very early. As a result, as of September 30, 2024, the proportion of outstanding loans assessed for environmental and social risks in the banking industry reached more than 3.2 million billion VND, accounting for more than 22% of the total outstanding loans of the economy, an increase of 15.62% compared to the end of 2023, higher than the general credit growth rate of the economy.
ESG affects bank credit
Experts say that in the past, international credit rating agencies only evaluated business activities and did not consider sustainable development reports. However, in the past two years, credit rating agencies have had their own, independent evaluations of sustainable development reports.
Within the framework of the Workshop, Ms. Nguyen Thi Thu Ha - Deputy Head of ESG Steering Committee, Agribank - emphasized: "No matter how good the credit rating is, if ESG is rated low, the bank's credit rating will be pulled down".
The banking industry has been a pioneer in applying ESG standards. European institutions have now made many commitments to sustainable development that are increasing and improving. On October 1, 2023, Europe piloted the Carbon Border Adjustment Mechanism (CBAM) which applies to 6 items. It is expected that by 2026, it will be fully applied to more than 60 items.
Since 2016, Agribank has started implementing a preferential credit program to serve "clean, high-tech agriculture" with a minimum capital scale of 50 trillion VND for customers who are enterprises, cooperatives, cooperative unions, farm owners, etc. participating in stages in the chain of producing safe, large-scale agricultural products.
According to Agribank representative, the implementation of green credit lending still faces many challenges. Green projects often have long terms, large capital sources while high risks, so the appraisal and lending process must be very thorough.
"Deploying ESG in the banking industry is a comprehensive measure, not just granting credit but the process requires capital, people, and technology," said Ms. Nguyen Thi Thu Ha.
The story of balancing capital sources and allocating green credit loans in the entire credit capital source is also one of the difficulties in implementing ESG in the banking industry. Therefore, Ms. Nguyen Thuy Duong - Chairman of EY Vietnam Consulting JSC - shared that it is very difficult to have a story of going to the bank to borrow at cheaper interest rates for green projects, "this is almost non-existent" - Ms. Duong said.
According to statistics as of September 30, 2024, there were 50 credit institutions with outstanding green credit balances reaching over 665,000 billion VND, an increase of 7.11% compared to the end of 2023, accounting for over 4.5% of total outstanding debt of the whole economy, focusing mainly on renewable energy and clean energy sectors.
