Vietnam is accelerating green transformation throughout the economy. The pressure comes not only from domestic sustainable development requirements but also from export markets, investment partners and global consumers with increasingly many environmental and climate standards.
According to Mr. Nguyen Hong Quang - Deputy Director of the Department of Environment, Ministry of Agriculture and Environment, green transformation is a process that requires very large investment resources. In the context of limited state budget resources, mobilizing social resources, especially capital from the financial - banking sector, is decisive.
Green finance, in which green credit plays a central role, is becoming an important tool to lead capital flows into green projects, emission reduction projects, circular economy, clean energy and environmental protection activities.
Identifying the "barriers" for the banking industry in the process of implementing green credit, Ms. Ha Thu Giang - Director of the Credit Department for Economic Sectors, State Bank of Vietnam (photo) said that the legal framework on criteria for identifying green projects, circular economy projects and ESG standards is not complete, causing difficulties for both credit institutions and businesses in the process of appraisal, implementation and access to capital sources.
In addition, the demand for capital for green transformation is increasing while the ability to balance resources of the banking system still faces many challenges. International capital sources often have high costs, potential exchange rate risks and complex access procedures, while the green bond market and the domestic carbon market have not yet developed synchronously.
Many credit institutions are still limited in implementing international standards on green finance, circular economy and ESG. The lack of green project planning data and corporate environmental compliance information also causes difficulties for appraisal, supervision and risk management.
Ms. Hoang Thi Dieu Thuy - Senior Customer Relations Director, Corporate and Institutional Customer Division, HSBC Vietnam (photo) - said that there are currently two common groups of tools to access sustainable capital: sustainable loans and sustainable trade finance. Sustainable loans include loans, green bonds, social bonds and sustainable linked bonds.
Meanwhile, sustainable linked loans and bonds have a different approach. Businesses are not required to use capital for a specific project but can use it for common production and business purposes. However, businesses must commit to achieving environmental, social and governance (ESG) goals. If committed goals are achieved, businesses can enjoy interest rate incentives or more favorable financial conditions than ordinary loans and bonds.
The common point of the group of sustainable debt instruments is compliance with international principles on sustainable finance, including identifying appropriate KPI ESGs, building clear measurement goals, implementing periodic reports and having independent units to evaluate and verify results.
Some KPIs commonly applied are reducing annual greenhouse gas emissions, reducing energy consumption, reducing the amount of waste discharged to landfills, increasing the number of affordable housing provided, or improving the business's ESG rating.
If sustainable loans often serve medium and long-term investment needs for development projects, then sustainable trade finance mainly supports businesses in daily production, business and transaction activities, contributing to promoting the transition to a sustainable development model" - Ms. Thuy informed.
