In the Mekong Delta, green credit flows from Agribank are helping rice fields transform with sustainable farming models, renewable energy and carbon emission reduction. This is just one of the typical efforts of the banking industry in integrating ESG (Environmental, Social and Governance) standards into business strategies, towards comprehensive sustainable development.
However, ESG is not just a story of green credit. It requires a strategic vision, synchronous coordination between pillars, and more importantly, support from management agencies and the investment community.
Green Credit - The Beginning of the ESG Journey
With a key role in providing capital and financial services to the agricultural and rural areas, Agribank has focused on implementing green credit as an important solution to promote sustainable growth. According to Dr. Nguyen Thi Thu Ha, Director of Agribank Staff Training School, the bank has prioritized capital for high-tech agricultural projects, clean energy, and environmental risk management in credit granting.
“We are well aware that green credit is an important part of the ESG strategy, but ESG does not stop there. It is necessary to synchronously deploy all three pillars of environment, society and governance to achieve comprehensive sustainable development," Dr. Ha emphasized.
In addition to green credit, Agribank has implemented many initiatives for sustainable development such as minimizing resource use, replacing materials that are harmful to the environment and increasing the use of environmentally friendly products. The bank also focuses on society, with preferential credit programs for people in remote areas and community support activities. Applying ESG not only helps to enhance reputation and competitiveness but also contributes to social development goals, protecting the rights of employees and customers.
According to Ms. Tran Thi Khanh Hien, Director of Research at MB Securities Company (MBS), global capital flows are shifting strongly to sustainable finance funds. As of mid-2024, the total assets of these funds have reached 3,500 billion USD, accounting for 7% of the total assets of global investment funds. Ms. Hien said that Southeast Asia, including Vietnam, is becoming a bright spot attracting sustainable capital flows thanks to strong economic growth, renewable energy potential and the rise of the middle class.
However, investors also face many difficulties in evaluating and selecting sustainable projects in Vietnam due to the lack of data on sustainable development and ESG practices. Ms. Hien said: "It is necessary to build a complete and transparent database system to support banks and businesses in assessing environmental and social risks."
ESG in Vietnam: Practices and challenges
In fact, the implementation of ESG in Vietnam still faces many difficulties, mainly due to the incomplete legal framework and lack of synchronization among management agencies. However, the Government has made important steps in building a legal corridor for ESG through laws and decrees related to environmental protection and sustainable development. MSc. Ha Thu Giang - Director of the Department of Credit for Economic Sectors of the State Bank of Vietnam - emphasized: "We have made important steps, but to practice ESG effectively, there needs to be close coordination among State agencies, banks and enterprises".
Applying ESG is not only a matter for banks but also the responsibility of the entire business system. Dr. Giang also added that promoting green credit in Vietnam still faces some limitations, such as the lack of clear criteria for green projects, and the lack of incentive mechanisms for financial institutions in granting green credit. To solve this problem, Ms. Giang proposed: "It is necessary to develop and perfect policies to support and promote green projects and develop sustainable financial funds."
The Future of ESG in Vietnam
With positive steps from banks and government agencies, ESG in Vietnam is on the rise. However, more specific support policies are needed to promote the widespread adoption of ESG in the banking industry and businesses. The government needs to continue to improve the legal framework on ESG, while encouraging businesses to disclose ESG information to facilitate investors and financial institutions.
Despite many challenges, the application of ESG has opened up great opportunities for the Vietnamese banking industry. ESG practices not only help banks develop sustainably but also contribute to promoting the development of a green economy and sustainable society in Vietnam in the future.
