It is very difficult to get "cheap" green capital.

Banks must solve the problem of balancing capital allocation for green credit loans among the entire credit capital source while still ensuring credit growth.

"Low ESG will drag down bank credit"

Speaking at the "ESG in the banking industry" workshop, Ms. Nguyen Thi Thu Ha, Deputy Head of the ESG Steering Committee, Agribank , said that international credit rating organizations previously only evaluated banks' credit performance, without considering sustainable development reports. However, in the past 2 years, credit rating organizations have had their own, independent assessments of sustainable development reports.

"Like Moody's, this organization rates each factor E, S, G for each bank in Vietnam. No matter how good the credit rating is, if ESG is rated low, the bank's credit rating will be dragged down," Ms. Nguyen Thi Thu Ha emphasized the importance of implementing ESG in the banking industry.

ESG is an acronym for E-Environmental; S-Social and G-Governance, a set of standards to measure factors related to sustainable development and the impact of businesses on the community. The higher the ESG score of a business, the better its ESG practice capacity.

Speaking further about the importance of ESG implementation in the banking industry, the representative of Agribank said that European organizations have now made many commitments on sustainable development that are gradually increasing and improving. On October 1, 2023, Europe piloted the carbon border adjustment mechanism (CBAM) which applied to 6 items. By 2026, it will be fully applied to more than 60 items.

"Banks implementing ESG will contribute to increasing competitiveness and supporting customers to participate in export markets to Europe," Ms. Nguyen Thi Thu Ha assessed.

However, according to Agribank representative, the implementation of green credit lending in Vietnam is facing many challenges. Accordingly, the lack of a specific set of green criteria makes the appraisal and granting of credit very difficult. The second problem is that green projects often have long terms, large capital sources while high risks, so the appraisal and lending process must be very careful.

"Deploying ESG in the banking industry is a comprehensive measure, not just granting credit. This process requires capital, people, and technology," Ms. Nguyen Thi Thu Ha assessed.

Speaking further about the difficulties in implementing ESG in the banking industry, Ms. Nguyen Thuy Duong, Chairman of EY Vietnam Consulting Joint Stock Company, emphasized that banks must meet the safety standards of the State Bank. In addition, they must ensure the interests of shareholders, balancing between short-term and long-term interests.

Banks must solve the problem of balancing capital allocation for green credit loans among the entire credit capital source while still ensuring credit growth.

"Therefore, it is very difficult to go to the bank to borrow at cheaper interest rates for green projects. This is almost non-existent," said Ms. Duong.

Therefore, in order to access green capital, Ms. Duong believes that in addition to "labeling green" projects, businesses and banks need to go into the nature and content to solve problems such as capital allocation, risk calculation, etc.

Credit flows grow faster in ESG practices

Speaking at the workshop, Deputy Governor of the State Bank Dao Minh Tu said that European countries are setting very strict standards for exported goods. Enterprises that do not achieve environmental or reduction certification will not be eligible to import. Typically, in the garment sector, if they do not meet standards and carbon emission reduction assessment certificates, products may not be able to be imported into these countries.

According to the Deputy Governor, this is a hot and urgent issue for Vietnamese businesses. For the banking industry in particular, promoting ESG such as green credit, issuing green bonds, and requiring environmental risk management in credit granting activities of credit institutions.

The Deputy Governor also emphasized that environmental and social risks do not stand alone or separately, but are also related to the risks of credit institutions (credit risk, market risk, liquidity risk, strategic risk, reputation risk, etc.). Therefore, practicing ESG will help credit institutions improve risk management efficiency, thereby improving the quality of operations and profits. At the same time, when applying ESG, credit institutions have the opportunity to expand the market, receive investment capital flows, technical support from international financial institutions, and develop credit products.

"Increasing ESG application requires credit institutions to implement, comply with and continuously update changes in regulations and policies to demonstrate good responsibility towards the environment and society. On the other hand, practicing ESG standards will help enhance the reputation and brand of credit institutions through disclosure and transparency of issues related to governance, environment and society," the Deputy Governor emphasized.

According to statistics as of September 30, 2024, there were 50 credit institutions with outstanding green credit balances reaching over VND 665,000 billion, 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, clean energy (accounting for over 43%) and green agriculture (over 30%).

Credit institutions have strengthened the management of environmental and social risks in credit granting activities, outstanding credit assessed for environmental and social risks reached VND 3.28 million billion, accounting for more than 22.33% of the total outstanding loans of the economy, an increase of 15.62% compared to the end of 2023.

According to Thuy An/VTV

Source: https://doanhnghiepvn.vn/kinh-te/rat-kho-de-co-von-xanh-gia-re/20241119061730331