Promoting green credit development

Green growth and sustainable development are inevitable trends, the goals that many countries are aiming for, including Vietnam. In that trend, green credit plays an important role, contributing to "greening" investment activities in production and business of enterprises, minimizing negative impacts on economic growth, environment and society.

Increase lending

Recognizing that importance, since 2015, the State Bank of Vietnam (SBV) has issued a series of policies and legal procedures to guide and guide credit institutions to develop green banking activities, contributing to promoting green growth and sustainable development. In particular, Circular 17/2022/TT-NHNN on environmental risk management in credit granting activities requires credit institutions to implement environmental risk management when granting credit to investment project groups with the risk of negative impacts on the environment.

According to the reporter of Nguoi Lao Dong Newspaper, many banks have implemented a series of green credit policies. Most recently, on May 28, HSBC Vietnam and Gemadept Joint Stock Company (operating in the field of port exploitation and logistics) signed a sustainable credit financing agreement, the next step in Gemadept's development plan and access to green capital.

Preferential loan programs for priority subjects and green sectors at Agribank. Photo: QUYNH TRAM

According to HSBC Vietnam, Gemadept has undergone the bank’s sustainable credit management and approval process. Not stopping there, the company must continue to complete the measurement and reporting of greenhouse gas emissions at ports, as well as achieve the Vietnam green port criteria issued by the Vietnam Maritime Administration.

At 8:30 this morning, May 29, Nguoi Lao Dong Newspaper organized a talk show "Solutions for developing green credit in Vietnam", with the participation of experts, businesses and banks. The talk show was broadcast live (livestream) on the newspaper's electronic platforms.

A few days ago, UOB Vietnam signed a green trade finance facility agreement with Ben Tre Import Export Joint Stock Company (BETRIMEX) - Vietnam's leading manufacturer of coconut products.

To be granted green credit, BETRIMEX has passed UOB Vietnam's rigorous green credit review process, focusing on assessing the company's compliance with ESG (environmental, social and governance) principles. This credit will help the company import or purchase raw materials and domestic goods to produce products with Organic certification, including Fairtrade certification. Previously, as of the fourth quarter of 2023, UOB Vietnam has granted credit to 17 renewable and clean energy projects, along with 7 green industry projects.

At the Vietnam Bank for Agriculture and Rural Development (Agribank), since 2016, the bank has started implementing a preferential credit program to serve "clean agriculture" with a minimum capital scale of VND 50,000 billion for enterprises, cooperatives, cooperative unions, farm owners... participating in stages in the chain of producing safe, large-scale agricultural products. Lending interest rates are reduced by 0.5% - 1.5 percentage points compared to preferential lending interest rates for the agricultural and rural sectors.

By the end of 2023, outstanding loans for the green sector at Agribank reached VND 28,277 billion, with 42,883 customers, focusing on the fields of renewable energy, clean energy, sustainable forestry, green agriculture... Currently, Agribank is coordinating with the Ministry of Agriculture and Rural Development to implement credit support for the Pilot Project on building a standard agricultural and forestry raw material area for domestic consumption and export in the period of 2022-2025 and the project "Sustainable development of 1 million hectares of high-quality rice cultivation and low emission reduction associated with green growth in the Mekong Delta region by 2030"...

The concept is still vague.

From the business perspective, Mr. Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association (VITAS), said that the trend of green transformation and sustainable development requires textile and garment enterprises to focus on investing in infrastructure according to green standards to meet market requirements, especially the European market.

"In that context, there is a need for low-interest finance for businesses to invest in green transformation, greening textile factories and industrial parks. However, currently, only large businesses have enough collateral to invest in green transformation. Small and medium-sized businesses will have more difficulties because they do not have stable assets," Mr. Giang reflected.

According to the leader of VITAS, when the awareness of green credit is still unclear, each enterprise must find its own way to solve the financial bottleneck. If it does not proactively find ways to manage finances to invest in green transformation but relies on the state and banks, it will be difficult for enterprises to meet market demands and develop sustainably. "Each enterprise that has relationships with brands and partners can discuss with them to borrow capital to invest in green transformation to meet their orders" - Mr. Giang suggested a solution.

Mr. Tran Van Son, General Director of Gia Bao Group Joint Stock Company, said that the company has just started construction of the Ba Tu Binh Phuoc agricultural and food processing factory project (Binh Phuoc province) in the direction of greening, with a total investment of 6.5 million USD from its own capital and regular commercial loans.

"We have proactively greened the production chain from the growing area, towards organic farming, the factory uses 100% solar energy, products use environmentally friendly packaging, ... but still have not been able to access preferential loans. The main reason is that there are no "green" criteria yet, nor are there any specific regulations for banks to apply. We are preparing documents to prove that the enterprise is green, when the bank needs to apply preferential interest rates, we will respond immediately" - Mr. Son informed.

Meanwhile, the director of a rice exporting company based in the Mekong Delta that is participating in the pilot project of 1 million hectares of high-quality, low-emission rice said that his company is also using its own capital to invest in raw material areas instead of accessing green credit sources because he himself finds this concept vague.

"Agriculture has always been a priority sector, with lower interest rates than other industries, so you can rest assured when borrowing. While preferential loans often have complicated and time-consuming procedures, businesses choose commercial loans for simplicity," the director of this rice company frankly said.

Mr. Nguyen Quoc Hung, General Secretary of the Vietnam Banking Association, said that currently, commercial banks are very eager to lend to finance green projects. However, project owners do not have enough resources to create green and clean products. Banks themselves do not know how to assess the level of risk when implementing loans. "Should the Government have appropriate support policies for clean product development projects, helping businesses improve their financial capacity, then banks will dare to provide capital?" - Mr. Hung said.

Mr. Tu Tien Phat, General Director of Asia Commercial Bank (ACB), believes that green credit is not simply lending and "labeling" it, but must comply with regulations, standards and green credit frameworks. Currently, the State Bank of Vietnam does not have a specific green credit framework, so ACB must seek advice from a third party, the International Finance Corporation (IFC). "I hope the Government and the State Bank of Vietnam will soon promote a clearer legal framework in this field, so that credit institutions can more easily grant green credit," said Mr. Phat.

Green credit scale is modest

According to the State Bank of Vietnam, in the period 2017-2023, the system's outstanding credit balance for green sectors has an average growth rate of more than 22%/year. As of March 31, 47 credit institutions had issued outstanding green credit with outstanding debt reaching nearly VND637,000 billion, accounting for about 4.5% of the total outstanding debt of the whole economy.

Despite double-digit growth in recent years, the current scale of green credit only accounts for 4.5% of total outstanding loans, a modest figure compared to the capital demand of about 20 billion USD/year of the economy to implement green transformation goals. The reason pointed out by experts is that the legal framework for green credit is not yet complete, lacking environmental regulations and criteria, especially the green classification list at the national level...

Source: https://nld.com.vn/thuc-day-tin-dung-xanh-phat-trien-196240528212725929.htm