On September 9, 2023, the State Bank of Vietnam (SBV) and the Lao Dong (Labor) Newspaper jointly organized a Workshop on “Green Credit – Vietnam cannot lag behind with Net Zero”. The Workshop was attended by SBV First Deputy Governor Dao Minh Tu; representatives from the Ministry of Natural Resources and Environment, the Ministry of Finance; representatives from several commercial banks, as well as financial and banking specialists, environmental experts, etc.
SBV First Deputy Governor Dao Minh Tu
Enormous efforts to promote green credit towards sustainable development
In his opening speech, Deputy Governor Dao Minh Tu emphasized that the SBV has been putting active and enormous efforts into implementing and achieving the objectives established by the Government in Vietnam’s National Green Growth Strategy for the 2021-2030 period, Vision to 2050, and has made encouraging progress, such as the approval of the Scheme on Green Bank Development in Vietnam; the issuance of the Banking Sector’s Action Plan for the implementation of the National Green Growth Strategy; as well as various documents to encourage the credit institutions to focus their resources on green sectors and areas, environmentally-friendly industries and fields, etc.; conducted several solution packages to manage and monitor the environmental and social risks in the credit granting operations, etc.
The SBV Deputy Governor expressed his hope that the participants at the Workshop would focus on discussing the following key substances: the position and role of green credit and green banking in the implementation of the objectives established in the National Green Growth Strategy; the progress of the Scheme on the implementation of Vietnam’s commitments made at COP26, and the National Climate Change Strategy to 2025; the performance of the credit mechanisms and policies in relation to enhancing green credit and green banking over the past time: the achieved results, difficulties, obstacles, limitations, and causes; the opportunities and challenges of the banking sector in contributing to the realization of Vietnam’s commitment of net zero by 2050, the international best practices, etc.
An overview of the Workshop
The SBV Deputy Governor went on to express his wishes that through the Workshop, the state management authorities would receive good recommendations on how to improve the mechanisms, contributing to enhancing the mobilization of green resources for sustainable development, and facilitating the credit institutions’ participation in the green financial markets, green credit development and green banking.
Sharing more details at the Workshop, Mr. Nguyen Xuan Bac, Deputy Director General of the Department of Credit for Economic Sectors, mentioned that, in the 2017-2022 period, the average growth rate of the banks’ loan outstanding for green credit had remained above 23% p.a. As of June 30, 2023, the loan outstanding for green projects had reached over VND 528.3 trillion, accounting for 4.2% of the total loan outstanding of the whole economy. Out of 12 green areas receiving loans from the credit institutions in accordance with the SBV’s guidance, the loan outstanding has mainly focused on renewable energy and clean energy (45%), green agriculture (31%), etc.
Green credit – area needs implementing urgently
Apart from the achieved results, according to Mr. Nguyen Xuan Bac, there are still many limitations and difficulties in the implementation of the measures to promote green credit. For example, there are currently no national regulations on the criteria and the portfolio of green projects for the credit institutions to decide on credit granting for the next period. The credit granting to green projects requires intensive technical knowledge on the environment, which makes it difficult for credit officers to appraise and evaluate the viability of the projects, and the debt service coverage ratios of the customers, etc. Moreover, there are still obstacles in monitoring and managing the risks when granting credit due to the lack of regulations, criteria and standards to measure the environmental impacts. In addition, the investment in green sectors and areas, especially in the fields of renewable energy and green buildings, often has a long repayment period and requires large investment costs, while the lending resources of the credit institutions are usually short-term mobilized capital. As a result, the credit institutions have difficulties in balancing their capital resources and ensuring the ratios of short-term capital resources used for medium and long-term loans in accordance with the regulations.
Therefore, it is necessary for the Government to formulate guidelines on the green portfolios and criteria for identifying green projects in line with the division of Vietnam's economic sub-sectors, helping the credit institutions to have the foundation for their appraisal, assessment and monitoring upon granting green credit; develop a roadmap to implement appropriate mechanisms and policies to support the green projects in each sector or area in a synchronous manner in order to attract and promote the effectiveness of green credit. At the same time, it is necessary to study and formulate more favorable mechanisms and policies to support the development of the capital market, the green bond market, and create more channels for the mobilization of capital in order to help investors to access more resources to implement their green projects.
Continuing to improve the legal frameworks
Toward the end of the Workshop, Deputy Governor Dao Minh Tu said that, in order to promote green credit, it is necessary to implement synchronously the solutions with long-term objectives.
For the banking sector, the SBV should continue to coordinate with the Ministries and agencies to advise the Government to further improve the legal frameworks for sustainable economic development and a green economy, including green credit, with a view to creating favorable mechanisms to attract more international financial resources to achieve the green targets.
The Deputy Governor further shared that the SBV would continue to research, clarify and specify the announced green portfolios for the commercial banks to focus on in their green credit granting; continue to raise the awareness of and disseminate information about green credit.
The SBV Deputy Governor also requested the Ministry of Finance to promote the capital mobilization through the bond, stock and green bond markets; enhance the communication and apply modern technologies for green credit development, because the banks’ resources are mainly short-term, while green projects need long-term investment, in the context when the SBV is continuing to reduce the ratio of short-term capital used for medium and long-term loans in alignment with the established roadmap.
Le Hang