Green credit is understood as loans that credit institutions provide to fund production, business, investment and consumption that do not cause risks to the environment.

This is considered one of the financial solutions to solve social and environmental problems. However, green credit is just a part of the panorama about ESG (environmental, social and governance).

At a recent workshop, Nguyen Thi Thu Ha from Agribank stressed that ESG not only means green credit, but deployment of three ESG pillars by banks for comprehensive sustainable development.

For E (environmental), it is necessary to diversify environmentally-friendly activities, in addition to funding clean energy projects and environmental protection programs.

For S (social), it is necessary to attach importance to labor relations, gender equality, community responsibility, investment in education, healthcare and sustainable development.

As for G (governance), it is necessary to maintain transparent activities, fight against corruption, and manage risks and ensure benefits for relevant parties (shareholders, workers, customers).

According to Ha, integrating ESG standards into commercial banks’ business strategy can be clarified in some areas, such as managing banks' reputation, enhancing position and competitiveness, improving risk management efficiency, expanding market and business opportunities, and developing new products and services.

With the activities that are being implemented, Agribank's outstanding loans provided to green sectors have grown steadily over the years with the green project proportion increasing from 0.9 percent in 2020 to 1.8 percent in 2023, and the ratio was maintained by the end of the second quarter 2024.

As of June 30, 2024, Agribank’s outstanding loans provided to green sectors had reached VND27.816 trillion. The outstanding loans pumped into the renewable energy sector and clean energy had reached VND15.33 trillion, accounting for 55 percent of total green credit. The outstanding loans funding sustainable forestry development had reached VND6.805 trillion, accounting for 24.5 percent, and green agriculture VND5.54 trillion and 20 percent, respectively.

Sustainable forestry is the sector with the highest number of borrowers (40,736, accounting for 96 percent of total borrowers). However, the biggest projects funded by green credit belong to renewable energy and the clean power sector.

Most recently, Agribank has become the major credit provider of the 1 million hectare high-quality low-emission project in Mekong Delta, committing to provide VND30 trillion worth of loans.

Deputy Governor of the State Bank of Vietnam (SBV) Dao Minh Tu said the interest rates of the loans under the program are at least one percent lower than the interest rates of commercial loans.

Debt for Climate Swap

Nguyen Thi Tuyet Hanh, director of the management board of international projects under SHB, said the outstanding loans provided by the bank to green sectors account for 10 percent of its total outstanding loans. SHB applies transparent and responsible corporate governance measures according to the best standards and practices to ensure sustainability.

The bank prioritizes credit to production, business, and fields acting as the driving force for national economic development, such as agriculture, supporting industries, export, SMEs, green energy saving projects, renewable energy, social housing development, infrastructure development and livelihood development in localities.

According to Nguyen Thuy Hanh from Standard Chartered Vietnam, ESG and sustainable development are a priority and part of the bank’s development strategy.

“We commit to expand the scale and sphere of the sustainable financing program with a plan to mobilize $300 billion of capital for sustainable finance by the end of the decade."

Agribank has made proposals to deploy ESG and green bank strategy. The Ministry of Natural Resources and the Environment and relevant agencies need to ask the government to promulgate sets of criteria for the environment, and criteria for projects to be eligible for green credit, which banks will refer to when choosing green projects to provide credit.

Ha suggested that the government of Vietnam consider Barbados’ Debt for Climate Swap model and change the private and public cooperation in deploying the measures to get adapted to climate change.

Ha believes that this is an innovative approach harnessing private finance through debt conversion. The climate debt conversion is that the Government negotiates with international creditors to adjust the payment terms, repayment periods and interest rates to finance climate projects, instead of using them to repay creditors.

Tam An