Le Mai, director of relationship management and country lead for sustainable finance at Standard Chartered Bank Vietnam, said the bank has a credit package of $300 billion to fund sustainable development projects globally up to 2030, but to date, only $87 billion has been disbursed. 

Nguyen Thuy Duong, president of EY Vietnam, reported that 70 percent of banks in Vietnam have deployed ESG (Environmental, Social and Governance) practices. However, harmonizing short term and long term benefits is the biggest challenge for banks.

“After considering benefits, banks realize there won’t be cheap capital for green projects,” Duong said.

“Previously, we thought that if we could mobilize preferential capital from international organizations, or from ODA (official development assistance) projects, we would be able to provide loans at better interest rates. But this is not true. The capital might be even more expensive,” Duong said.

Businesses, which want to access green loans, have to strictly observe regulations and satisfy criteria. Meanwhile, banks have to reserve resources to monitor capital use by borrowers.

On one hand, banks have to ensure compliance with regulations, and on the other hand, they have to allocate green loans. Meeting the requirements in terms of credit growth and capital indicators is difficult.

However, this must not be a reason to avoid ESG in businesses and credit institutions. Ly Thu Nga from GIZ (German Agency for International Cooperation), said ESG is not only a responsibility, but also a business opportunity in the short and long term for businesses and banks.

European banks say they consider green transition and ESG as an opportunity to develop business. Some banks say they will focus on providing loans for sustainable development.

However, some experts warned that, for developing countries like Vietnam, encouraging banks to practice ESG is difficult, because banks have to sacrifice short term benefits and strive for long term benefits.

Therefore, to accelerate ESG practice, experts said it is necessary to warn of the risks that banks and businesses may face if they don’t apply ESG.

According to Ha Thu Giang from the State Bank of Vietnam, as of September 30, 2024, 50 credit institutions had green outstanding loans, totaling VND665 trillion. The capital  was disbursed for renewable energy, clean power (43 percent) and green agriculture (30 percent).

Tuan Nguyen