Accelerating Green Finance Activities for Sustainable Development Goals

DNHN - In the aftermath of the United Nations Framework Convention on Climate Change (COP28) in Dubai, United Arab Emirates (UAE), many Vietnamese local banks are increasing their efforts in green lending.

Banks Endorsing Net Zero Objectives

Significantly, collaborations between Japan's MUFG Bank and VietinBank, Standard Chartered Bank and BIDV, and BIDV and ADB seek to advance and mobilise sustainable financing, supporting the realisation of sustainable development objectives and ESG (environmental, social, and governance) practices in Vietnam. For example, MUFG has pledged to assist VietinBank in securing up to $1 billion for sustainable development initiatives that advance a circular economy and provide social and environmental advantages.

The bank would strengthen its assistance to Vietnam in terms of capital mobilisation, luring green finance, and fostering green growth in line with the Net Zero commitments set at COP 26, according to Standard Chartered Group CEO Bill Winters. This will help Vietnam develop, which will include creating a market for carbon credits and green money.

In keeping with reaching Net Zero goals, a few of banks have moved quickly. NamA Bank is measuring CO2 emissions at several business units and has implemented a White Paper on Carbon Neutrality as a pilot project. The objective of this programme is to evaluate, quantify, and compute carbon dioxide emissions in green credit products and incorporate them into day-to-day operations.

"Green development is a requirement for developed countries, creating significant pressure on the production systems of developing countries while ensuring the safety of the global environment," said Mr Nghia.

Furthermore, the bank seeks ecologically friendly and responsible operations in addition to applying an environmental and social management system to its green loan portfolio through its overall lending strategy. Nam A Bank has consistently expanded its range of green finance offerings over time, concentrating on the clean energy, renewable energy, and electric car industries.

The general director of HDBank, Mr Pham Quoc Thanh, emphasised that the bank looks for foreign financial resources in the agriculture sector to promote high-tech agricultural credit, including funding large-scale value chains like CP and Loc Troi. Additionally, HDBank is a frontrunner in the commercial banking industry for green lending, sustainable agriculture, and rural development, consistently implementing a range of useful incentive programmes.

Growth and Improvement of Green Capital

As of mid-2023, the outstanding green credit balance of the entire system was around VND 530,000 billion, or 4.2% of the overall outstanding balance of the banking system, according to the most recent statistics provided by the State Bank of Vietnam. Commercial banks have aggressively worked with climate change funds and international financial institutions to secure green capital, which has been brought to Vietnam for lending. This helps to increase the potential for future green capital provision.

Green money generally has interest rates that are around 2% cheaper than those of traditional capital sources, giving borrowers a big advantage in making their products more competitively priced. According to VinaCapital Investment Group CEO Don Lam, companies need to progressively implement a greening process for their manufacturing activities, starting with input materials and ending with resource-saving techniques, to obtain green capital. Through targeted actions and credits, they can also convert waste into input resources, resulting in more environmentally friendly production.

Vietnam's foreign trading partners are calling for a greater decrease in carbon emissions during the production process, according to the Ministry of Industry and Trade. Among these, the European Green Deal (EGD), which will control the production activities of companies exporting goods to the EU market, has attracted a lot of interest due to its new criteria.

Essential to the EGD is the Carbon Border Adjustment Mechanism (CBAM). Through this approach, the carbon tax that the EU would levy on all items that are imported into the market will be determined by the intensity of greenhouse gas emissions during the exporting country's production.

Nghe Nhan