Expanding opportunities to access green credit for enterprises

Renewable energy is one of the pillars of green credit at banks. Photo: collected

Green credit is growing fast

In 2018, the Governor of the State Bank (SBV) has signed a decision approving the green banking development scheme in Vietnam, with a strategic framework of five levels of classification, from the lowest level is participating in green community activities to building products, building processes and even building an ecosystem with quality and top-level goals that have clear goals for green credit-related banking activities. This scheme is the legal basis for banks to promote green credit development. So far, nearly 70 banks have deployed green credit.

Orient Commercial Joint Stock Bank (OCB) started implementing green credit in 2015 in the direction of sustainable development combined with environmental protection in line with the orientation of the Government and the State Bank, then started promoting green credit in 2018. OCB gives priority to granting credit in the fields of high-tech agriculture, renewable energy and projects that effectively use natural resources, and conduct business in an environmentally friendly direction. The scale of green credit at OCB is on an increasing trend and accounts for a high proportion of the total credit balance of the bank. By the end of 2021, green credit accounted for about 7.8% of total outstanding loans and is expected to continue to increase to at least 8% in the next 3 years.

OCB's green credit programs have been highly appreciated by international financial institutions, as demonstrated by capping the large-scale lending limit s to this bank. Specifically, in 2021, ADB and IFC both increase the funding limit  for OCB to serve the green credit program. In which, ADB provides US$25 million and trade finance limit  of US$ 100 million; IFC grants a loan limit  of US$100 million and a trade finance limit  of US$60 million.

In 2021, IFC also signed a contract to provide US$70 million to HDBank to increase capital for renewable energy projects in Vietnam. Accordingly, HDBank will expand its portfolio of climate finances to US$800 million by 2025.

HDBank is also one of the banks that have applied ESG criteria (environmental, social and corporate governance). Specifically, the bank has an environment and social department(E&S) belonging to group of corporate clients, which having a leadership office, a human resources department that advises the board of directors and the Board of Management on ESG. Accordingly, green credits using funds sponsored by IFC will have to comply with this organization's strict E&S policy. In addition, in 2022, HDBank will also complete the process of environmental and social responsibility management (ESMS) to apply to the entire bank's portfolio.

Increasing access to green credit for small and medium enterprises

The increasing interest of banks in green credit has significantly helped promote green capital in the banking industry. According to SBV Deputy Governor Pham Thanh Ha, as of December 31, 2021, the total outstanding green credit of the banking industry reached about VND 451,000 billion, accounting for about 5% of the total outstanding loans of the economy. This result was achieved thanks to the State Bank always orienting the balance sheets of commercial banks. At the same time, the SBV always tried to come up with solutions focusing on raising the awareness and actions of the management agencies through support, policy advice on research, development of legal documents of the State Bank in the sector of green credit and green banking.

At the recent annual general meeting of shareholders, Nam A Bank also affirmed that it would continue to promote green banking development activities, contributing to sustainable development. Recently, Nam A Bank has also promoted green credit capital for many fields. In the overall lending policy, the construction of an environmental and social risk management system is not only applicable to the green credit sector, but also towards a bank operating environmentally, friendly and responsibility with environment and society.

Mr. Ha Huy Cuong, Deputy General Director of Nam A Bank, said that Nam A Bank's green banking strategy was based on two main pillars: renewable energy and financial digitalisation. Accordingly, the bank signed a contract with the organization on anti-climate change, VCBF, thereby developing programs to support enterprises, implementing activities to support green development. As a result, Nam A Bank's share of funding for renewable energy had so far reached about 10% of the bank's total outstanding loans.

However, in order to expand the scale of green credit in the future, Mr. Ha Huy Cuong suggested that there should be a mechanism for small and medium enterprises to access green credit from banks. Because most Vietnamese enterprises are small and medium ones, these enterprises had limit ed resources, especially in terms of collateral for loans. Therefore, there is still a gap. Besides, the development of green criteria was also a very important issue. Because banks are currently using capital from foreign financial institutions, they must meet the standards of these institutions. Accordingly, it was necessary to have specific instructions on how green a product or industry should be for the bank's capital deployment to be highly effective.

SBV Deputy Governor Pham Thanh Ha also said that in the future, the SBV would focus on researching and developing a strategy and roadmap of the banking industry towards neutralizing emissions, including some contents such as inspection., monitoring; developing scenarios and models of endurance assessment; monetary policy, credit…