For a long time, green credit has been considered an inevitable trend of the global banking and finance industry. Therefore, Vietnamese banks cannot continue to stand outside.
According to Directive No. 03/ CT-NHNN dated March 24, 2015, the State Bank of Vietnam (SBV) requires commercial banks to promote green credit for projects with clear objectives on protecting the environment, encouraging environmentally friendly business activities.
At the same time, SBV also focuses on improving the efficiency of resource and energy use, protecting human health and ensuring sustainable growth and development. Securities Investment Newspaper consulted some banks on green credit and received shallow feedbacks.
“Banks are not charity places. We are still rushing for capital mobilisation, so how to get the capital for green credit with low interest rates and longer term?” general director of a joint stock bank said.
Furthermore, a bank’s credit officer frankly shared: “Enterprises are not easy to prove the green factor in the project, not to mention the management ability and the experience. In addition, banks do not always have qualified experts to assess green projects.”
Even the senior leader of a bank emphasized: “Many banks have announced to grant green credit to businesses, but the reality is only to promote their images.”
By the beginning of 2017, the SBV issued Directive 01/2017 to continuously emphasized the banking sector’s action plan to carry out the national strategy on green growth by 2020 and the market began to have better signal. Data from the Department of Credit for Economic Sectors (SBV) showed that, in the fourth quarter of 2017, the green credit balance reached only 180.121 trillion dong. At the first quarter of 2018, it was 188.27 trillion dong and as of the third quarter of 2018, it reached 235.717 trillion dong.
The SBV survey to credit institutions (CIs) in the field of green growth and green credit implemented in March 2019 shows that the understanding of CIs on green credit has been significantly improved. Specifically, 19 CIs have developed strategies for environmental and social risk management while 13 CIs have integrated the content of environmental and social risk management in the process of green credit assessment.
10 CIs have built credit products and banking services for green sectors and have been interested in providing credit for these sectors in mainly medium and long term with preferential interest rates for green projects.
However, the SBV’s statistics also showed that currently only 24 percent of green projects are developed by the banks for credit appraisal process, which is mainly done at the head office and branches of some banks such as Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam Bank for Agriculture and Rural Development (Agribank), Saigon Hanoi Commercial Joint Stock Bank (SHB), VietNam Asia Commercial Joint Stock Bank (Viet A Bank), Orient Commercial Joint Stock Bank (OCB) and HSBC.
Earlier in the week, Tien Phong Commercial Joint Stock Bank (TPBank) signed a long-term contract of a green credit loan worth $20 million within three years from the Global Climate Partnership Fund (GCPF). It is known that the signing of cooperation with GCPF will open more opportunities to access capital with attractive interest rates for projects, production and business plans with energy saving factors, CO2 reduction and environment protection.
Earlier, GCPF signed a cooperation on implementing the “Green Credit” programme with Nam A Commercial Joint Stock Bank (Nam A Bank) to finance businesses and individuals. This is considered the first step of the bank in the community project “I choose to live green”.
Talking to Securities Investment Newspaper, Bui Quang Duy, GCPF’s Asia-Pacific investment expert, said TPBank was the second bank partner in Vietnam. The Fund highly appreciated the potential of the Vietnamese market, expressed by the fact that TPBank immediately signed a number of loans that exceeded the expected plan.
“Vietnam has many favourable factors in terms of macro economy, awareness of people and partners… GCPF determined that this was a big market for long-term development with increasing values”, Duy added.
Large capital from the handshakes between partners or banks for businesses are increasing. For example, Agribank and Vietnam Development Bank (VDB) signed a co-financing agreement for the Solar Power Plant TTC Phong Dien (Thua Thien Hue province) with the investor’s counterpart capital of 40 percent and loans from banks of 60 percent.
Agribank and Central Power Corporation (EVNCPC) signed a credit contract to invest in the construction of the Central Power Solar Project (in Cam An Bac commune, Cam Lam district, Khanh Hoa province). Total construction investment capital is 1.372 trillion dong. In particular, loans from Agribank accounte for 58.5 percent of the total pre-tax investment cost (equivalent to 735 billion dong); reciprocal capital of EVNCPC is over 521 billion dong, accounting for 41.5 percent.
Sharing with reporters, Nguyen Hung, TPBank’s general director, said that lending to green projects was not only less risky than conventional credit loans, but also brought more benefits for the objectives of sustainable, long-term development and environmental protection. Of course, when lending, banks still had to choose loans and customers to ensure compliance with conditions and standards to meet green credit.
“Not only taking into account each business efficiency, banks now also comply with environmental and social factors aimed at sustainable development, the common interests of the community,” Hung emphasized.
Ha Thu Giang, deputy director of the Department of Credit for economic sectors said that the target of the banking industry by 2025 was 100 percent of banks would build internal regulations on environmental and social risk management in credit granting activities; 100 percent of banks assessed social and environmental risks in credit granting activities; applied environmental standards for projects funded by banks; combined environmental risk assessment as part of the bank’s credit risk assessment; at least 10-12 banks had specialised units or departments for environmental and social risk management; and 60 percent of banks had access to green capital and provide loans for green credit projects.
“Regarding the solution group, SBV encourages credit institutions to develop green banking development strategies independently or integrated into annual business development strategies and plans. It also gives support to banks to develop specific policies for sensitive environmental areas”, Giang added.
