“The Green Finance Challenge: Transforming Vietnam’s Commercial Credit Landscape”

Financial Green Development Status in Vietnam

Vietnam is one of the five countries most vulnerable to the impacts of climate change, with potential losses of up to 3.5% of its national income by 2050. As a result, Vietnam has committed to achieving Net Zero emissions by 2050 at the UN Climate Change Conference (COP26). To meet this goal, the Vietnamese government has introduced several policies to encourage green growth, including green finance.

In a recent interview with Tien Phong on the topic of green finance in sustainable development in Hanoi, organized by C asean Vietnam, Mr. Mohammad Mudasser, Director of Working Capital Management at PwC Vietnam, shared his insights. He defined green finance as the mobilization and allocation of capital from financial institutions, businesses, and individuals to invest in projects and activities that positively impact the environment and society, contributing to the country’s sustainable development. Therefore, green finance is a crucial component in attracting investment and supporting Vietnam’s green growth strategy.

Mr. Mudasser estimated that only 4-5% of commercial credit in Vietnam is considered green finance, with over 80% focused on sectors such as electricity, utilities, agriculture, and green buildings. He attributed this to challenges in clearly defining the criteria for green economy activities and the difficulty in certifying completely green energy sources.

Despite these challenges, the PwC Vietnam expert remained optimistic about the prospects for Vietnam’s green finance development. He predicted that the proportion of green finance in the country could increase from 5% to 10-15% by 2030, thanks to the emergence of new sectors like automotive and public infrastructure, along with improved legal framework support.

Banks and Businesses Need to Change Their Mindset

Financial experts argue that the trend towards green development has gained momentum in Vietnam over the past 5-7 years. There are two mechanisms that can be employed to enhance capital sources for green investment: credit and capital markets.

In the context of credit, publishing a catalog of priority sectors for green credit allocation is a first step in guiding commercial banks to enhance lending to environmentally friendly businesses. Regarding the capital market, policies should focus on enhancing corporate disclosures about their environmental and social responsibilities, thereby motivating businesses to accelerate their green transition. Additionally, for the green classification system, Vietnam can consider adopting popular international standards such as ICMA and ASEAN+3.

Discussing solutions for green credit development in Vietnam, Mr. Nguyen Ba Hung, Chief Economist at the Asian Development Bank (ADB) in Vietnam, emphasized the need for banks and businesses to shift their mindset. They should not only focus on financial profits but also consider the environmental impact of their operations.