Central bank at the helm of shaping sustainable ambition

Pham Thi Thanh Tung, Deputy general director, Department of Credit for Economic Sectors State Bank of Vietnam

The banking industry, as an important capital channel, is responsible for directing credit capital to green projects. Accordingly, the State Bank of Vietnam (SBV) has taken proactive measures to integrate green principles into monetary policy, credit activities, and banking operations. These measures aim to contribute to the national strategy on green growth and sustainable development.

One of the key strategies employed by the SBV is the flexible and synchronous operation of monetary policy tools to control inflation, ensuring macroeconomic and monetary market stability. Credit policies are carefully managed to meet the credit capital needs of the economy, aligning with government priorities, including the transition to a green and sustainable growth model. This approach reflects the SBV’s commitment to supporting economic transformation while responding to climate change challenges.

Furthermore, the SBV has outlined a green banking development orientation, emphasising the importance of environmental responsibility within the banking system. This includes the issuance of the green bank development project and the integration of green credit and banking development into the banking industry’s development strategy. By setting clear goals and expectations, the SBV aims to promote awareness and social responsibility within the banking sector regarding environmental protection.

To concretise these orientations, the SBV has issued circulars and action plans outlining specific steps for credit institutions. Circular No.17/2022/TT-NHNN provides guidance on environmental risk management in credit activities, highlighting the banking industry’s responsibility for environmental protection. The circular mandates credit institutions to develop internal regulations for managing environmental risks by June 1, demonstrating the SBV’s commitment to raising environmental standards in the banking sector.

In addition, the SBV has issued action plans aligning with national strategies on green growth and sustainable development. These plans emphasise the integration of green principles into credit loan programmes and projects, encouraging credit institutions to prioritise environmentally friendly production and business projects. By setting a requirement for credit institutions to conduct social and environmental risk assessments in credit-granting activities, the SBV aims to ensure a comprehensive approach to green credit.

The SBV’s efforts have resulted in tangible outcomes. The banking system has experienced an average outstanding loan growth rate of over 23 per cent for green fields from 2017 to 2022. As of September 30, outstanding green credit loans have surpassed $23 billion, accounting for about 4.4 per cent of the total outstanding loans in the economy. Notably, renewable energy and green agriculture constitute significant portions of these loans, reflecting the sector’s commitment to financing projects aligned with sustainable development goals.

However, despite these achievements, challenges persist in the implementation of solutions to promote green credit. The absence of a general national regulation on criteria and a list of green projects, the need for specialised environmental technical factors, and the requirement for long-term capital mobilisation for green projects are among the challenges faced by credit institutions. The SBV acknowledges these difficulties and emphasises the importance of addressing them to further enhance the effectiveness of green credit initiatives.

Looking ahead, the SBV has outlined a comprehensive set of orientations and policies to guide the banking industry’s credit policy for sustainable development goals. These include guiding credit institutions to grant green credit based on the National Green Classification List, monitoring and guiding environmental risk management, deploying training programmes to improve capacity, and actively mobilising international resources to support green growth.

The SBV’s proactive stance and forward-looking strategies position Vietnam’s banking industry as a key player in driving sustainable and green development.

Vietnam’s banking sector, under the leadership of the SBV, is making significant strides in aligning credit activities with green growth objectives and sustainable development. Through a combination of regulatory frameworks, action plans, and a commitment to environmental responsibility, it is fostering a transition towards a green, low-carbon, and climate-resilient economy.

As the banking industry continues to adapt and implement green credit initiatives, Vietnam stands poised to meet its sustainability goals and contribute to the global effort in combating climate change.

Green vision rises in finance-banking Experts are to shine a light on Vietnam’s efforts towards realising its committed green vision, particularly in the finance and banking sector.