Full ESG adoption the priority for Agribank

Why is it vital for commercial banks to implement environmental, social, and governance (ESG) criteria?

Nguyen Thi Thu Ha, deputy head of the Steering Committee for Environmental, Social, and Governance at Agribank

The adoption of ESG practices is increasingly essential for commercial banks to thrive in a sustainable and competitive environment. It enables a bank to build a strong reputation with key stakeholders, including governments, regulatory bodies, customers, partners, employees, and communities. This not only enhances brand positioning and trust but also translates into increased sales and the ability to scale operations sustainably.

International credit rating agencies now assess banks on their ESG implementation to evaluate risks. These assessments provide a valuable reference for investors, fund managers, and other stakeholders, helping them compare companies, assess risk levels, and make informed decisions. Integrating such policy into the management process thus enhances a bank’s reputation and competitiveness.

Sustainable development also allows banks to seize new growth opportunities by fostering the development of innovative products and services. These include green credit, green bonds, sustainability-linked loans, and carbon credits, which align with emerging economic and environmental trends. This adaptability allows banks to create unique products and stay ahead in a rapidly evolving market.

Another crucial aspect is improving risk management. By identifying ESG-related risks, banks can proactively address factors that could negatively impact their portfolios, partners, or brand reputation. Such risks, whether present now or emerging in the future, could significantly disrupt a bank’s financial system.

How does Agribank incorporate ESG into operations?

Agribank integrates green principles into its operations in compliance with the government’s regulations and guidelines set by the State Bank of Vietnam (SBV). To institutionalise these efforts, Agribank has established a steering committee and working group, which oversee the bank’s implementation plan.

However, Agribank faces unique challenges in adopting ESG, given its primary focus on the agricultural sector. Agriculture is among the sectors most vulnerable to climate change and is associated with intensive use of resources like water, fertilisers, and chemicals. Moreover, many of its customers operate in areas affected by deforestation, compounding environmental concerns. The absence of a clear legal framework for ESG implementation further adds to these challenges.

Despite these difficulties, Agribank has achieved notable progress in its ESG journey. These accomplishments stem from the concerted efforts of the board and employees across its network, supported by the government, the SBV, and international financial institutions.

Notably, Moody’s has assigned Agribank an ESG Credit Impact Score of CIS 2, the highest among Vietnamese commercial banks. This rating is competitive globally for banks with comparable credit ratings, underscoring Agribank’s strong commitment to green principles.

There is now guidance for resource-saving activities

What are the key solutions driving ESG implementation at Agribank?

Agribank has employed a multipronged approach to effectively integrate ESG into its operations while addressing obstacles. The bank has developed mechanisms, policies, and organisational structures to promote green banking. In this context, it has also introduced policies on sustainable development, a green finance framework, and social finance guidelines, which underpin its commitment to ESG principles.

To support these initiatives, the bank has refined its organisational structure, assigning clear functions and responsibilities to relevant units and establishing a dedicated department for sustainable development. Agribank has also aligned its credit activities with international standards, prioritising sectors that align with ESG principles. This includes creating a list of sectors that face restrictions or are excluded from receiving credit.

Agribank remains committed to financial inclusion and focuses on providing capital for agriculture, rural areas, and farmers, with a significant proportion of its total loans – about 65-70 per cent – allocated to these sectors. This commitment is further supported by mobile transaction units and group lending mechanisms to enhance access to finance.

To improve operational efficiency, Agribank is upgrading its IT systems to support green banking and implementing a comprehensive environmental and social risk management framework. This framework includes internal guidance for managing related risks in credit activities, as well as tools to measure energy, water, and paper consumption, ensuring that resource-saving practices are embedded across the organisation.

Agribank boasts tools to measure energy and paper consumption

How does Agribank promote ESG awareness among stakeholders?

Raising awareness and fostering ESG adoption among employees, customers, and stakeholders is a key focus for Agribank. The bank has developed a suite of green financial products and services to meet sustainability standards.

It also formulates preferential policies to encourage lending to environmentally friendly projects and business plans. These efforts align with Agribank’s broader business strategies and its aim to support small businesses, cooperatives, and women-led enterprises.

Agribank leverages digital technology to promote non-cash payments and environmentally friendly financial habits among consumers. It also integrates insights from international best practices, staying updated on Vietnam’s commitments to green growth, sustainable development, and climate change response. These efforts are complemented by proactive measures to draw in foreign funding for green projects and issue green bonds.

Social sustainability is another key priority. Agribank ensures fair and equitable policies for its employees, while encouraging them to participate in community activities and support disadvantaged groups. Efforts to protect consumer rights and promote financial literacy further strengthen its social impact.

To instil green values throughout its organisation, Agribank invests in communication and training initiatives. Employees are educated on the importance of ESG practices, with a focus on green banking, environmental and social risk management, and the benefits of sustainable products and services. Simultaneously, customers are informed about Agribank’s green banking offerings, encouraging the adoption of environmentally friendly habits.

In addition to internal initiatives, Agribank actively discloses its ESG performance to external stakeholders. The bank has begun producing independently audited sustainable development reports. It works with consulting organisations to develop ESG policies, measure criteria, and ensure compliance with international reporting standards.

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