From green credit to green growth

The Bank plays an important role in Vietnam's greening journey and achieving its goal of net zero emissions by 2050.

In the journey towards net zero emissions by 2050, the role of banks is indispensable. By providing capital, developing green financial products and raising awareness about sustainable development, banks not only contribute to environmental protection but also promote sustainable economic development.

Regarding this issue, VNA reporters had an interview with Mr. Nguyen Hung, General Director of Tien Phong Commercial Joint Stock Bank (TPBank).

Mr. Nguyen Hung, General Director of Tien Phong Commercial Joint Stock Bank (TPBank).

Reporter: How do you evaluate the role of banks in the greening journey, towards the goal of reducing net emissions to zero by 2050?

General Director Nguyen Hung: The Bank plays an important role in the greening journey and achieving Vietnam's goal of reducing net emissions to zero by 2050 by providing capital for renewable energy and development projects. green financial products and encourage businesses to implement environmental standards. At the same time, the bank organizes training programs on green finance, discloses transparent information, participates in international initiatives, and mobilizes foreign capital; contribute to the development and implementation of state policies on sustainable development.

Reporter: At TPBank, what criteria are used to classify and evaluate the sustainability of projects to grant green credit?

General Director Nguyen Hung: TPBank has relied on many criteria to evaluate and classify the sustainability of projects to grant green credit. First, for the criteria of meeting environmental standards, these projects must comply with national and international legal regulations on environmental protection and sustainable development. These are projects that have achieved environmental certifications such as ISO 14001, LEED (Leadership in Energy and Environmental Design); or similar international standards. The project needs to demonstrate its ability to reduce emissions of CO2 and other greenhouse gases. Aiming to achieve the goal of preserving natural resources and biodiversity, projects do not damage natural resources and biodiversity, and even contribute to protecting and restoring them. Second, TPBank is interested in projects that bring high efficiency, reduce waste, and use renewable energy; Prioritize projects that apply and produce renewable energy such as solar power, wind power, and biomass energy; Use and manage water resources effectively, avoid waste and water pollution.

Third is the criterion of positive impact on social factors. Projects should provide employment opportunities in green and sustainable industries, or contribute to reducing gender inequality and supporting disadvantaged groups in society to access financial opportunities (e.g. women-owned businesses - WSME). Or projects that have a positive impact on the community, improving people's quality of life and health. Finally, there are criteria to ensure financial capacity and economic efficiency. Those green projects must be financially feasible, have clear and transparent financial plans. Not only does it bring short-term economic benefits, but it is also sustainable and beneficial in the long term. These criteria help TPBank comprehensively evaluate the sustainability of the project, ensuring that the green credits granted will truly contribute to sustainable development and environmental protection.

Reporter: In the process of granting green credit, what are the difficulties and risks that banks are or may encounter and what should be done to overcome those difficulties, sir?

General Director Nguyen Hung: Evaluating green projects requires a complete legal framework with clear criteria to determine what is "green". The definition and criteria to determine a "green" project currently applied by credit institutions are not clear and consistent, leading to difficulties in the approval process. In addition, detailed data collection and specific technical assessment tools to determine whether a project is truly green or not in banks are still lacking. In addition, environmental and green finance regulations and policies may change, creating legal risks for projects that have been granted credit. And compliance with international standards on green finance is relatively complex and requires extensive understanding.

Mr. Nguyen Hung, General Director of Tien Phong Commercial Joint Stock Bank (TPBank).

Regarding financial and market risks, renewable and sustainable energy projects may encounter financial problems due to high initial investment costs and long payback periods. The renewable energy market can be affected by price fluctuations and policy changes, increasing risks for green projects. On the other hand, attracting investment capital into green projects can be difficult due to lack of trust from investors. Investors are afraid of the risks and return on capital of these projects, especially when compared to traditional projects. Green projects often require higher initial investment costs while the payback period is longer than conventional projects, reducing their attractiveness to investors. Faced with the above difficulties, TPBank also have proposed some solutions to overcome these problems. Within the framework of TPBank's ongoing ESG (environmental, social and corporate governance) project, TPBank has built a Green Credit Framework in compliance with the Green Loan Principles. Based on business strategy, TPBank selects suitable industries to deploy green credit. For each industry, TPBank develops specific technical criteria to determine the "green" conditions of the project. TPBank also closely monitors policy changes to ensure timely adjustments and establishes a specialized department for legal compliance and green finance standards. In addition, the bank has increased cooperation with international financial institutions to attract capital and learn from experience in green finance; Call for support from the government and non-governmental organizations in developing and implementing green projects. The bank also organizes training programs for employees on green finance and related international standards, raising awareness of customers and investors about the benefits of green finance and sustainable projects.

Customers make transactions at TPBank.

Reporter: The capital flow for green projects is usually medium and long-term capital. Could you please tell us how TPBank plans to structure capital sources or expand capital sources to meet capital needs for green growth?

General Director Nguyen Hung: TPBank has pioneered and actively contributed to accelerating the realization of Vietnam's green growth strategy by providing loans at preferential prices, creating conditions for customers to supplement capital. for investment, business, and consumption purposes as well as complying with the State Bank's orientation in developing green credit, contributing to environmental protection. A typical example is the 3-year green credit loan between TPBank and The Global Climate Partnership Find (GCPF) worth 20 million USD in 2019. To meet capital needs for green growth of customers, TPBank continuously plans to expand loan capital for green projects from medium and long-term sources at home and abroad. Regarding medium and long-term green credit sources from foreign financial institutions, TPBank has proactively approached and discussed to seek preferential loan sources and received the attention and goodwill of cooperation from Many large and reputable partners in the world such as ADB, IFC (USA), DEG (Germany), BII (UK), FinDev (Canada)... Currently, the parties are continuing to discuss and negotiate on loan financing. along with technical support programs to help TPBank provide direction for its loan portfolio and develop green projects.

Reporter: Through the implementation process, what notable results has TPBank recorded and how do you assess the potential for green credit growth in the future?

General Director Nguyen Hung: During the implementation process, TPBank's green credit balance has grown steadily, and always accounts for nearly 3% of the total credit balance. This demonstrates TPBank's efforts in developing and maintaining a stable source of green investment capital, and shows the increasing interest of businesses and individuals in green projects. TPBank has sponsored many green projects in areas such as renewable energy, water management, and energy efficiency improvement projects, contributing to reducing greenhouse gas emissions. In addition, the bank organizes many training programs and participates in seminars to raise awareness about green credit for both bank employees and customers, while improving the capacity to evaluate and manage projects. Green project of the bank.

Customers make transactions at TPBank.

Regarding the potential for green credit growth in the future, the Vietnamese Government is promoting policies and strategies on sustainable development and emission reduction, creating favorable conditions for banks to develop green credit. Businesses and individuals' awareness of the importance of sustainable development and environmental protection is increasing, thereby increasing demand for green financial products. In addition, the demand for investment in green projects such as renewable energy, water resource management, and green building construction is increasing, creating many opportunities for green credit to develop. On the other hand, cooperation and support from international financial institutions and green investment funds also opens up many opportunities to attract capital and implement green projects in Vietnam. With the achieved results and strong development potential, green credit at TPBank promises to continue to grow, making an important contribution to the sustainable development of the economy and environmental protection.

Reporter: Thank you!