Experts recommend 5 priority areas of green credit capital

Sharing at the seminar “Letting large capital sources for green credit” organized by the Investment Newspaper on December 4, Ms. Pham Thi Thanh Tung, Deputy Director of the Credit Department for Economic Sectors, State Bank, said The number of banks participating in green credit and green credit balance from 2017 to present has grown positively.

Specifically, in the period 2017-2022, the system’s outstanding credit balance for green fields has an average outstanding loan growth rate of more than 23%/year. By September 30, 2023, outstanding green credit loans will reach more than 564 trillion VND, accounting for about 4.4% of the total outstanding loans of the entire economy.

BLOCK POINTS NEED TO BE REMOVED TO OPEN THE FLOW OF GREEN CREDIT CAPITAL

According to Ms. Pham Thi Thanh Tung, although the green credit growth rate is at an average double-digit level, the banking industry also faces many difficulties when implementing green credit products.

Currently, credit institutions still lack a basis to determine green credit because there are no general national regulations on criteria and lists of green projects for industries/fields according to the economic subsector system. . This is also the reason why credit institutions do not have a basis to fully quantify investment banking resources for the green sector.

Granting green credit requires in-depth technical environmental factors, which will make it difficult for credit officers to appraise and evaluate the effectiveness of the project and the customer’s ability to repay debt (especially in the field of green credit). renewable energy implementation time is not long, effectiveness depends heavily on power purchase agreements), difficulties in monitoring and managing risks when granting credit due to lack of legal basis and standards. Criteria and standards for evaluating environmental impact measurement tools.

Ms. Tung also noted the risk of term differences. Investing in green industries/fields, especially the field of renewable energy and green construction, often requires a long payback period and large investment costs, while loan capital from credit institutions Usually short-term mobilized capital makes it difficult for credit institutions to balance capital and ensure the ratio of short-term capital to medium and long-term loans according to regulations.

Long-term capital mobilization channels for green projects have not really developed like the green bond market, putting pressure on long-term capital for the banking system.

Bà  Pham Thi Thanh Tùng, Phoó  Director, Department of Credit of Economic Sectors shares solutions to promote green credit.
Ms. Pham Thi Thanh Tung, Deputy Director, Department of Credit for Economic Sectors shared solutions to promote green credit.

“Since 2021 when Vietnam made a statement at COP26, media and press agencies have been involved in providing a lot of information about the green development program, but borrowers’ awareness of green credit is still limited, they focus on focusing on immediate efficiency, there is no clear awareness of environmental and social standardization, difficulties in bringing capital into this field”, Ms. Phung Thi Binh, Deputy General Director of Agribank shared more about the difficulties when green credit disbursement.

Limitations in people and businesses’ awareness of environmental protection lead to sanctions for violating environmental laws, affecting project implementation progress and potential debt recovery risks for credit institutions. .

In addition, Ms. Binh also said that domestic banks are currently having difficulty mobilizing long-term capital to promote green credit lending. Up to now, major institutions in the world still mainly support domestic credit institutions on a technical basis but have not promoted lending.

BALANCE BETWEEN ENVIRONMENT AND PROFIT

Choosing potential industries and prioritizing them when granting green credit is very important. This process requires two factors simultaneously: (1) having a positive impact on the climate and environment and (2) having the ability to generate profits.

Therefore, Mr. Nguyen Ba Hung, Chief Economist of the Asian Development Bank (ADB) in Vietnam, recommends 5 areas that need to prioritize green credit capital.

The first, recycled energy. Vietnam has huge potential for developing renewable energy, with an estimated total potential capacity of up to 220GW. Developing renewable energy will help reduce greenhouse gas emissions and protect the environment. Recently, besides hydropower, solar power and onshore wind power in Vietnam have grown by leaps and bounds, and this trend is forecast to continue in the near future. Along with developing renewable power sources, investing in upgrading the power grid to effectively exploit new renewable power sources is also an important need.

Monday, Economic sectors can implement energy-saving activities such as cement, iron and steel, construction (energy-saving buildings)… Besides converting to renewable energy sources, effective use and energy efficiency also reduces overall energy consumption, reduces costs, and uses fewer resources, thus helping to reduce greenhouse gas emissions.

Tuesday, green agriculture, green tourism. These are economic and service sectors that interact with the environment and natural resources. Not only can they contribute to reducing environmental impacts such as greenhouse gas emissions, but they also have the potential to contribute Actively absorbing greenhouse gases and protecting the environment more sustainably.

Fourth, urban traffic. Converting means of transport from using fuel (gasoline, oil) to electricity, or developing public transport to reduce the need to use personal vehicles are also green economic sectors with potential for development. big.

Thursday, sustainable consumption. The trend of changing consumption styles to be more environmentally friendly, using resources more efficiently such as reducing single-use plastic, increasing reuse and recycling of goods and materials are activities can meet green criteria and will therefore create demand for green finance.

In addition to the green economic sectors with commercial potential mentioned above (high profit potential to attract private investment), there are other important green economic sectors with lower profit potential and need government support. Support policies to attract green capital sources in the market. For example, environmental protection industries such as collection and treatment of solid waste, wastewater, environmental pollution treatment, etc. are urgent and important activities for the green economy.

However, according to Mr. Nguyen Ba Hung, these industries need a better support policy framework, from a service fee mechanism that balances social benefits and compensates for investment and operating costs, to Financial support measures or investment risk sharing to attract large-scale private investment. When the market in these industries is vibrant, this will be a significant opportunity to develop green finance.

In addition to projects that directly contribute to green goals, areas with indirect contributions such as education and training, research and development to improve technological capacity and labor quality for business sectors Green economy also needs attention. Depending on the classification criteria, financial sources for this activity have clear social benefits and can develop a responsible and sustainable financial market, in addition to green finance. .

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