Green Finance Presents Ever- Increasing Opportunities for the Vietnam Banking Industry

According to Decision 687/QD-TTg issued by the Prime Minister on June 7, 2022, Vietnam has set ambitious goals to reduce greenhouse gas emissions. By 2030, the country aims to reduce the intensity of emissions by 15% compared to 2014 levels and achieve #netzero emissions by 2050.

This is part of Vietnam’s commitment to #sustainabledevelopment and #greengrowth, which is a global development strategy. #Greenfinance leverage will play an important role in achieving this goal and contributing to the green growth strategy in Vietnam.

According to a report by McK Green Bonds published in July 2022, green bond issuance reached around US$620 billion by 2021 globally, and "the green financial market has grown at a compound growth rate of about 60 % in the last 5 years", a remarkable milestone for a rapidly growing industry. Some experts estimate this market could bring up to $1.7 billion in revenue for Vietnam's financial institutions by 2025.

According to McKinsey, project funding in Vietnam has grown strongly year by year, from about $3 billion in 2018 to $38 billion in 2021, in the fields of energy, transportation, telecommunications and clean water. This is one of the prerequisites for the growth of the green bond market in Vietnam.?

As of 2022, the number of credit institutions in Vietnam that have funded green projects has reached 31, with a total debt value exceeding VND 285,000 billion. Clean agriculture and renewable energy are among the key areas that attract green credit investments.

Green credit debt in Vietnam is currently growing rapidly year by year. However, the scale of debt is still relatively small compared to the total credit of the system, at about 3.69% in 2021.

To accomplish ambitious goals and bridge the gap between the supply and demand of green financial services, governments, financial institutions, investors and individuals need to work together to develop, implement legislation and policies prioritizing green finance at all levels.

The way forward for Vietnam's banking industry?

Climate change is reshaping our planet and with it the way we bank. There are more and more customers, realizing the urgency, would demand to act now. According to research by cloud banking platform Mambu, half of customers would consider moving their bank to another bank with a more sustainable commitment. Customer demand is revolutionizing the way banks connect with their customers.

Ecolytig and Doconomy are two businesses that provide solutions for individuals and businesses to raise awareness of activities affecting the environment, measure daily CO2 emissions across their activities, as well as setting targets and increasing operations to reduce emissions. Cloud banking platform Mambu has partnered with Ecolytig as well as Doconomy to help these organizations act quickly on the climate crisis and take the first step towards sustainable operations, based on Application Programming Interface (API) and modern cloud technology.

Likewise, banks can through third party partners like Mambu to create a variety of financial services including green loan management tools, savings accounts for sustainability goals, sustainable bond management, integration with ESG (Environment - Society - Governance) scoring system, as well as environmental risk assessment, etc. Services can be customized based on issuers bank-specific sustainability, and real-time reporting and analytics, enabling the impact of these sustainable financial products and services to be tracked and analysed, enabling the bank to adjust and improve over time.

The solution Mambu offers can be thought of as an ESG data warehouse for tracking the non-financial impact of financial services and monitoring ESG data at the portfolio level (e.g., % of investments in line with sustainability criteria) or end-user individual level (e.g., % of customers in rural/suburban areas, number of unbanked customers, etc.).??

Mambu provides capabilities to build a sustainable bank with ESG proposals such as: Mambu partnering with low-carbon public cloud providers; Assist the bank in determining physical ESG indicators; Set up ESG data platform on Mambu; Projected reduction of imported carbon emissions and against competitors; Annual customer emission distribution report on Customer Service Portal…

Regarding promoting sustainable leadership, Mambu organizes seminars as part of its Client Community Program. This is a forum designed to promote value discovery and mutual learning among customers. Sustainability leadership seminars bring together industry leaders, green finance subject matter experts and Mambu clients to share sustainability knowledge, insights, and methodologies across financial services industries.

Embracing the Future Toward #SustainableFinance Together

The latest initiative from the Vietnamese government to support green finance is the issuance of the National Action Plan on Green Growth for the period of 2021-2030. This action plan aims to promote sustainable economic growth, reduce greenhouse gas emissions, and increase the resilience of communities to climate change.

Many financial institutions, in turn, offer green finance solutions to align supply with demand and meet market conditions. Some leading examples include the Green Loan from Vietcombank which offers up to VND 2,000 billion for projects that promote green growth, environmental protection, and sustainable development; and BIDV Green Credit, which offers loans with preferential interest rates of up to VND 1,500 billion for individuals and organisations that are developing renewable energy projects, waste treatment systems, and other green initiatives.?

By offering such packages, these institutions represent a positive step towards creating a more eco-friendly and sustainable economy in Vietnam and provide the organisations with a significant competitive advantage.

Ultimately, the Vietnam banking industry is poised to benefit greatly from the ever-increasing opportunities presented by #greenfinance. With a growing demand for sustainable investments and environmentally friendly products and services, banks in Vietnam can position themselves as leaders in this field and tap into a new stream of revenue.

Through innovative solutions and partnerships with key stakeholders, Vietnamese banks can contribute to the country's sustainable development while achieving their own financial growth. It is crucial for the industry to take advantage of these opportunities and to prioritise sustainability in their business strategies, as the benefits of #greenfinance extend beyond just profits, but also towards creating a healthier and more sustainable future for all.