Can “green credit” serve as a compass to guide Vietnamese businesses toward sustainable growth?
Despite rising interest, Vietnam’s green finance market remains small. As of late 2022, loans to green projects made up only 4.2% of total outstanding credit—around US$21 billion—far behind regional peers like Thailand and Indonesia. Most of these funds went to renewable energy (47%) and green agriculture (30%), according to HSBC Vietnam.
Recent deals, such as DBS Bank’s US$77.5 million green loan for two solar plants in Long An, highlight growing international attention. Yet, hurdles remain: vague legal frameworks, complex procedures, and limited capacity among small and medium-sized enterprises to prove sustainability credentials. Moreover, interest rates for green loans remain 6–11%, similar to conventional lending, as banks cite higher risk and a lack of unified assessment criteria.
Vietnam’s pledge to reach net-zero emissions by 2050 under COP26 has accelerated pressure for greener financing. Still, global trends show imbalance — in 2022, over US$440 billion went to oil, gas, and coal projects, compared with US$125 billion for green initiatives. Experts say Vietnam must streamline regulations and develop credible standards to attract sustainable capital.
“Vietnam still has a long way to go on the road to a green financial market,” said economist Vo Tri Thanh. But for firms like BCG Gaia, which secured foreign green credit, the shift is already paying off. “The green loan helped us balance cash flows and improve project efficiency,” said Pham Nguyen Ngoc Thuong, BCG Energy’s deputy CEO.
This article is a condensed and translated summary (original in Vietnamese, VN) of a feature published in the October 2023 issue of Bloomberg Businessweek Vietnam.