BAC A BANK: The journey to becoming a green bank
Proactively anticipating trends, on its journey to becoming a green bank, Bac A Commercial Joint Stock Bank (BAC A BANK) has focused on advising and providing credit financing for projects oriented towards a green economy, creating livelihoods and providing jobs for local people.
Challenges and opportunities from green credit
Amidst global climate change, "greening" credit is a top priority. However, in reality, as of the end of 2023, outstanding green credit in Vietnam only reached over 600,000 billion VND, representing a very modest proportion of 4.4% of the total outstanding credit in the entire economy.
The reasons for this situation are, firstly, the lack of guidelines on the classification criteria for green projects suitable for various economic sectors and fields, which would serve as a basis for credit institutions to assess, select, and monitor green credit granting. The legal framework for implementing ESG and green credit systems is still under development and refinement. Furthermore, there is a lack of mechanisms for recognizing, evaluating, and ranking credit institutions with good performance in green credit granting; as well as mechanisms for supporting and providing incentives to encourage the effective implementation of green credit. Meanwhile, in Vietnam, there are no specific regulations defining whether the development of green banking is a mandatory task, leading to this activity being easily neglected or overlooked.
Currently, many banks are facing difficulties in balancing their capital sources. Green investment projects in Vietnam, especially in renewable and clean energy sectors, often require long payback periods, high investment costs, and high market risks, while lending capital mainly comes from short-term, commercially raised funds with high costs. Technical knowledge and expertise in environmental matters also become a barrier for many credit officers in managing potential environmental and social risks; appraising and evaluating project effectiveness, as well as the quality of collateral and the customer's ability to repay the debt…
However, many experts believe that Vietnam is one of the most vulnerable countries to climate change. In this context, the government is increasingly concerned about environmental issues, especially after committing to developing and implementing even stronger greenhouse gas emission reduction measures to achieve net zero emissions by 2050.
To solve this problem, investment in green sectors is expected to grow strongly in the future; green credit and green banking activities will increasingly develop. According to World Bank estimates, Vietnam needs to invest a very large amount of resources – approximately US$368 billion by 2040, equivalent to 6.8% of GDP annually – to pursue a green transition and achieve sustainable development goals. This requires many reforms in policy, solutions to mobilize domestic and foreign capital, and attract private investment into projects with a "green" element.
Currently, thanks to the concerted efforts and coordination of the State Bank of Vietnam and credit institutions, the outstanding credit balance for green sectors recorded a growth rate of over 22% per year during the 2017-2023 period, higher than the average credit growth rate of the entire economy.
Proactively anticipating trends, BAC A BANK selects projects for consulting and credit financing only those that apply the achievements of modern management science and technology to production in the direction of green economy, circular economy, and knowledge economy, creating livelihoods and providing jobs for local people.
Proactively "get ahead" on the journey to becoming a green bank.
Dairy farming and milk processing projects concentrated in Nghia Dan district; projects for the conservation and production of clean medicinal herbs and natural fragrances in Muong Long… are the clearest evidence of high economic efficiency while ensuring positive environmental impact; bringing sustainable economic value to investors, and at the same time, creating products that contribute to improving the lives and health of consumers. In fact, the proportion of agricultural loans at BAC A BANK is always quite high, such as loans for growing vegetables, flowers, fruits, and industrial crops; loans for agricultural production and business for individual customers; and credit for corporate customers in the rice industry…
Furthermore, BAC A BANK has introduced various mechanisms and policies to encourage customers to borrow capital for "green" projects. Most recently, within the framework of the "Quick Capital Transfer - Breakthrough Business" program, with a scale of up to VND 3,000 billion, in addition to the support of competitive and attractive lending interest rates – starting from only 6%/year, the bank has further reduced interest rates by up to 0.2%/year for businesses implementing green projects and some other priority industries and sectors.
For two consecutive years (2023 and 2024), BAC A BANK was honored as the "Outstanding Bank in Green Credit" within the framework of the "Vietnam Outstanding Banking Awards".
Facing the trends of the green economy and circular economy, and recognizing the importance and opportunities of green banking, BAC A BANK has proactively researched and developed strategies to mobilize resources for the implementation of green activities; practicing green transformation and digital transformation in its operational practices. It has perfected green credit mechanisms and policies by establishing clear criteria and preferential interest rates and loan terms for green projects, not only facilitating businesses but also attracting sustainable development projects.
The focus should be on prioritizing high-potential projects such as renewable energy (solar energy), green transportation, green infrastructure, and sustainable agriculture, clean agriculture, high-tech agriculture, and projects utilizing waste gas and heat from cement plants. This approach helps banks optimize resources and create tangible progress in the nation's green growth process. Furthermore, it strengthens awareness, enabling bank staff and customers to keep pace with green trends, enhance their knowledge, and build greater confidence in participating in green credit projects.
Simultaneously, with the green transformation process, the digital transformation process is also being systematically implemented at BAC A BANK, from digitizing operational activities to enhancing the development of digital products and services such as e-banking, Kiosk Banking, and Alpha Bank.
Deeply aware that banks not only play the role of financial intermediaries but are also crucial links in the green transformation process, guiding capital flows towards sustainable development goals, BAC A BANK will continue to adhere to the State's policy of "greening" its loan portfolios, linking business growth objectives with community and social responsibility, and contributing to the mission: "Developing green banking and green credit - a very central task of the banking industry in the coming time."
Representatives of BAC A BANK's leadership
