Mr. Le Duc Tho, General Director of the Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank), spoke with VET about green credit and the bank's activities in following government directions to develop green growth.
■ At the “Solutions for Green Growth” conference held recently, experts suggested that for every 1 per cent of GDP growth there is 3 per cent lost on handling environmental matters. What is your opinion of such views?
The economic growth model of many developing countries depends on the mining of natural resources and manufacturing and assembling low added value products, which are detrimental to the environment. This also has a negative influence on the sustainability of economic development.
Some countries have seen overheated economic growth, with consequences for the environment that may take hundreds of years to fix, according to many experts. If the environment cannot be protected it is impossible to secure sustainable economic development because the inputs for production come from natural resources. Therefore, we must carefully select a sustainable economic model, protected from overheated growth and with environmental aspects given full consideration. Otherwise, the results of economic growth can never cover environmental damage.
However, the increase in production costs that come with environmental protection presents difficulties for many enterprises. Enterprises have to adapt to standards regarding the environment, with higher costs and longer timeframes in implementing projects or strategies. A general shortage of capital may also be an issue, which will influence macro-economic development as a whole.
In September of 2012 the Prime Minister approved the National Strategy on Green Growth, which focuses of three major missions: reducing greenhouse gases and increasing clean energy and renewable energy; enhancing green production; and improving green living and increasing green consumption.
In order to implement the directions from the government and handle the shortcomings and difficulties facing enterprises in conducting “green business”, on March 24 this year the State Bank of Vietnam (SBV) issued Directive No. 03/CT-NHNN regarding green credit and managing environmental and social risk when granting credit. The granting of credit needs to focus on environmental protection, improving the efficiency of resource and energy use, bolstering environmental quality, and protecting human health while ensuring sustainable development. Credit institutions must review, adjust and perfect their credit structure to match green growth objectives, focus resources on providing credit with preferential policies to business plans and strategies that are environmentally and socially friendly, and support businesses to follow the targets of green growth. VietinBank is one of the leading players in this regard and we are aware of our responsibilities. Right after Directive No. 03 was issued we fully and effectively implemented its articles under the direction of the government and the central bank.
“Under the existing credit appraisal process at VietinBank, we assess a project’s effect on the environment and on society and evaluate the environmental and social risks of a project before granting credit. Documents to be completed for borrowing must include an environmental impact study, otherwise the project will be restricted or rejected from credit granting.”
Mr. Le Duc Tho
■ What has VietinBank done since Directive 03 was issued?
Shortly after the directive came into effect we conducted a review and verification of each credit granting step and how they measured up against the Directive. We also started an “Action Plan of the Banking Sector to Implement the Strategy for Green Growth to 2020” and deployed it throughout the bank with the following content.
First, we reviewed, adjusted and perfected mechanisms in the credit granting process to bring them in line with green growth objectives. Specifically, we created a vision for the development of green growth through the establishment of a committee to conduct the plan, perfect the mechanisms needed to follow certain goals, such as checking or updating policies on the management of social and environmental factors when granting credit to suit the new model adopted by VietinBank, creating an annual credit orientation, including environmental management, and introducing environmental evaluation criteria when providing credit.
Second, we enhanced the capacity of our staff to implement green credit, via training and communication, in order to raise awareness among staff about the issues and the need for efficient energy use and saving and the protection of natural resources and the environment.
Meanwhile, within the framework of a cooperative agreement between VietinBank and the International Finance Corporation (IFC), the IFC supported us in building up efficient energy funding strategies and coordinating with a working team to help conduct more training for staff on appraisals, providing credit to green projects or effective energy savings projects, project identification, saving energy at VietinBank, and promoting our image as a “green bank”.
VietinBank is also proactive in approaching international green financing through ministries such as Ministry of Industry and Trade (MoIT) and the Ministry of Finance, as well as the SBV and others, and directly approaching international finance support organizations like the WB, the ADB, and the EIB, and non-government organizations from Switzerland and Sweden. This is also to strengthen cooperation with reputable financial institutions to enhance service quality in the field of green energy and at the same time to take advantage of opportunities to reach partners who are major donors in the field. We also publicized our loan program to provide credit to projects in energy saving and actively sought such customers.
Thirdly, we developed solutions to promote our products on green credit, supported enterprises to implement green growth, and encouraged a focus on credit for projects, business plans, and investment in sectors or fields that can positively influence climate change and those using environmentally-friendly high-technology to contribute to green growth
■ As a bank with one of the largest credit exposures in the sector, does VietinBank consider environmental protection a factor when providing credit or does it have policies to encourage investors?
As a pillar of the banking sector, VietinBank has fully recognized the importance of green banking and green credit.
In 2011 we issued a social and environmental policy for cred