ESG Application: The Key to Sustainable Growth for Banks and Credit
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In an economic context full of risks and unpredictable challenges, applying ESG (Environmental, Social, and Governance) becomes a strategic solution to help banks and credit institutions maintain stable growth.
Pioneering ESG Reporting in Vietnam
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Asia Commercial Bank (ACB):
- At the end of 2023, ACB became the first commercial bank in Vietnam to publish an ESG report.
- This achievement is the result of a decade of sustainable efforts, from reducing operational waste to protecting the rights of employees, customers, and the community.
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Ho Chi Minh City Development Joint Stock Commercial Bank (HDBank):
- In May 2024, HDBank announced its sustainable development report, becoming the first bank to publish an ESG report independently of its annual report.
- HDBank’s ESG report highlights efforts in green finance and effective governance.
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Other financial institutions:
- Banks such as BIDV, MB, and Home Credit have also released ESG reports.
- Some banks, although not yet publishing reports, have integrated ESG evaluation frameworks into their operations.
Benefits of ESG for Banks
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Capital provision and economic transition:
- Banks play a significant role in providing capital to the Vietnamese economy.
- Pursuing ESG creates positive impacts, promoting a shift towards more sustainable and responsible sectors.
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Cost savings and productivity improvement:
- According to Dr. Nguyen Thi Hoa, Director of the Banking Strategy Institute, ESG helps save operational costs and improve labor productivity through effective and transparent management solutions.
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Risk management:
- ESG helps banks identify and prevent risks related to sustainable development.
- It mitigates risks from economic sectors that pose environmental and social threats.
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Expanding customer base:
- ESG enables banks to reach new customer segments that integrate sustainable development into their production, business, or offer ESG solutions to the economy.
- This customer group is highly potential, aligned with societal issues, and receives many incentives from the government and international organizations.
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Attracting foreign capital:
- ESG is a mandatory criterion for attracting foreign capital, helping banks access new initiatives and solutions.
- It creates an "upward spiral" that helps banks address growth challenges.
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Enhancing brand value:
- ESG enhances the reputation and brand value of banks.
- It receives support from the government.
The Current State of ESG Application in Vietnam
- Approximately 80 – 90% of banks have applied some or all ESG criteria into their operations.
- 50% of banks have established risk management departments for environmental protection lending.
- Green credit outstanding loans have exceeded VND 620 trillion, up 24% from 2022, accounting for 4.5% of the total economic outstanding loans.
In summary, the application of ESG not only helps banks and financial institutions mitigate risks and achieve sustainable growth but also enhances brand value and attracts foreign capital, playing a crucial role in the stable development of the Vietnamese economy.
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