Green credit and principles of environmental risk management

Green credit-granted projects

As prescribed in Article 149 of the Law on Environmental Protection 2020, green credit is the credit granted for the following investment projects: Efficient use of natural resources; Adaptation to climate change; Waste management; Pollution remediation and environmental quality improvement; Natural ecosystem restoration; Nature and biodiversity conservation; and Creation of other environmental benefits.

Accordingly, credit institutions and foreign bank branches in Vietnam that allocate green credit enjoy incentive mechanisms such as getting priority access to preferential loans from the Government, international organizations, and development partners, and receiving support from the competent state agency for training in green credit issuance.

Principles of environmental risk management

According to the report of the Ministry of Agriculture and Environment, so far, the green credit market has had a much higher growth rate than the general credit growth rate of the economy. However, according to experts, the selection of measures to encourage green credit should be consistent with the level of development of the financial market and must have an environmental risk management mechanism in granting credit.

Currently, in order to guide the environmental risk management in credit granting, the State Bank has issued Circular 17/2022/TT-NHNN, in which it gives the principles that must be adhered to, specifically:

Credit institutions carry out environmental risk management in credit granting to ensure compliance with the provisions of the law on credit granting and credit risk management in banking activities. Credit institutions carry out environmental risk assessments in credit granting for investment projects, identify credit-granting conditions, and manage credit risks for customers' credit grants.

Along with that, credit institutions can also use evaluation results from organizations that provide environmental risk assessment services or from other credit institutions, as agreed in the service supply contract. When evaluating investment projects with environmental risks in credit granting, credit institutions agree with customers on measures to limit environmental risks.