Client
Expertise
Finance
Impact
Increasing access to sustainable finance for Vietnamese corporates and SMEs.
Challenge
How can banks prepare themselves to enter the green finance market?
When Vietnam updated its Nationally Determined Contribution (NDC) and committed itself to Net Zero emissions by 2050 following COP26, the role of climate finance only grew. The country needs an additional $368 billion between 2022-2040 to achieve its Net Zero emissions target by 2050.
Financial institutions are key players in providing sustainable finance. This can be through investments, but also by offering loans and other financial products that increase capital flow into sustainable projects and incentivise customers to switch to low carbon, energy-efficient solutions.
As the largest bank in terms of total assets in Vietnam, the Bank for Investment and Development of Vietnam (BIDV) is already familiar with green banking and green credit development. The bank has a long-term strategy for customers operating in the fields of clean energy, low carbon production and consumption industries as it seeks to support Vietnam’s transition to a green economy. In order to offer green, social, sustainability and sustainability-linked loans in line with market practice, BIDV first needed to develop a Sustainable Loan Framework.
Solution
Capacity-sharing and the development of a Sustainable Loan Framework
BIDV is a market leader in green financing in Vietnam. To help BIDV take the next step in its sustainable lending journey and introduce sustainable financial products to the local market, we:
Held workshops for senior management and working-level staff to increase awareness of good governance, sustainable financial products and sustainable investments.
Advised on the development of a Sustainable Loan Framework that follows international principles and is adapted to BIDV’s business processes. The framework includes eligibility criteria for green projects as defined by the Climate Bonds Taxonomy as well as the State Bank of Vietnam’s Green Sector Listing Guidelines.
Engaged with senior management and internal teams on implementing the framework.
The framework follows the principles jointly produced by the Loan Market Association, the Loan Syndications and Trading Association, and the Asia Pacific Loan Market Association: Green Loan Principles, Social Loan Principles, and Sustainability Linked Loan Principles.
IMPACT
Streamlining sustainable finance to drive sustainable action
In 2023, BIDV became the first Vietnamese bank to issue a Sustainable Loan Framework. With the framework, BIDV can develop thematic loans to direct capital to projects with a positive impact on society. It also can help inform the design of sustainability-linked loans to incentivise corporate borrowers to improve their sustainability performance. BIDV’s Sustainable Loan Framework is a critical first step in mobilising the capital needed for sustainable solutions and driving impactful outcomes in the broader society. By implementing the framework, BIDV has been able to:
Introduce new sustainable finance products and diversify BIDV’s offerings in the local market. BIDV has begun to implement the framework and offer targeted loans. In 2023, BIDV issued green bonds of VND2,500 billion (> $100 million) to finance projects with an environmental focus.
Increase access to finance for corporate borrowers looking to adopt low carbon, sustainable solutions. This can encourage Vietnamese businesses to adopt more sustainable practices.
Position itself as a credible partner to support the government’s Net Zero by 2050 ambitions. BIDV is actively consulting with the country’s Ministry of Natural Resources and Environment and other multilateral development finance institutions to promote green finance, sustainable development and climate mitigation.
The development and issuance of a Sustainable Loan Framework will help BIDV provide sustainable financial products in accordance with international standards to domestic enterprises and help strengthen cooperation with international partners in the field of sustainable development in Vietnam.
ASEAN Low Carbon Energy Programme
This work was part of the ASEAN Low Carbon Energy Programme (LCEP), a £15.8 million UK government programme aimed at helping Southeast Asia transition to low carbon energy. The programme collaborated with Southeast Asian public and private entities to increase access to sustainable finance, improve energy efficiency, reduce poverty, and promote inclusive growth by providing capacity building and technical assistance on relevant policy, regulation, and market development work.
The programme ran 2019-2023 and operated across all ASEAN member states.
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