As sustainable development is the overarching goal for any country in the face of climate change, financial institutions play an important role in realizing that goal by fine-tuning their performance to support the business community in this endeavor. VPBank is one such institution, having re-oriented its business strategy over the years to help its clients in the transition to the green economy for sustainability.
The bank over the past year has initiated numerous activities to promote environmental, social, and governance (ESG) development, enhance women’s empowerment, and help its corporate clients move forwards to sustainable development.
Such a pathway of the bank is well aligned with the Government’s aim to achieve the multiple millennium development goals as well as the country’s commitment to net-zero emissions by 2050 made at the UN Climate Change Conference COP26. The Government has also made it clear that Vietnam will promote the crucial role of the banking sector in implementing financial programs to cope with climate change and promote sustainability.
A bridge for greenization
Via its Green Financial Framework and Social Financial Framework that have been established in accordance with international standards, VPBank in 2022 managed to mobilize US$1.25 billion from many international financial institutions including the Asian Development Bank, JICA, SMBC, ANZ, and Maybank to finance numerous greenization initiatives in the country. These initiatives were meant to alleviate the impacts of and adapt to climate change, as well as to support small and medium-sized enterprises (SMEs), especially women-led SMEs. In addition, part of the financial pool was used to support social projects in Vietnam, specifically in areas of healthcare, education, environmental sanitation, clean water supply, and housing for the poor.
Greenization projects accounted for a major share in this financing scheme by VPBank. A leader of the bank said up to VND8,692 billion was disbursed in 2022, rising 113% year on year, for green projects or transitional projects, including VND3,326 billion for clean and renewable energy projects, VND3,506 billion for environmental-friendly transport projects, and VND1,595 billion for material-recycling and circular-economy projects.
To facilitate its green loan scheme, the bank has built its own ESG risk management framework and has diversified its credit portfolio with the goal of gradually reducing the proportion of outstanding loans allocated to carbon-intensive industries, while promoting green credit through green funds mobilized from international financial institutions.
EY Consulting Vietnam in a report in December 2022 assessed that VPBank has applied the ESG Risk Management Framework throughout its network, with all components in the frame meeting international standards.
Also last year, Moody’s for the first time announced VPBank’s ESG sustainability score at 2 out of 5, with 1 being the highest.
In addition, with its ESG scores rising from 79% in 2021 to 83% in 2022, VPBank was voted for the fourth time by the Hochiminh Stock Exchange (HoSE) in the Vietnam Sustainability Index (VNSI), which includes the top 20 companies with the highest sustainable development scores listed on the HoSE.
Supporting women-led SMEs
VPBank has launched many preferential credit programs to support small and medium enterprises (SMEs) in general and women-led SMEs in particular, the latter aimed to enhance women’s empowerment.
Specifically, in 2022 VPBank kickstarted the support project to minimize the impacts of the Covid-19 pandemic on women-led enterprises financed by a gratis aid of US$5 million entrusted by the Asian Development Bank via the Women Entrepreneurs Finance Initiative. The project offered a concessional lending rate plus a reduction or exemption of service fees to help women-led SMEs access soft loans to overcome the consequences of the pandemic.
The bank also organized training workshops for its own executives to equip them with knowledge and skills to support women-led enterprises.
Owing to such efforts, outstanding credits for women-led SMEs by the end of 2022 increased by 22.4% year on year to over VND12,450 billion.
Apart from financial programs for women-led SMEs, the bank has also rolled out many non-financial programs benefiting these businesses. For example, the bank has launched the so-called health diagnosis program for enterprises, measuring business viability via six core metrics comprising business model, sale and marketing, leadership, operation, financial management, and manpower management. Such a program alongside the bank’s financial support benefited thousands of enterprises last year.
A leader of VPBank said that the bank in 2023 will continue to collaborate with other partners and stakeholders to offer products and services closely associated with the reduction of emissions, elimination of inequality, and promotion of sustainable development.