Green Credit Deadlock: Banks Fear Businesses Are Only “Green on Paper”

Green credit in Vietnam is growing at an unprecedented pace. Banks are continuously announcing multi-billion-dollar financing packages for renewable energy, low-emission agriculture, green transport, and circular economy projects. Yet behind the impressive growth figures lies an increasingly obvious paradox: banks have capital available, but struggle to find businesses that meet the standards required for disbursement.

What financial institutions are now worried about is no longer simply repayment capacity, but a far more difficult question: are companies truly “green,” or merely “green on paper”?

Rising Pressure from “Greenwashing”

In recent years, ESG and sustainable development have become a “passport” for businesses seeking preferential financing from banks and international investment funds. However, this trend has also created the growing risk of “greenwashing” — when companies build environmentally friendly images or make attractive ESG commitments in order to access green capital, while their actual environmental impact remains limited.

Mr. Nguyen Hung, CEO of TPBank, said that data transparency has become the key condition in evaluating green financing applications. According to him, indicators such as carbon emissions, energy consumption, and water usage must be consistently measured and independently verified. Otherwise, banks could face serious reputational risks by financing projects that later prove not to be genuinely sustainable.

Financial experts note that the risks associated with green credit differ significantly from traditional lending. In conventional loans, banks mainly assess cash flow and collateral. In green finance, however, they must also evaluate the actual “green quality” of projects, their real emissions reduction impact, and compliance with increasingly strict international standards.

Dr. Can Van Luc, Chief Economist at BIDV, has pointed out that one of the market’s biggest weaknesses is the lack of a synchronized ESG data system. Many businesses publish sustainability reports, but without independent auditing mechanisms, making it difficult for banks to verify the reliability of the disclosed information.

Experts say this is also why international financial institutions are tightening their appraisal procedures. Many foreign banks now require companies to provide carbon emission reports, carbon neutrality roadmaps, and detailed energy transition strategies before considering green financing applications.

Where Vietnamese Businesses Are Struggling

In reality, most Vietnamese enterprises, especially small and medium-sized businesses, still face major difficulties in meeting green standards.

One of the largest obstacles is the cost of transition. Investing in energy-efficient technologies, waste treatment systems, or circular production lines requires substantial capital. Meanwhile, many businesses continue to operate on thin profit margins, making rapid transformation financially challenging.

In addition, many companies still lack proper emission measurement systems and structured ESG governance frameworks. Some businesses continue to treat ESG merely as a set of documents for obtaining loans or meeting export requirements, rather than as a long-term development strategy.

Mr. Lim Dyi Chang, Head of Business Banking at UOB Vietnam, explained that a seafood company seeking access to green capital today must do far more than prove its raw materials meet international standards. It must also demonstrate supply chain traceability, emission reduction efforts, logistics optimization, and a commitment to circular economy practices.

This creates significant pressure for many Vietnamese companies that are still unfamiliar with international sustainability standards.

According to experts, another major challenge is the shortage of ESG professionals. Many businesses do not yet have dedicated sustainability departments, lack expertise in greenhouse gas inventories, or have limited understanding of international frameworks such as the IFRS Sustainability Disclosure Standards or the European Union’s CBAM mechanism.

Some companies are also hesitant to fully disclose environmental data, fearing that transparency could expose operational weaknesses and negatively affect their competitiveness or public image.

Banks Are Also Under Pressure

On the banking side, lenders themselves are facing mounting challenges.

Ms. Nguyen Thi Thu Ha, Deputy Head of the ESG Steering Committee at Agribank, said the bank is implementing large-scale green credit packages for low-emission agriculture and green infrastructure projects. However, actual disbursement rates remain relatively low because the number of businesses capable of meeting the required standards is still limited.

Many banks are now facing a shortage of “qualified green projects.” International ESG funding sources are increasingly abundant, but to access and deploy those funds, banks must prove that the capital is genuinely directed toward environmentally beneficial projects.

A senior executive at a commercial bank noted that the biggest challenge today is not finding capital, but building a sufficiently strong ESG assessment system. If banks loosen standards too much in pursuit of green credit growth, they risk rising bad debts and reputational damage. Yet if they apply overly strict conditions, green capital may fail to flow into the economy as expected.

In practice, many Vietnamese banks still lack specialized ESG expertise. Not every financial institution has the capability to assess lifecycle emissions, carbon reduction efficiency, or the sustainability of a company’s supply chain.

Lessons from International Markets: Sustainability Cannot Rely on Slogans Alone

Many countries have already experienced periods of “paper green growth” before tightening sustainability regulations.

In Europe, the European Union introduced the EU Taxonomy system to clearly classify which economic activities can genuinely be considered sustainable. Companies seeking access to green finance must disclose detailed environmental data and comply with strict regulatory oversight.

In 2023 and 2024, several major investment funds in Europe and the United States faced investigations or penalties for overstating ESG claims. This signaled a shift in developed markets from simply “encouraging green investment” toward actively “verifying sustainability claims.”

Singapore offers another notable example. The country has not only promoted green finance but also invested heavily in building a national ESG data infrastructure. The government introduced unified reporting standards and supported companies in digitizing emissions data to improve transparency.

Meanwhile, South Korea and Japan adopted a more flexible approach by combining green financing with technical assistance. Rather than requiring companies to immediately comply with ESG standards, these countries subsidized consulting services, emissions audits, and technological upgrades to help businesses gradually adapt.

According to experts, this is an important lesson for Vietnam. If policymakers impose high standards without providing adequate support mechanisms, many small and medium-sized enterprises could be excluded from the green transition altogether.

Vietnam’s Legal Framework Is Gradually Taking Shape

One positive sign is that Vietnam is steadily improving its legal framework for green finance.

The issuance of green classification criteria for 45 sectors by the State Bank of Vietnam is considered a major step toward reducing ambiguity in defining green projects.

The government is also considering various support measures, including interest rate subsidies for green and circular economy projects. Experts believe such policies are necessary to help businesses ease financial pressure during the early stages of transition.

However, in the long term, green capital will no longer be considered “easy money.” Banks are paying increasing attention to governance quality, transparency, and measurable emission reductions, rather than focusing solely on collateral.

Ms. Shuyin Tang, CEO of Beacon Fund, said that investment funds today no longer treat ESG as a secondary consideration but fully integrate it into investment decisions. Companies with transparent governance and strong environmental risk management will enjoy major long-term advantages.

This means the future green transition will not simply be about gaining access to financing. It will be about proving — through real data and measurable performance — that businesses are genuinely sustainable.

And that is precisely what banks fear most today: not a shortage of money to lend, but a shortage of companies truly qualified to receive green capital safely, transparently, and effectively.