Green finance contributes to promoting sustainable development in Vietnam
Green finance plays an important role in reshaping the economy toward sustainable development. National strategy on green growth for the period 2011- 2020 with a vision toward 2050, has been approved by the Prime Minister.
In this context, the banking sector has actively promoted green growth while integrating environmental, social and governance (ESG) considerations into lending activities. Alongside domestic banks, many international financial institutions and foreign banks are also increasing their focus on ESG in Vietnam. Regarding this topic, Banking Times interviewed Mr. Michael Wen, Executive Vice President of Cathay United Bank.
The Vietnamese Government is promoting sustainable development and green economic growth, while the banking sector continues to align with these objectives. Could you share your perspective on the broader trend and how foreign financial institutions and banks view ESG development in Vietnam?
From a banking perspective, small and medium-sized enterprises are often considered more vulnerable due to their limited scale, unstable cash flow and relatively short operating history, which may affect their creditworthiness. As a result, many businesses, especially startups in innovative sectors, face challenges in accessing bank financing despite having strong business potential.
For this reason, Taiwan authorities have introduced credit insurance and guarantee mechanisms specifically designed for SMEs, helping share risks with the banking system. Through these mechanisms, when banks provide financing to businesses, part of the credit risk is guaranteed, enabling banks to more confidently support companies with strong potential but limited access to capital.
One of the core principles in banking is that bank capital essentially comes from customer deposits, which means capital preservation must always remain a top priority. Therefore, even when supporting SMEs and startups, banks must maintain prudent credit assessment and risk management practices. Government-backed credit guarantee mechanisms serve as a “bridge,” allowing banks to both safeguard customer funds and expand financial access for SMEs.
Currently, many Vietnamese enterprises, from large corporations to SMEs, are increasingly interested in green financing and sustainable development. From Cathay United’s perspective, which sectors or areas hold the greatest potential for green financing in Vietnam?
In recent years, Cathay United’s approach to green finance has not focused on prioritizing specific industries. Instead, the bank evaluates each project and business based on ESG readiness, environmental and social impact, and long-term sustainability. This approach allows green capital to be allocated flexibly according to Vietnam’s economic development needs.
Over the past two to three years, Cathay United’s ESG and green finance portfolio for clients in Vietnam has recorded significant growth, reaching approximately USD 100 million. This figure is expected to continue increasing this year, reflecting stronger demand from businesses for financing solutions linked to green transition and sustainable development.
Looking ahead, Vietnam still has substantial room for growth in green finance, especially as international trade expands and sustainability requirements become increasingly important in global partnerships. While the bank does not set fixed lending ratios for specific industries, it remains optimistic about expanding green financing for businesses with clear sustainability transition strategies and is committed to supporting Vietnamese enterprises in meeting global ESG standards.
In your view, what practical benefits does the application of technology in ESG risk management and forecasting bring compared with traditional approaches?
In practice, applying technology to ESG risk management and forecasting delivers significant advantages compared with traditional approaches, particularly as the business environment becomes more volatile and demands for transparency and accountability continue to rise. First, technology helps strengthen customer trust and satisfaction. A clear example was during the Covid-19 pandemic. Before the pandemic, remote working models and digitalized processes had not yet been widely adopted. By rapidly implementing technological solutions, banks were able to maintain uninterrupted operations and respond to customer requests more efficiently and transparently. This not only ensured service quality but also reinforced customer confidence during a highly uncertain period.
In addition, technology plays an important role in improving operational efficiency and workforce productivity. Through data platforms, AI and automation, Cathay can analyze risks more systematically, support faster and more accurate decision-making, and reduce manual workloads. This enables employees to focus on higher-value activities such as advisory services, risk management and the development of sustainable financial products.
Furthermore, technology adoption helps optimize costs and improve long-term business efficiency. For example, ESG risk forecasting tools enable financial institutions and banks to identify potential environmental, social and financial risks at an early stage, allowing them to proactively adjust strategies, minimize losses and allocate resources more effectively. Compared with handling risks after incidents occur, a technology-driven approach offers significantly greater economic efficiency.