HÀ NỘI — Việt Nam will be tying State-backed interest rate subsidies to environmental, social and governance (ESG) standards for the first time in an effort to channel cheaper credit toward greener and more sustainable projects.

The Ministry of Agriculture and Environment is seeking public comments on a draft Prime Minister’s decision that would define green and circular economy projects and set out an ESG framework for borrowers seeking preferential loans.

Under the draft, projects must prove that they meet green or circular criteria and comply with ESG standards to qualify for a 2 per cent annual interest subsidy funded by the State budget.

The ESG framework comprises 52 criteria across a wide variety of environmental, social and governmental pillars. Large companies would be required to meet at least 40 of them, while smaller firms would face lighter requirements based on scale, the ministry said.

Borrowers would be required to maintain compliance throughout the subsidy period, the ministry said.

The draft outlines detailed classifications for green projects across seven sectors, including energy, transport, construction and agriculture, and identifies circular economy activities such as reuse, refurbishment and recycling.

According to the ministry, the move addresses longstanding gaps in Việt Nam’s green finance system caused by a lack of a unified green classification. Meanwhile, the demand for green finance is increasing rapidly as Việt Nam deepens economic integration and faces stricter sustainability requirements from trade partners.

Establishing clear, transparent criteria would help businesses access lower-cost capital, integrate into global green supply chains and improve competitiveness, while reducing risks for lenders, the ministry said. — VNS