Theoretical Basis of Green Banking

Green banking depends on age, education level, occupation, but is not affected by gender. On that basis, the author proposes some managerial implications towards sustainable green banking applications in Vietnam. However, the study still has some limitations such as: relying entirely on primary information, divided equally among 3 banks HDB, BIDV, VCB, with a sample size of 90, and the convenience sampling method, which does not ensure good generalization of results and the study only focuses on awareness and perception, not related to the diagnosis of impacts (Ha Nam Khanh Giao, 2020)

Regarding the need for widespread awareness of green banking, authors Nguyen Thi Kim Oanh and Nguyen Viet Trung (2019) believe that: Popularizing green banking is an approach that spreads quickly and thoroughly because no economic sector or field of activity can escape transactions related to money and banking services.

In addition, the increasing scale of banks today increases carbon emissions into the surrounding environment. With a huge number of branches, banks will significantly increase carbon emissions into the environment due to the use of a lot of energy, air conditioning, printing equipment, etc. To reduce carbon emissions, customers need to change their habits of using non-cash payments and transactions via electronic banking (Nguyen Minh Loan, 2019). Some aspects of green banking such as banks using electronic banking, applying Fintech in banking operations are also mentioned in banking studies. For commercial banks, the development of Fintech leads to increased profits, financial innovation and improved risk control capabilities. In general, by using financial technology, commercial banks can improve their traditional business models by reducing banking operating costs, improving service efficiency, enhancing risk control capabilities and creating customer-oriented business models; thereby enhancing overall competitiveness. The level of this impact varies depending on the level of technological innovation used by the bank (Dao Duy Tung, 2021).

7.2. Overview of foreign research

Discussing the development of green banking, the level of awareness and green banking development model in some countries, there have been some studies on this topic in the world.

Subrata et al. (2017) studied the awareness and perception of customers towards green banking in Bangladesh, the results showed that customers are more aware of SMS banking. Prakash and Pappu (2017) showed that customers have better awareness and perception of green banking for large state-owned banks. Satheesh (2017), Omid et al. (2015) pointed out that: customers at small private banks along with bank employees have better awareness and perception of green banking than the public, so state-owned banks need to do more to help the public access the green banking system. Ganesan and Bhuvaneswari (2016) pointed out that education has a significant impact on awareness and perception of green banking. Lalon (2015) pointed out that changes in investment management, deposit management, recruitment, corporate social responsibility and raising community awareness are the fundamental factors for the development of Green Banking. Sharing the same view on this issue, Maruf (2010) also recommended that Green Banking activities need to be catalyzed and supported by public investments and expenditures, and improved government policies and regulations.

The study by Sadia Noureen et al. (2020) on Green Banking Awareness, Challenges and Sustainability in Pakistan asserts that viable policy measures and initiatives to promote green banking have become the need of the hour. In a rapidly changing market economy where market globalization has intensified competition, banks should play an active role in protecting the environment and ecosystem. The concept of Green Banking will benefit both the banking sector and the economy.

7.3. Research gaps

It can be seen that there have been studies on green banking both domestically and internationally. These studies have also shown the inevitable trend of developing green banking models.

Green banking in the overall sustainable development strategy. However, these studies have only stopped at proposing green banking from the perspective of providing green banking financial services and the impact of providing green banking services on banking performance as well as contributing to environmental protection, ensuring green and sustainable growth or studying some experiences of countries on developing green banking.

Domestic studies have also analyzed the trend of green banking development in the world, the opportunities and barriers in promoting the development of Green Banking in Vietnam, and given certain policy implications. However, they have not gone into depth in analyzing the experience of developing this model in specific countries that have had certain achievements as well as similarities in the role of management agencies that we can learn from.

Thus, there is still a research gap, from a theoretical perspective, a comprehensive theoretical basis for green banking including concepts, characteristics, organization of activities, development models, practical benefits for related entities and for economic, environmental and social development, as well as studies synthesizing international experience in green banking development, then assessing the current status of green banking activities in Vietnam to be able to make recommendations to enhance the development of green banking activities in Vietnam according to international standards.

CHAPTER 1: THEORETICAL BASIS OF GREEN BANKING

1.1 Concept of Green Banking

Green banking is a new concept that has emerged in the past 10 years. However, some researchers and organizations have tried to come up with their own definitions. There are many definitions of Green Banking in the world and there may also be differences between countries. In a broad sense, “Green Banking is Sustainable Banking”, in order to develop sustainably, banks need to look at the big picture and put their interests in parallel with the interests of the environment and society (Imeson M. & Sim A., 2010). SOGESID, an Italian state-owned engineering joint stock company, said: “Green banking operates like a traditional bank, providing superior services to investors and customers, while implementing programs that benefit the community and the environment. Green banks are not purely social responsibility enterprises, nor are they purely profit-oriented enterprises, but they combine and ensure economic, environmental and social harmony and sustainability” (SOGESID, 2013)

In a narrow sense, Green Banking encompasses environmental actions, such as “green” activities not only inside but also outside the bank. “Green banking refers to activities that promote environmental activities and reduce carbon emissions, such as promoting the use of green products and services; applying environmental standards to approve loans or providing preferential credits for CO2 reduction projects” (UN ESCAP, 2012). A bank is considered “green” when it meets both conditions: (i) providing green services in the short term and (ii) having a long-term business strategy that meets environmental and social responsibility criteria. The Institute for Development and Research in Banking Technology (IDRBT) defines: “Green banking is a general term related to the applications and guidelines that make banks sustainable in economic, environmental and social contexts. It aims to make banking processes and IT and technology infrastructure platforms as efficient as possible, with little or no impact on the environment” (IDRBT, 2013). The 2014 study by

Singhal and Arya argue that: “Green banking is inclined towards socio-economic activities and focuses on environmental factors through reducing carbon both inside and outside the bank”. Specifically, banks reduce carbon in banking by conducting online activities, using ATM systems, mobile banking, cards, and email exchanges to minimize activities related to documents, stationery, air conditioners, etc. For the goal of reducing emissions outside the bank, banks provide green credit packages to finance environmentally friendly projects, reduce pollution emissions, and prioritize green industries (Singhal K., & Arya M., 2014). According to research by Kanak Tara & Ritesh Kumar, Green Banking is understood as “a way of providing and characterizing banking services that aim to support activities that have a positive impact on the environment, reduce carbon emissions, save natural resources, and promote sustainable development”. Thus, green banking includes two main areas, first, rational use of all resources, energy sources and minimizing printed materials, second, encouraging and financing activities, environmentally friendly projects. Green banking is not only about sustainable use of resources but also about granting credit to environmentally friendly projects (Kanak Tara & Ritesh Kumar, 2015)

In Vietnam, the concept of “Green Bank” was first introduced at the workshop “Green Finance and Banking” held on June 25, 2013 under the chairmanship of the German Development Cooperation Organization (GIZ) in coordination with the State Bank and the Ministry of Finance. Ms. Vu Xuan Nguyet Hong - representative of the Central Institute for Economic Management (CIEM) explained: “Green Bank is the activities and operations of the banking system to encourage environmental activities and reduce carbon emissions”. Up to now, this understanding has been commonly used in domestic Green Bank studies. According to this understanding, a Green Bank must actively carry out activities such as encouraging customers to use green products and services; applying environmental standards when approving loans; granting preferential credit for carbon reduction projects, renewable energy projects, etc.

In short, although it is defined in many different ways, basically, according to the author, the concept of green banking can be understood as the bank's association of organization, operation and provision of banking services with the implementation of social and environmental responsibilities.

environment and community. In essence, green banking activities are similar to conventional banking activities and are also controlled by the authorities like what a traditional bank does. However, the difference is that Green Banks attach more importance to environmental and social factors, taking into account the impact on the community and the environment in the way banking services are provided and used, ensuring sustainable development. A conventional bank becomes a green bank by orienting its core activities towards the environment, promoting environmentally friendly activities and reducing carbon emissions from banking activities, while at the same time, in all aspects of its business (deposit collection, credit disbursement, trade finance, leasing activities, mutual funds and monitoring services, etc.) being oriented towards environmental conservation and improvement. For example, in their lending operations, they check all the factors before lending, whether the project is environmentally friendly and has any future impacts, and will only award a loan if it complies with all environmental safety standards.

1.2 Features and benefits of Green Banking

1.2.1 Characteristics of Green Banking

Green banks vary in structure and operation around the world, however there are certain elements that define a green bank. The scope of green banking, can be defined on the basis of the banks' activities related to the environment. These activities can be divided into two groups, which relate to two types of aspects and therefore have two types of environmental impacts: direct and indirect. Direct environmental impacts relate to the use of resources by banks for the purposes of banking operations - electricity, oil, heating, paper, waste, etc. Indirect environmental impacts relate to all types of activities through which banks can indirectly influence the environment, for example, the relationships with the bank's customers and the conditions that the bank places on them for granting loans and other services, as well as the awareness of employees, the marketing activities that the bank organizes that are directly related to the environment, etc.

Accordingly, some common characteristics of Green Banks can be listed as below:

The first is the implementation of electronic and automated services. Thanks to the application and support of modern technology, especially the achievements of the 4.0 industrial revolution, banks are actively implementing online banking with a variety of electronic services and meeting most basic needs such as transaction inquiries, balance fluctuations, withdrawals, money transfers, online money receipts, creating deposit accounts, etc., helping customers not have to leave their work and queue at bank branches but still be able to complete their transactions anytime, anywhere in a short time. In addition, banks also coordinate with businesses, as well as organizations to form a system of automatic transactions, including many integrated services such as payment of electricity, water, television, Internet bills, tuition, installment payments, etc.

Second, promote green credit and green investment activities. Banks will select projects that assess risks related to the social environment and prioritize lending or investing in projects that protect the environment or pose little risk to the environment. Environmental laws are included in the assessment and compliance, and environmental and social impact assessment tools are developed to implement project assessment and appraisal before lending, aiming at sustainable growth and green development, encouraging businesses to protect the environment and fulfill their social responsibilities.

Third, manage and monitor customer projects to prevent risks and limit/minimize negative impacts on the environment. Banks set out management measures, as well as requirements and reporting standards for project implementation units. The level of control/management depends on the level of impact and influence of the project on the social environment. If there is a violation, the customer must be responsible for proposing and implementing handling and remedial measures. Banks can also participate in consulting and guiding businesses during project implementation to ensure compliance with environmental regulations and commitments.

Fourth, improving the spirit and assessment capacity of bank staff and customer awareness of green banking activities is emphasized.

Proactively disseminate information, raise awareness, and inspire staff and employees to develop sustainable banking through internal communication, seminars, etc., and training to improve project assessment and appraisal capacity with consideration of environmental factors. The greening process is supported by both management and employees of the bank. At the same time, through product marketing activities, communication channels, and green products and services provided, the bank helps customers see the benefits and importance of applying the green banking model.

Fifth, greening is carried out internally within the bank. The bank focuses on building green information systems and facilities, prioritizing the use of new environmentally friendly products, aiming to save energy, avoid wasting resources such as electricity, water, paper, minimizing waste to the environment, as well as encouraging green initiatives internally. The level of greening is measured, strategic frameworks and internal greening implementation plans are built, and greening factors are included in the criteria for evaluating internal bank performance.

The difference between green banking and traditional banking is shown in table 1.1.

Table 1.1: Comparison of green banking and traditional banking

Traditional banking

Green Bank

- Focus on economic benefits

- Only care about today's benefits (current results)

- No “future benefits”, no solutions to environmental problems

- Not much attention is paid to minimizing the environmental impact of the bank's daily operations,

- Focus on three factors: economic benefits, social benefits and environmental impact)

- Concerned about future benefits (long-term effectiveness)

- Has "future benefits", has solutions to current and future environmental problems

- Use internal processes, to