Analysis and evaluation of the impact of green banking practices on banks

Hence, the topic "Analysis and Evaluation of the Impact of Green Banking Practices on Banks' Environmental Performance in Vietnam" is crucial to assisting the banking and financial sys

The necessity of the study

In the wake of the COVID-19 pandemic, nations worldwide are prioritizing economic recovery through green and sustainable growth For Vietnam, embracing green growth presents a vital opportunity to lead in the region and align with global development trends The banking sector, playing a critical role in the economy, is actively adopting sustainable development practices in line with this global movement.

The rising demand for environmentally friendly banking has become a strategic goal for financial institutions Adopting the "Green Banking" model is an effective approach to tackle the current challenges in the banking sector, ensuring economic growth while protecting the essential social environment.

Vietnam's Environmental Performance Index (EPI) ratings have significantly declined over the past decade, with the latest YCELP report revealing a drop from 79th place in 2012 to 178th out of 180 countries by the end of 2022 The EPI score plummeted from 50.6 to 20.1, highlighting a critical level of environmental pollution that threatens the nation's long-term economic growth This situation places additional pressure on the banking sector to balance economic growth with operational sustainability, emphasizing the interdependence of business, consumer demand, and sustainable development with a healthy society and environment.

The Vietnamese government is actively developing and implementing innovative strategies to balance economic growth with environmental protection amid global economic integration To support sustainable and green development, they have updated their Nationally Determined Contributions (NDC), increasing the unconditional emission reduction target from 9% to 15.8% by 2030 compared to the 2020 NDC Additionally, the conditional contribution has been raised from 27% to 43.5% relative to the Business As Usual (BAU) development scenario, highlighting the crucial role of the banking sector in these efforts.

2 sector participates in the process of implementing this objective by fostering economic restructuring linked to innovative models of economic growth (Khanh Ly,

The "Green Banking" approach has emerged as a pivotal development in the banking sector, aligning with global sustainability goals The UNEPFI (2018) estimates that achieving the 2030 Sustainable Development Agenda will require an annual investment of USD 5-7 trillion, alongside an additional USD 83 billion each year from 2016 to 2050 to mitigate global warming to 1.5 degrees Celsius However, many banking processes currently fail to meet these objectives, highlighting the necessity for high governance standards to enhance environmental, social, and financial performance While developed nations have initiated "Green Banking" practices, transitioning from traditional to green banks typically takes 5-7 years, necessitating a long-term strategy for Vietnam's green banking development (Tran Thi Luong Binh and Nguyen Thi Huong, 2022) Moreover, the IFC's Annual Report (2020) reveals that only $1.6 billion of the anticipated $33 billion in green loans as of 2019 is linked to developing countries.

The banking system, particularly commercial banks, serves as a vital financial intermediary that aligns with government policies and supports economic growth "Green Banking" emerges as a crucial strategy for promoting environmentally sustainable development, benefiting communities, businesses, and the nation The effective implementation of "Green Banking" fosters green economic development and aids in economic restructuring Therefore, the analysis and evaluation of "Green Banking Practices" on banks' environmental performance in Vietnam is essential for guiding the banking and financial sector towards a sustainable growth model.

3 the urgency and practical applicability of the sustainability of banking activities in the future.

Literature review

International studies

The development of "Green Banking" is influenced by various conditions, ultimately leading to enhanced environmental performance in banks Research by Rehman et al (2021) highlights the lack of studies on green banking in developing countries like Pakistan, examining its direct and indirect effects on environmental performance The impact of green practices on policy-making and financial investments in environmental projects is significant, with legislation, daily operations, and investments playing crucial roles in adopting these practices Xin Zhang et al (2022) further identify the positive effects of green banking on green financing and environmental performance in Bangladesh, noting that green banking practices significantly enhance banks' environmental outcomes, mediated by green financing However, challenges such as low customer awareness, high investment costs, technical barriers, and a lack of qualified personnel hinder the growth of green banking in Bangladesh Chen et al (2022) also discuss customer-related issues in this context.

"Green Banking" practices among bank employees showed no statistically significant impact; however, daily activities and policy-related practices significantly benefited green financing Moreover, banks that financed green projects experienced a strong and positive influence on their environmental performance, unlike the effects observed from employee- and customer-related "Green Banking" practices.

4 banks' everyday operations and policy-related "Green Banking" practices were found to have considerable effects on banks' environmental performances

In their 2018 study, Risal and Joshi examine the influence of green banking practices on the environmental performance of banks in Nepal The findings reveal that green policies and energy-efficient equipment significantly enhance a bank's environmental performance, while green loans and projects have a lesser effect Additionally, environmental training contributes only a minor improvement The research emphasizes the importance of banks and government promoting eco-friendly technologies to bolster banks' reputations and raise consumer awareness.

In recent years, banks have increasingly adopted green banking programs; however, there remain significant gaps in empirical research regarding green banking and its impact on environmental performance in Sri Lanka, as highlighted by Shaumya, S and Arulrajah, A.

A 2017 study assessed the impact of green banking practices on the environmental performance of Sri Lankan banks, revealing a positive and significant relationship The research highlighted that employee engagement, operational strategies, and bank policies contribute effectively to enhancing environmental performance However, it found that customer-related practices did not significantly influence banks' environmental outcomes.

National studies

Vietnam is embracing international integration, leading to increased focus on the "Green Banking" model Research by Tran Thi Thanh Tu and Nguyen Thi Phuong Dung (2016) highlights that while adopting green banking is essential for the growth strategies of Vietnamese commercial banks, awareness and implementation of this model remain low The study reveals that knowledge of green banking, current practices, and the benefits of developing this model positively influence banks' willingness to adopt green practices, while simultaneously, these factors negatively correlate with existing barriers to green banking.

Tran Thi Thanh Tu and colleagues conducted an empirical study on the development of green banking in Vietnam, utilizing Kaeufer's 5-level green banking model from 2010 Their findings indicate that Vietnam's green banking sector is currently at level 3, characterized by systematic business activities where most processes and products adhere to "green" principles The organizational structure of these banks is designed to enhance their environmental impact across four dimensions: people, processes, principles, and purposes Additionally, the study identified two key bank-specific variables, notably the capability of officers, as significant factors driving the advancement of green banking in Vietnam (Trần Thị Anh Tú et al., 2020).

A survey conducted by Nguyen Thi Le Huyen on bank employees reveals that four key factors significantly influence the implementation of green banking in Vietnamese commercial banks These factors include pressure from stakeholders, economic interests, environmental concerns, and policy and legal considerations.

In Vietnam, the implementation of "Green Banking" is influenced by various factors, with "Human" elements playing the most significant role, while "Technology application" has the least impact (Trinh Chi Mai et al., 2020) Although green banking offers economic benefits through cost savings, banks are also motivated by the desire to enhance their brand reputation among environmentally conscious customers (Le Huyen, 2019) Additionally, factors related to banking strategies, products, services, and corporate culture positively affect the awareness of Vietnamese commercial banks regarding "Green Banking." However, from the customer's perspective, there is a lack of deep public awareness and understanding, indicating a need for bank management to develop more fundamental strategies for sustainable green banking practices in Vietnam (Ha Nam Khanh Giao, 2020).

Research on "Green Banking" has employed various techniques to assess the current state and performance of banks in Vietnam and globally, focusing on both banks and consumers However, existing literature lacks comprehensive studies on the impact of green banking on environmental performance, particularly in Vietnam This study aims to analyze how green banking practices affect banks' environmental performance, emphasizing the need for a thorough examination in the Vietnamese context to address this empirical knowledge gap The findings from previous research serve as a reference point, but a specific reassessment is crucial for a clearer understanding of banks' environmental performance.

Research gap

There has been a lack of comprehensive studies on the environmental performance of commercial banks in Vietnam Previous research has primarily focused on the factors influencing the adoption of "Green Banking" practices, but it has not explored the relationship between these practices and the banks' overall environmental performance.

Environmental performance is an emerging economic category that is still evolving, leading to various methods for assessing banks' environmental impact These evaluation approaches change over time and differ across countries and international banks Recognizing the banking sector's crucial role in environmental enhancement, further research is essential to clarify the concept of "Green Banking" and enhance overall environmental performance.

Research on the factors affecting banks' environmental performance typically focuses on specific elements, such as green financing and green activities, or examines the issue from the limited perspectives of either customers or banks However, there is a lack of comprehensive studies that evaluate the collective impact of various "green banking" factors on enhancing banks' environmental performance.

Object and Scope of the Study

Research object: The object of the study is the “Green Banking” related practices factors affecting the environmental performance of Vietnam commercial banks

This article examines the landscape of space research within Vietnam's commercial banking sector, specifically highlighting major institutions like VietinBank, Vietcombank, BIDV, Agribank, MB, Techcombank, TP Bank, Sacombank, and LienVietPostBank These banks possess significant market power, promising growth potential, and effective business operations, making them representative of the overall performance of commercial banks in Vietnam.

The scope of time research focuses on the period: 2019 - 2023

Research Objectives

General objectives: Researching the impacts of “Green Banking” practices on banks' environmental performance, and subsequently developing practical recommendations to improve banks' environmental performance in Vietnam

Specific objectives: The research will specifically carry out the following tasks to reach the primary objective:

- Systematize the theoretical basis for the implementation of Green Banking and its relationship with banks’ environmental performance

- Analyzing the effect of green banking on environmental performance in Vietnamese commercial banks

- Proposing recommendations to enhance the environmental performance of Vietnamese commercial banks

Research questions

The study focuses on answering the following research questions:

- What is "Green Banking" and its role in developing Vietnam's commercial banks’ environmental performance?

- What "Green Banking" factors influence the environmental performance of Vietnamese commercial banks?

- Which scale and model are used to assess the influence of factors on the banks’ environmental performance in Vietnam?

- How to improve the positive impact of factors on the banks’ environmental performance in Vietnam?

- How to reduce the negative impact of factors on the banks’ environmental performance in Vietnam?

Thesis structure

In addition to the introduction and conclusion, the structure of the study consists of 03 chapters:

Chapter I: Theoretical and practical issues on the “Green Banking” Practices and environmental performance in commercial banks

Chapter II: Research Methodology and Result of the Impact of “Green Banking” Practices on environmental performance in Vietnam commercial banks

Chapter III: Discussion of the result and Recommendations for environmental performance development in Vietnam commercial banks

THEORETICAL AND PRACTICAL ISSUES ON THE “GREEN BANKING” PRACTICES AND ENVIRONMENTAL PERFORMANCE IN

Overview of "Green Banking"

1.1.1 The concept of "Green Banking"

Green banking, as highlighted by Jing Chen et al (2022), is an emerging concept that significantly impacts environmental policy, financial institution operations, and socioeconomic development Triodos Bank, established in 1980, was the pioneer in implementing this concept and introduced a "Green Fund" to support environmental initiatives, inspiring other banks to adopt similar practices by 1990 Green banking encompasses two main approaches: firstly, it involves promoting green banking principles and integrating them into the bank's internal processes; secondly, it includes applying environmental standards in the credit sector by evaluating the environmental risks of projects before lending and supporting "green" initiatives This approach also emphasizes the use of renewable energy and automation to minimize carbon emissions associated with banking activities.

The Institute for Development and Research in Banking Technology (IDRBT) defines green banking as a comprehensive approach that ensures banks operate sustainably across economic, environmental, and social dimensions Its primary goal is to leverage technological advancements to achieve maximum efficiency while minimizing environmental impact Specifically, green banking involves banks applying environmental standards in loan approvals and offering preferential credits for projects focused on emission reduction and renewable energy Additionally, it promotes initiatives aimed at reducing carbon emissions and encourages customers to adopt eco-friendly products and services.

The Indian Bankers Association (IBA, 2014) defines a "green bank" as a conventional banking institution that integrates social, economic, environmental, and ecological considerations to protect the environment and conserve natural resources While operating under the same regulatory framework as traditional banks, green banks implement additional regulations focused on environmental sustainability, linking them to the principles of sustainable banking and management.

Green banking is defined as a financial institution that adheres to standards for funding and investing in environmentally responsible enterprises It plays a crucial role in reducing carbon emissions, demonstrating both social and environmental responsibility A bank qualifies as "green" if it meets two key criteria: it must provide green services internally and externally while also implementing innovative business practices that align with social responsibility and environmental protection standards.

1.1.2 Formation and development of "Green Banking"

Regarding the provision of green banking and financial services, Kaeufer

(2010) made an observation A 5-level green banking model was additionally presented at the same time by Kaeufer (2010), and it includes the following:

- Level 1: Engaging in side activities, such as sponsoring "green" events and taking part in community events;

- Level 2: Distinguishing project development and business activities, wherein the bank creates distinct green products and services (only a small portion) to add to the list of banking conventional products;

Level 3 represents systematic business operations in which most of the bank's methods and products adhere to the "green" concept The bank's organizational structure is designed to bolster "green" initiatives across four key areas: personnel, procedures, principles, and objectives.

- Level 4: To achieve sustainability of social, environmental, and financial considerations, green banking activities are expanded into networks, partnerships,

11 community dialogues, and the entire ecosystem rather than being limited to single operations;

Level 5 represents a proactive approach to ecosystem balancing in green banking, where activities are conducted consciously rather than merely in response to external changes, as seen in Level 4 While Level 4 focuses on adapting to strategic objectives, Level 5 emphasizes the importance of meeting social and environmental requirements for sustainable development This proactive stance not only enhances the bank's long-term business strategy but also creates a positive ripple effect across various economic sectors within the green growth model.

1.1.3 The Role of "Green Banking"

While banks themselves do not significantly emit greenhouse gases through their core operations, they contribute indirectly to climate change through their investment and lending activities As noted by Alastair (2021), asset managers and the loan portfolios of banks are major contributors to emissions, with the greenhouse gases associated with these financial activities averaging over 700 times higher than the banks' direct emissions Consequently, the concept of "Green Banking" has become crucial in promoting sustainable development globally.

Risk mitigation is crucial for banks, as Shalu Katyal and Shafali Nagpal (2014) highlight the potential consequences of neglecting environmental standards Failure to operate responsibly can lead to credit, legal, and reputational risks Indirect credit risk arises when banks lend to businesses affected by stringent environmental regulations, which may drive some to insolvency due to compliance costs Additionally, lending to real estate companies with devalued properties due to environmental issues poses significant credit risks Non-compliance with environmental standards can also result in legal challenges, particularly when banks attempt to seize polluted assets as collateral, jeopardizing their ability to recover loans and diminishing the value of such collateral.

Engaging in environmentally harmful practices can damage a bank's reputation, while implementing "Green banking" initiatives can enhance its brand image By prioritizing sustainability, banks can differentiate themselves from competitors and appeal to clients, partners, and organizations that value environmental responsibility.

The banking industry has seen a significant increase in service income, primarily driven by the growth of transaction fees and online service transfers, alongside offerings like insurance, credit cards, ATMs, and digital banking Additionally, the shift towards greener banking practices has led to substantial cost savings By embracing technology and replacing traditional services with eco-friendly online options, banks have reduced their investment costs in supplies and paper, while also lowering electricity consumption at branches as more customers opt for online transactions.

Green Banking is emerging as a powerful model for financial institutions, emphasizing human, economic, social, and environmental responsibility This banking approach not only attracts environmentally-conscious businesses and projects but also modernizes banking processes through adaptable, digital technology By focusing on enhancing environmental performance, Green Banking promotes energy savings, reduces carbon emissions, minimizes waste, and lessens negative environmental impacts.

Green Banking focuses on conducting banking operations in a manner that minimizes both internal and external carbon emissions This approach aids businesses in mitigating environmental risks and shielding themselves from external challenges like climate change and natural disasters Consequently, it ensures that economic growth remains resilient against environmental obstacles.

Green banking initiatives not only drive profits but also foster long-term sustainable economic growth and national development These initiatives actively support environmental programs and projects, contributing to a healthier planet and a more resilient economy.

Creating awareness and imparting education: According to Shalu Katyal and

Shafali Nagpal (2014) emphasizes that green banking plays a crucial role in promoting sustainable development through awareness and information dissemination Effective communication is essential for enhancing public consciousness about environmental issues To achieve this, it is vital to identify target audiences and appropriate communication channels The framework of green banking can be divided into two subsystems: internal, which focuses on managers and employees, and external, aimed at clients and the broader community For internal engagement, strategies such as weekly green news updates, educational programs, high-level meetings, and newsletters can be implemented Conversely, external communication can be enhanced through websites, capacity-building initiatives, roadshows, events, benchmarking, and media outreach to effectively connect with clients and the general public.

The banking industry is increasingly aligning with global trends in climate change and sustainable development, as highlighted by Johanan Devanesan (2023) Green banking is emerging as a significant trend within sustainable finance, according to GlobalData Financial institutions are heavily investing in climate-friendly banking practices, green and social bonds, and renewable energy projects, positioning green banking as a crucial driver in the decarbonization efforts essential for environmental preservation.

Overview of Banks’ Environmental Performance

Environmental performance, as described by Shaumya et al (2017), extends beyond corporate environmental protection to include proactive and transparent management aimed at achieving specific objectives in corporate planning It involves setting sustainability goals that address the needs of stakeholders—such as shareholders, employees, and communities—while ensuring compliance with legal regulations Unlike organizational environmental protection, environmental performance focuses on the consistent management of operations to preserve natural resources and enhance corporate productivity over the long term.

Environmental performance can be assessed through various metrics, including the percentage of toxic waste, fines for environmental law violations, adherence to ISO 14001 standards, and overall environmental efficiency scores (Horvathova, 2010) Qi et al (2014) further evaluated environmental performance using emission intensity, highlighting that a firm’s environmental impact can be quantified through ratings, indices, or environmental scores The authors emphasize that the most effective measure of a company's environmental performance is its resource utilization efficiency Additionally, Ditz and Ranganathan (1997) identify four key Environmental Performance Indicators (EPIs) essential for businesses.

(1) material use; (2) energy consumption; (3) non-product output; and (4) pollutant discharges Additionally, a calculation technique known as environmental

Footprints are valuable tools for evaluating the environmental performance of industrial systems from a life cycle perspective, measuring natural resource consumption and human activities that influence sustainable development (Di Xu et al., 2020) According to Xin Zhang et al (2022), environmental performance encompasses the use of eco-friendly materials, pollution reduction, waste elimination at the source, and enhancements in energy efficiency and resource management.

A bank's environmental performance is best assessed through its efficient resource utilization, rather than solely through its operations and outputs This approach emphasizes the importance of minimizing ecological impact by avoiding hazardous materials and enhancing overall efficiency (Tung et al., 2014).

This thesis defines environmental performance as the assessment of a bank's sustainability through specific criteria It encompasses several key aspects: (1) providing green training to employees to enhance energy efficiency, (2) minimizing pollutants, (3) lowering carbon and greenhouse gas emissions from banking operations, and (4) improving the working environment within banks Collectively, these efforts contribute significantly to the long-term development of the country.

1.3.2 Banks’ environmental performance in some countries

The European Central Bank (ECB) has assessed its environmental performance based on criteria such as energy consumption, renewable energy usage, fresh water consumption, waste reduction, and chemical use in cleaning In 2021, significant declines in energy consumption, water use, waste generation, and chemical usage indicated improved environmental performance The ECB's registration with the European Eco-Management and Audit Scheme (EMAS) has facilitated a reduction in its environmental impact, prompting initiatives to minimize travel-related emissions and enhance on-site cycling infrastructure for sustainable commuting Additionally, the ECB is transitioning from natural gas to biogas for heating, aligning with its goal of 100% renewable electricity usage This publication also marks the ECB's commitment to transparency by reporting on its carbon footprint and environmental impacts throughout its value chain (ECB Environmental Statement, 2022).

Canadian banks evaluate their environmental performance primarily through reduced greenhouse gas and carbon emissions from their banking activities According to the latest TCFD study, the National Bank is projected to emit 8,996 tonnes of CO2 in 2022, reflecting a significant 27% reduction compared to previous years.

2019 The Bank has voluntarily adopted a number of indicators and targets to lower its GHG emissions, including operational activities and financing and investment activities

Image 1.2: TD Bank environmental statement 2020

Source: TD Bank environmental statement 2020

Many banks assess their environmental performance by measuring carbon emissions through the Greenhouse Gas Protocol, established in 1998 to manage climate-warming emissions This framework categorizes emissions into three scopes: Scope 1 includes direct emissions from owned or controlled sources; Scope 2 accounts for indirect emissions from the energy purchased and used; and Scope 3 covers emissions linked to the company's value chain, which are not directly produced by the company or its controlled assets.

CIBC's Climate Report for 2022 reveals the bank's commitment to reducing its absolute Scope 1 and 2 GHG emissions in Canada and the U.S by 30% by 2028, with a notable 22% reduction already achieved The bank aims for carbon neutrality in its global operations and plans to source 100% of its electricity from renewable sources by 2024 to offset unavoidable emissions In 2022, CIBC utilized 54,935 and 12,801 megawatt hours of renewable energy credits from Canada and the U.S., respectively, offsetting nearly 35% of its power usage and contributing 45% towards its carbon neutrality goal Additionally, CIBC is investing $9 million in energy initiatives as part of its sustainability strategy.

20 optimisation programmes across Canada as part of its ongoing commitment to implementing operational emissions abatement techniques to increase energy efficiency and lower energy usage in the facilities occupied

Image 1.3: CIBC Environmental performance in 2022

DBS Bank employs the GHG Protocol to evaluate its environmental performance, closely monitoring emissions across various scopes as part of its assessment criteria The bank actively implements solutions to reduce emissions, including sourcing data to quantify greenhouse gas values from direct energy purchases Notably, DBS Bank Taiwan achieved an 82% reduction in plastic usage and decreased its carbon footprint by 10 grams per card by introducing bio-sourced, corn-based credit cards in July 2020.

Image 1.4: DBS Bank annual GHG Emissions by scope

In conclusion, the environmental performance assessment of banks currently prioritizes carbon and greenhouse gas emissions, waste reduction, and enhanced recycling efforts This study utilized established criteria and evaluation methodologies, previously applied to assess environmental performance, to evaluate Vietnamese commercial banks The research was informed by earlier studies and the existing status of environmental performance assessments in various representative banks globally.

Relationship between “Green Banking” Practices and Bank’s Environmental

The banking sector has seen a significant increase in its carbon footprint due to high energy consumption from lighting, air conditioning, and IT equipment, as well as excessive paper waste and a lack of green buildings (Shaumya, 2017) Despite not being typically viewed as a polluting industry, banks play a crucial role in the economy and society, providing essential funding to various businesses However, as highlighted by Jing Chen et al (2022), they face substantial liability and responsibility, as failure to implement strict environmental protection measures could lead to unintended contributions to environmental contamination.

Green banking practices are increasingly emphasized at both corporate and policy levels to promote environmental sustainability through green project funding Although environmental conservation may not be the primary objective of banks, these initiatives help improve overall climate conditions, enhance quality of life, and optimize the performance of material and energy usage, as well as service and product quality.

The "green" in "Green Banking" refers primarily to banks' environmental responsibility and performance in business operations (Bai, 2011) Rehman et al

Research conducted in 2021 highlighted the positive correlation between "Green Banking" practices and the environmental performance of banks in Pakistan, emphasizing the significance of green investments and policy-related practices Similarly, a study on Sri Lankan banks revealed that "Green Banking" methods greatly enhance environmental performance Kala (2020) identified various green initiatives adopted by banks, including employee environmental training, energy-saving techniques, and green financing, which collectively improve environmental outcomes Additionally, research in Coimbatore, India, confirmed that practices such as environmental training and energy efficiency positively impact banks' environmental performance In contrast, the influence of customer-related practices like green financing was found to be statistically insignificant, while banks' commitment to environmental issues is primarily reflected in their initiatives, including green finance and paperless banking.

Green banking encompasses various eco-friendly initiatives, including the use of 23 panel construction, recycling activities, and maximizing daily light use, while also focusing on reducing reliance on petrol and petroleum products It involves investing in sustainable projects and marketing, budgeting for climate risks, and conducting environmental risk assessments (Miah et al., 2016) Azam (2012) defines green banking as a strategy aimed at halting environmental degradation and enhancing the planet's habitability Furthermore, Bhardwaj and Maholtra (2013) highlight that green banking promotes industrial growth while fostering ecosystem regeneration, emphasizing the importance of considering social and environmental impacts in banking operations.

Green banking practices enhance banks' environmental performance by minimizing negative impacts such as paper usage, energy consumption, fuel use, and emissions, while simultaneously boosting positive contributions through initiatives like employee environmental training, the establishment of green buildings, and the adoption of renewable energy sources like solar and wind According to Lober (1996), effective measures for assessing environmental performance include pollution control, waste minimization, and recycling operations.

Green banking is an environmentally conscious banking practice aimed at enhancing banks' environmental performance by minimizing negative impacts and maximizing positive contributions to the environment This approach involves various initiatives, such as environmental education, the use of energy-efficient equipment, and the construction of sustainable buildings As a result, green banking activities significantly improve banks' overall environmental performance.

RESEARCH METHODOLOGY AND RESULT OF THE IMPACT

Research model

This study identifies key Green Banking Practices—specifically, policies related to banks, employee engagement, customer involvement, and daily operations—as crucial factors influencing the environmental performance of commercial banks in Vietnam The research model focuses on the relationship between banks' environmental performance and their green banking practices, informed by theoretical foundations and a comprehensive literature review.

The model identifies four internal factors that significantly influence the environmental performance of banks in Vietnam: policies related to banking practices, employee engagement and practices, customer-oriented initiatives, and daily operational procedures.

Research by Rehman et al (2021) highlights that banks' environmental performance is significantly enhanced by their policy-related practices This finding is supported by Risal and Joshi (2018) as well as Shaumya and Arulrajah (2017), who also emphasize the positive impact of banking policies on environmental outcomes.

A bank with a strong corporate strategy focused on environmental protection will train its employees and managers to foster awareness of environmental issues and encourage eco-friendly practices This commitment to environmental responsibility not only enhances the bank's performance but also aligns with its regulations Consequently, this research suggests that factors related to "Green Banking" policies are likely to positively influence the bank's environmental performance.

Hypothesis (H1) Banks' policy-related activities have a positive effect on

According to Shaumya and Arulrajah (2017), employee-related practices significantly enhance a bank's overall environmental performance in green banking Additionally, environmental training, while having a minor positive impact, contributes to this performance (Risal and Joshi, 2018) This research posits that human resources play a crucial role in formulating and implementing green banking strategies, suggesting that employee engagement will determine the effectiveness of environmental performance in commercial banks in Vietnam.

Hypothesis (H2) Employee-related activities have positive effects on

According to Shaumya and Arulrajah (2017), customer-related practices do not significantly impact a bank's environmental performance However, services such as mobile banking, internet payments (E-payments), ATMs, and POS devices help reduce paper usage and carbon emissions Additionally, priority lending and financing for environmentally friendly projects encourage companies to enhance their environmental protection initiatives Zhang et al (2022) further emphasize that sources of green financing positively influence banks’ environmental performance.

A study by Rehman et al (2021) revealed that green banking practices significantly influence banks' environmental performance through green funding, particularly in emerging economies Additionally, Kala (2020) emphasized that investments in customers' green projects substantially enhance banks' environmental outcomes Thus, this research posits that customer-related practices positively affect banks' environmental performance.

Hypothesis (H3) Customer-related activities have a positive effect on

Daily operation-related practices in banking promote environmentally friendly actions and highlight the role of technology in internal processes Research by Rehman et al (2021) indicates that these green banking practices significantly enhance the industry's environmental performance Similarly, Shaumya and Arulrajah (2017) found that daily operational practices positively and significantly influence a bank's environmental performance Therefore, it can be concluded that factors associated with daily operation practices are likely to positively impact a bank's environmental performance.

Hypothesis (H4) Daily operational activities have a positive effect on

Hypothesis

Thus, the following research hypotheses are provided in view of the theoretical background and review of the previous literature:

Hypothesis (H1) Banks' policy-related activities have a positive effect on Vietnam banks' environmental performance

Hypothesis (H2) Employee-related activities have positive effects on Vietnamese banks' environmental performance

Hypothesis (H3) Customer-related activities have a positive effect on Vietnam banks' environmental performance

Hypothesis (H4) Daily operational activities have a positive effect on Vietnam banks' environmental performance.

Research methods

Primary as well as secondary data were used in this research

To gather primary data, a survey questionnaire was created specifically for officials and employees at bank branches This paper survey was distributed directly to staff in Hanoi's bank branches Additionally, online surveys were designed using Google Forms and sent to commercial bank employees through various platforms, including email, Zalo, Messenger, and fanpages Following the data collection process, SPSS 22.0 was utilized for data analysis.

Secondary data serves as a valuable information source, integrating insights from relevant ministries, departments, the State Bank of Vietnam (SBV), businesses, and both international and domestic commercial banks This research also utilizes verified information from reputable websites regarding current laws and regulations related to "Green Banking." Additionally, comprehensive literature on sustainable development supports the findings.

"Banks’ Environmental Performance" documents on how to analyse and assess data; and other resources linked to the research topic are also cited in the study

The survey was designed as follows:

The preliminary investigation design involved consulting with experts to enhance the survey's accuracy and clarity Following this consultation, the study made necessary adjustments to the questionnaire to ensure its effectiveness.

The research team developed a refined questionnaire consisting of 17 questions, following edits made from the preliminary survey This questionnaire is structured into three main sections.

● Part 1: General information (including demographic-related questions)

Part 2 of the study focuses on evaluating "Green Banking" activities and the influencing factors at commercial banks in Vietnam This evaluation is conducted using a 5-point Likert scale, where respondents indicate their level of agreement ranging from 1 (Completely disagree) to 5 (Totally agree).

● Part 3: Assessment questions about Banks' Environmental Performance in Vietnam with the form of choosing the level of agreement… according to the

5 level Likert scale in which: 1 - Completely disagree and 5 - Totally agree Investigation period: April 2023

Scale constructing: The specific scale observation variables are used to build the scale (Appendix 2)

Sample size: 385 people According to Yamane Taro (1967), the formula using for sample size which determined in this research as the population was unknown is:

● n: sample size to be determined

● Z: The 95% confidence interval used corresponds to Z = 1.96

● p: choose p = 0.5 so that the product p(1-p) is the largest, this ensures safety for the sample n estimates

● e: allowable error Usually, the three commonly used error rates are: ±01 (1%), ±0.05 (5%), ±0.1 (10%), of which the most common is ±0.05

● From there, the result of the equation equal 385 people

2.3.4.1 Evaluation of Cronbach's Alpha coefficient

The reliability of a scale is evaluated using the internal consistency method, specifically through Cronbach's Alpha coefficient, which ranges from 0 to 1 A higher Cronbach's Alpha indicates greater reliability; however, values exceeding 0.95 may suggest overlapping variables within the scale A scale is deemed effective when the Cronbach's Alpha falls between 0.8 and 1, while coefficients between 0.7 and 0.8 indicate a good scale, and those above 0.6 signify an acceptable level of reliability.

According to Jum Nunnally, a measurement variable is deemed satisfactory when the Corrected Item-Total Correlation coefficient is equal to or greater than 0.3 (Nunnally, 1978).

29 this total variable is less than 0.3, the research team will remove the variable to increase the reliability of the scale

Following the assessment of reliability using Cronbach's Alpha coefficient, the research team proceeded to employ exploratory factor analysis (EFA) to evaluate both the convergence and discriminant validity of the scale.

Exploratory Factor Analysis (EFA) is a multivariate technique that aims to reduce the number of variables by identifying significant factors based on their correlations The EFA process utilized the Principal Components method for extraction, the Varimax method for rotation, and a selection criterion of values greater than or equal to 0.5, as outlined by Hair & Ctg (1998).

Factor loading is a crucial indicator in exploratory factor analysis (EFA), with a minimum value of 0.5 required for observed variables to be deemed statistically significant Variables falling below this threshold will be excluded from the analysis Additionally, the KMO and Bartlett test assesses the correlation among variables and the suitability of the factor analysis model, with values between 0.5 and 1 indicating appropriateness (Hair et al., 2006) A statistically significant result (Sig ≤ 0.05) confirms that the observed variables are correlated within the population (Hair, Anderson, Tatham, and William, 2006).

To assess the model's suitability, the research team employed the ANOVA (analysis of variance) method A significance level (Sig) of 0.05 or lower indicates that the model is appropriate, whereas a Sig value above 0.05 suggests that the model is unsuitable and requires reevaluation.

To accurately assess the relationship between independent and dependent variables, the research employed regression analysis As noted by Hoang Trong and Mong Ngoc (2005), this method facilitates the identification of significant patterns and correlations within the data.

"which variable plays a more important role in predicting the theoretical value of Y"

This study focuses on analyzing a multivariable linear regression model, utilizing evaluation metrics such as R², which indicates the percentage of variation in the dependent variable explained by the independent variable Additionally, the F statistic serves as a measure of the overall significance of the regression model (Dinh Cong Khai, 2011).

Green Banking activities and bank's environmental performance in Vietnam 30 1 Basis implementation of "Green Banking" practices in Vietnam commercial

2.4.1 Basis implementation of "Green Banking" practices in Vietnam commercial banks

The Government of Vietnam recognizes climate change as a critical global issue impacting sustainable development and prioritizes participation in international treaties addressing this challenge Vietnam has signed key agreements, including the UNFCCC in 1992, the Kyoto Protocol in 1998, and the Paris Agreement in 2016 At the COP26 Conference, the country reaffirmed its commitment to combat climate change In alignment with these international commitments, Vietnam has established a Climate Change Response Program, integrating climate considerations into 90% of its long-term socio-economic development plans The 2022 Decision on the "National Strategy on Climate Change for the Period to 2050" aims to enhance adaptive capacity, reduce vulnerability, and achieve net-zero greenhouse gas emissions by 2050.

The banking sector plays a crucial role in financing the economy and is increasingly focused on "greening" capital flows to support sustainable growth in response to climate change Since 2015, with the support of the IFC, the State Bank of Vietnam (SBV) has issued several guidelines to steer banking activities towards environmental sustainability, aiming to limit funding for projects that could harm the environment Notably, Directive No 03/CT-NHNN emphasizes the promotion of green credit growth while managing environmental and social risks in credit extension activities.

Since the implementation of the National Action Plan on green growth in 2015, the banking sector's credit extension activities must prioritize environmental protection, enhance the efficiency of natural resource and energy use, improve environmental quality, safeguard human health, and ensure sustainable development.

The Governor of the State Bank has introduced the Banking Sector Action Plan to implement the National Strategy on Green Growth through 2020, as outlined in Decision No 1552/QD-NHNN To further support green credit initiatives, the Governor issued Decision No 813/QD-NHNN, promoting a loan program aimed at advancing high-tech applications in agriculture and clean agriculture, in line with Resolution No 30/NQ-CP from March 7, 2017 Additionally, the State Bank has released a Manual for environmental and social risk management, serving as a valuable resource for credit institutions across 15 economic sectors.

The State Bank of Vietnam (SBV) has implemented significant initiatives for sustainable finance, including Decision No 1604/QD-NHNN 2018, which outlines the Green Banking Development Strategies, and Decision No 34/QD-NHNN 2019, focusing on the Banking Sector's Action Program to support the country's green growth strategy The aim is to achieve substantial progress by 2025.

(i) 100% of construction banks have internal regulations on environmental and social risk management in credit granting activities;

All banks conducting environmental and social risk assessments in their credit granting processes implement environmental standards for financed projects, integrating these standards with environmental risk evaluations as a key component of their overall credit risk assessments.

(iii) At least 10-12 banks have a unit/department in charge of environmental and social risk management;

(iv) 60% of banks have access to green capital and provide loans for green credit projects

The Governor of the State Bank issued Circular No 17/2022/TT-NHNN, which outlines the guidelines for credit institutions and foreign bank branches to manage environmental risks in their credit extension activities This circular mandates that credit institutions assess environmental risks associated with investment projects to identify potential credit risks and establish conditions for credit approval In alignment with the Prime Minister's directives, the State Bank has engaged in discussions and collaborations with international partners to enhance these practices.

Thirty-two financial institutions, including the World Bank (WB), Asian Development Bank (ADB), and French Development Agency (AFD), are being evaluated for their capacity to mobilize resources for green and sustainable development This assessment aims to explore and propose effective coordination and implementation mechanisms that align with emerging trends and current challenges.

The State Bank and the broader banking system in Vietnam are actively enhancing and implementing various credit support policies to address the adverse effects of climate change These efforts significantly improve the effectiveness of domestic climate change response strategies while aligning with international commitments.

2.4.2 Actual implementation of "Green Banking" practices in Vietnam commercial banks

According to the State Bank of Vietnam's survey data; Just 19 out of 35 banks in our nation have created plans to control environmental and social risks, 10 out of

Thirty-five banks have developed specialized credit products and banking services tailored for the green sector, focusing on offering mid- to long-term loans with competitive interest rates to support environmentally friendly projects.

Relating to product activities - green consumers

As of December 2021, approximately 25 commercial banks in Vietnam, including Sacombank, BIDV, Vietinbank, and Vietcombank, are actively implementing green credit packages Statistics indicate that around 24% of green projects are assessed and financed by these banks, with 50% having established environmental and social risk management processes in their credit granting procedures Furthermore, 68% of these banks have outlined plans to expand their green credit activities in the short to medium term.

In the period 2017-2021, green credit balance has an average growth rate of more than 25% per year By June 30, 2022, the credit balance for green projects

As of 2023, outstanding loans for environmental and social risk assessments reached over 2,283 trillion VND, representing nearly 20% of the total loans in the economy, with a steady growth trend and over 1.1 million loans issued Notably, loans focused on renewable and clean energy accounted for 4.1% of the total outstanding loans, amounting to more than 474,000 billion VND, which reflects a 7.08% increase compared to 2021.

Figure 2.1: Green credit structure by sector in the first 6 months of 2021

Many credit institutions are collaborating with international financial organizations, such as the IFC, to enhance their internal regulations for environmental risk management and establish green credit policies Techcombank adopts IFC's environmental and social standards, while Sacombank develops its own management policy inspired by these standards In contrast to Sacombank, Techcombank actively engages in green credit initiatives through partnerships with international entities Notably, Techcombank has entered into a credit cooperation agreement with the IFC to support clean production and energy-saving projects for small and medium enterprises in Vietnam, enabling businesses to upgrade their technology and systems for improved energy efficiency, production expansion, and cost reduction.

Businesses are evaluated by IFC technical experts to enhance energy efficiency and reduce gas emissions and waste, with guidance on upgrading machinery and consulting suitable equipment suppliers Additionally, Techcombank, ACB, and VIB support financial assessments and offer credit through the Green Credit Trust Fund established by the Swiss Federal Economic Agency (SECO).

Notable green credit programs in Vietnam include the low-carbon transformation project funded by the Danish Government under the Green Investment Support Program (GIF), implemented by BIDV and ANZ Additionally, major banks such as Vietcombank, BIDV, VietinBank, SHB, and HDBank offer loan products for renewable energy development projects, supported by World Bank capital SHB, alongside BIDV, TPBank, VietinBank, Vietcombank, ACB, and Techcombank, provides energy-efficient project lending through the World Bank's Green Climate Fund VPBank offers green building loan products financed by the IFC, while Vietcombank facilitates on-lending for renewable energy projects through JBIC loans As of December 2021, BIDV has approved nine projects, including two operational wind power projects in Quang Tri and Ninh Thuan, and offers competitive loan interest rates of 5-5.5% per year for USD loans and 10% per year for VND loans.

The effect of "Green Banking" Practices on environmental performance in

To assess the implementation of "Green Banking" practices and their impact on environmental performance in Vietnamese commercial banks, a survey consisting of 17 questions was conducted A total of 400 questionnaires were distributed, with 311 completed offline and 89 online After eliminating 15 invalid responses due to inconsistencies, the final sample comprised 385 valid responses, representing 100% of the collected data The characteristics of the study sample are detailed in the accompanying tables.

Table 2.2 General information of survey participants

Source: Results of the research's data analysis

The survey included 385 participants, revealing a nearly even gender distribution with 195 male respondents (50.6%) and 190 female respondents (49.4%) Most participants, 70.6% (272 individuals), were aged between 22 and 35, while 24.9% (96 individuals) were aged 35 to 45, and only a small number were 45 years or older In terms of educational qualifications, a significant majority, 79.7% (307 individuals), held a Bachelor's degree, while 20.3% had attained a Postgraduate degree.

Table 2.3 Selected survey respondents' information

Source: Results of the research's data analysis

The survey included 385 participants, primarily consisting of officers and employees in key roles such as Bank Teller, Relationship Manager, and Credit Officer, who together represented 69.1% of the respondents, totaling 266 individuals Additionally, 10.4% of the participants were from positions like Risk Management Officer and Customer Service Officer, while administrative, operational staff, and interns made up 10.1% A significant portion of the respondents hailed from four state-owned banks—Vietcombank, Vietinbank, and BIDV—each contributing over 15% to the survey, alongside participants from various joint-stock banks.

51 commercial banks such as Techcombank (10.1%), MBBank (14.9%), VPBank, VIB and other joint stock commercial banks

The majority of respondents have less than 5 years of work experience, representing 70.6% of the total, while those with 5 to 10 years of experience make up 24.7% Additionally, there are 18 individuals with over 10 years of experience.

With a decade of experience, 4.7% of the sample size demonstrates significant familiarity with 'Green Banking.' An impressive 99.2% of respondents are aware of 'Green Banking' initiatives, while 99.5% recognize the activities associated with it Furthermore, 93.5% of participants, totaling 360 individuals, understand the impact of 'Green Banking' on the environment and economy.

Therefore, the respondents’ following evaluations are considered acceptable:

Table 2.4 Green Banking evaluation based on respondents’ perspectives

Enhance the bank's brand image

Improve the bank's environmental performance

Modernize processes with a built-in, easily adaptable, digital-based system

Expand the list of potential customers

Enhancing the role of the

Bank in the process of sustainable development

Source: Results of the research's data analysis

The data indicates that 57.4% of respondents believe their bank is currently at level 3 in implementing "Green Banking" activities, aligning with findings from Tran Thi Thanh Tu's previous study The benefits of "Green Banking" from bankers' perspectives primarily include enhancing the bank's brand image at 35.5%, followed by cost efficiency, modernizing processes with adaptable digital systems, and improving environmental performance, each representing over 10% Other benefits are relatively minor, accounting for approximately 6%.

Vietnamese commercial banks primarily adopt "Green Banking" initiatives to enhance their brand image and attract customers, rather than focusing on improving environmental performance The implementation of environmentally friendly products and technology is mainly driven by cost management and a desire to keep pace with trends Furthermore, there is a lack of a specific and clear assessment system for environmental performance among bank officials and employees, resulting in neutral and subjective evaluation outcomes.

2.5.2 Suitability accreditation and reliability of the factors

2.5.2.1 Evaluation of Cronbach's Alpha reliability coefficient

The variable PP7 has a Cronbach's Alpha if Item Deleted value of 0.826, exceeding the overall scale's Cronbach's Alpha of 0.789 Removing PP7 would result in an improved Cronbach's Alpha for the scale Additionally, the Corrected Item-Total Correlation for PP7 is below 0.3, indicating its low contribution to the scale's reliability Therefore, eliminating the PP7 variable is recommended for enhanced scale performance.

The analysis of 27 observed variables across four factors and one independent variable reveals that all meet the criteria for reliability, with a Corrected Item-Total Correlation exceeding 0.3 and a Cronbach's Alpha greater than 0.6 Consequently, these variables are deemed reliable and suitable for further analytical procedures.

Table 2.5 The results of Cronbach's Alpha test

Scale Mean if Item Deleted

Scale Variance if Item Deleted

Cronbach's Alpha if Item Deleted

Banks' Policy related practice factor after removing PP7 (PP):

Employee-related practice factor group (EP): Cronbach's Alpha = 817

Customer-related practice factor (CP): Cronbach's Alpha = 814

Daily Operation related practice factor (DO): Cronbach's Alpha = 813

Banks’ Environmental Performance (BEP): Cronbach's Alpha = 820

Source: Results of the research's data analysis

After excluding variable PP7, the exploratory factor analysis (EFA) revealed four factors with an Eigenvalue greater than 1 for the five independent and dependent variables The KMO-Meyer measure was 0.875, indicating a satisfactory level of sampling adequacy (above 0.6), and the total variance extracted per variable was also acceptable However, the variable CP6 in the Rotated Component Matrix showed the highest load factor of 0.490, which is below the 0.5 threshold, leading to its removal and a subsequent rerun of the model (Appendix 5).

Table 2.6 Result of KMO and Bartlett's Test after rerunning

Kaiser-Meyer-Olkin Measure of Sampling Adequacy .871

Bartlett's Test of Sphericity Approx Chi-Square 2767.269 df 210

Source: Results of the research's data analysis

Following the removal of PP7 from the analytical model, variable CP6 was also eliminated due to an unsuitable load factor This adjustment led to the extraction of EFA analysis results at Eigenvalue.

The KMO-Meyer value of 0.871, exceeding the threshold of 0.6, indicates satisfactory total variance extraction All observed variables align correctly with their original factors, demonstrating acceptable loading coefficients for factor analysis Additionally, Bartlett's test result of 0.871, with a significance level of 0.000 (less than 0.5), confirms that the observed variables are not correlated with one another, validating the appropriateness of the data for factor analysis (Appendix 5).

Table 2.7 Result of variance extracted in factor analysis after rerunning

Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings Total

Extraction Method: Principal Component Analysis

Source: Results of the research's data analysis

The analysis revealed four Eigenvalues greater than 1, confirming the creation of four distinct factor groups, which aligns perfectly with the original four-factor model These groups collectively account for 56.627% of the variance in the 23 observed variables The Rotated Component Matrix indicates the maximum factor weights for each variable, and since all observed variables exhibit factor loadings exceeding 0.5, they are retained in the model Following rigorous checks for reliability and validity, all selected scales were re-evaluated to meet the necessary standards for subsequent analyses (Appendix 5).

Table 2.8 KMO and Bartlett's Test of dependent variable

Kaiser-Meyer-Olkin Measure of Sampling

Source: Results of the research's data analysis

The KMO scale yielded a value of 0.839, indicating that factor analysis is suitable for the data The exploratory factor analysis (EFA) revealed that one observed variable was extracted with an Eigenvalue greater than 1, and the total variance extracted per variable was satisfactory All observed variables aligned correctly with the original factor, meeting the criteria for factor analysis, as evidenced by the loading coefficients Bartlett's Test showed a significance level of 0.000 (p < 0.05), confirming that the observed variables are correlated Additionally, the rotation matrix indicated that only one factor was extracted from the observed variables in the EFA analysis, further supporting the findings.

> 1 Thus, only 1 dependent variable is created, completely match the original model The cumulative explained variation is 58.378%, indicating that the above factors

The analysis reveals that 59 observed variables account for 58.378% of the variation, with an eigenvalue exceeding 1 at 2.919 All loading coefficients for the observed variables are greater than 0.5, indicating their significant contribution to the model After verifying reliability and value, the selected BEP scale underwent re-testing to meet the necessary reliability and value criteria for subsequent analysis (see Appendix 5).

DISCUSSION OF THE RESULT AND RECOMMENDATIONS

Discussion of the results

The regression model results indicate that the research hypotheses regarding the impact of "Green Banking" activities on the environmental performance of Vietnamese commercial banks are largely validated Notably, all independent variable coefficients are positive and statistically significant, confirming the anticipated positive influence of these factors.

Four research hypotheses have been validated, demonstrating that Banks' Policy Related Practices, Employee Related Practices, Daily Operation Related Practices, and Customer Related Practices significantly enhance the environmental performance of banks in Vietnam.

The impact levels of the 4 factors are ranked in descending order as (1) Banks' Policy related practice (β standardized = 0.583), (2) Employee-related practice (β standardized = 0.212), (3) Daily Operation related practice (β standardized = 0.101),

The regression model indicates that customer-related practices have a standardized β of 0.094, highlighting that the environmental performance of commercial banks in Vietnam is most significantly influenced by the Strategy criterion This underscores the importance of enhancing "Green Banking" initiatives through effective policies, employee engagement, customer involvement, and daily operations to boost banks' environmental performance These findings align with previous research, notably the studies by Zhang et al (2022), Rehman et al (2021), and Shaumya and Arulrajah (2017), which examine the determinants of banks' environmental performance.

The Policy-related Practice factor significantly influences banks' environmental performance, demonstrating a strong positive impact according to modeling results The quantitative analysis reveals that this factor exhibits high reliability, with a score of 0.789, surpassing the acceptable threshold of 0.6 Furthermore, Policy-related Practice accounts for 58.3% of the variance in banks' environmental performance, underscoring its critical role in enhancing sustainability efforts within the banking sector.

The success of the 'Green Banking' initiative is heavily influenced by the strategic framework established by banks, which includes specific guiding documents that articulate their commitment to implementing sustainable banking practices Research by Rehman et al (2021), Risal and Joshi (2018), and Shaumya and Arulrajah highlights the importance of these strategies in promoting effective "Green Banking" activities.

(2017) are comparable to this one, which all agree that Policy-related Practices have a positive effect on banks' environmental performance

Employee-related practices significantly influence the environmental performance of commercial banks in Vietnam, accounting for 21.2% of this impact With a high Cronbach's Alpha score of 0.817 for the Employee-related practice scale, it is evident that these practices are crucial for implementing 'Green Banking.' This study aligns with findings from Risal and Joshi (2018) and Shumya and Arulrajah (2017), which emphasize the positive effects of employee involvement on environmental performance Thus, enhancing employee-related practices is essential for improving the environmental performance of Vietnamese commercial banks and advancing their 'Green Banking' initiatives.

Customer-related practices significantly enhance banks' environmental performance, contributing 9.4% to their overall effectiveness The study demonstrates a strong reliability with a Cronbach's Alpha of 0.814 These findings align with previous research by Zhang et al (2022), Rehman et al (2021), and Kala, highlighting the importance of customer engagement in promoting sustainable banking practices.

Research by various authors in 2020 indicates that customer-related practices significantly enhance banks' environmental performance However, this finding contrasts with the earlier study by Shaumya and Arulrajah in 2017, which presented different conclusions.

A study revealed that customer-related practices did not significantly influence a bank's environmental performance, leading the author to exclude this variable from the model This decision was based on its low standardized beta value of 0.185, which was the lowest among the independent variables analyzed.

Daily Operation-related Practice on banks’ environmental performance:

The Daily Operation-related Practice factor significantly influences banks' environmental performance, demonstrating a positive effect with a notable contribution of 10.1% With a high Cronbach's Alpha score of 0.813, this factor is essential for enhancing banks' sustainability efforts These findings align with the research conducted by Shaumya and Arulrajah, underscoring the importance of operational practices in improving environmental outcomes in the banking sector.

Research by Rehman et al (2021) and others indicates that the effectiveness of banks' environmental initiatives is significantly influenced by their daily operational practices Therefore, investing in daily operational strategies is crucial, as it directly supports the successful implementation of 'Green Banking' initiatives.

The findings in Table 3.1 indicate that all variables influencing banks' environmental performance are significant and positively correlated This outcome is expected, as effective implementation of these initiatives relies on a structured framework, primarily shaped by the bank's policies and the efforts of its employees Furthermore, customer engagement and daily operations serve as both internal and external factors that align with the bank's policies and staff actions Consequently, these interconnected factors contribute to consistent results that support the initial hypothesis.

Table 3.1: Results Comparison of the study

Banks' policy-related activities have a positive effect on Vietnam banks' environmental performance

Banks' policy-related activities have a positive effect on Vietnam banks' environmental performance

Employee-related activities have positive effects on Vietnamese banks' environmental performance

Employee-related activities have positive effects on Vietnamese banks' environmental performance

Customer-related activities have a positive effect on Vietnam banks' environmental performance

Customer-related activities have a positive effect on Vietnam banks' environmental performance

Daily operational activities have a positive effect on Vietnam banks' environmental performance

Daily operational activities have a positive effect on Vietnam banks' environmental performance

The output of the impact model identifies four key research factors that positively influence the environmental performance of commercial banks in Vietnam: Banks' Policy related practices, Employee-related practices, Daily Operation related practices, and Customer-related practices These factors are ranked in descending order of impact as follows: (1) Banks' Policy related practices, (2) Employee-related practices, (3) Daily Operation related practices, and (4) Customer-related practices This ranking serves as a foundation for the author's forthcoming recommendations.

Recommendations for commercial banks in Vietnam

Commercial banks must collaborate with the State Bank's functional units to develop a comprehensive data system that tracks compliance and violations of environmental regulations by enterprises This system will enable banks to assess environmental risks associated with borrowers, thereby reducing loans for environmentally harmful activities Additionally, commercial banks should implement policies from the State Bank and Government to actively support green economic development in Vietnam.

Commercial banks must develop clear and specific solutions for implementing 'Green Banking,' focusing on long-term goals and a comprehensive vision This involves outlining detailed orientations and a step-by-step approach to achieve specific objectives aligned with this new banking model It is essential for banks to establish regulations for procurement activities that adhere to green criteria, in accordance with the Law on Green Procurement, integrating environmental protection factors To effectively realize strategic goals, the Vietnamese commercial banking system needs to stabilize and grow investment capital for green projects Additionally, banks should collaborate with leadership to regularly educate staff on E-Banking and conduct training programs to enhance awareness of environmental protection Leaders equipped with a clear vision and understanding of green and sustainable development can effectively implement strategies for 'Green Banking.'

Strengthening and improving the environmental and social risk assessment system is essential for Vietnamese commercial banks This approach goes beyond merely restricting projects with harmful effects; it involves conducting thorough analyses of environmental requirements to prevent adverse impacts on ecosystems and ensuring social security considerations are addressed prior to credit approval By focusing on these strategies, banks can enhance the positive outcomes of their operations.

It is essential for stakeholders to clearly outline their roles in ensuring that projects adhere to environmental protection standards Promoting clean technologies and renewable energy sources, such as bioenergy, thermal power, and solar energy, plays a crucial role in meeting the objectives of green credit services and fostering environmental sustainability.

To meet user demands and stay competitive, commercial banks must focus on attracting high-quality talent with expertise in modern information technology and green banking Regular professional training programs are essential to enhance operational quality, reduce transaction errors and risks, and foster a culture of responsibility and professionalism among staff.

The effectiveness of implementing a green banking system largely depends on the staff's capabilities, making it essential to develop human resources in this area Training employees in energy and environmental assessments is crucial for evaluating loan applications and ensuring that businesses meet "green" criteria Commercial banks should prioritize enhancing their workforce's professional knowledge and ethical standards, which will improve risk management and build trust with investors and clients Additionally, senior leadership must receive training to elevate their management skills and align with the overarching goals of promoting green and sustainable development.

Banks must enhance their human resource training to effectively address the realities of financial and banking technology, particularly in the context of environmental and social risk management By collaborating with international development financial institutions experienced in sustainable investment and green credit, banks can develop a knowledgeable team of instructors This initiative will facilitate the organization of training sessions focused on green credit and environmental management, ensuring that staff are well-equipped to navigate these critical areas.

The establishment of a dedicated unit for environmental and social risk management is crucial, following 71 seminars aimed at exchanging experiences This unit will oversee and ensure the effective implementation of green banking and green credit initiatives within the bank.

Investing in employee-related practices is a sustainable strategy that fosters a positive workplace culture, emphasizing the importance of green products and services This approach not only enhances employee satisfaction but also aligns the organization with environmentally friendly initiatives, ultimately driving long-term success.

Commercial banks in Vietnam should prioritize the development of capital allocation and financing programs specifically for green and environmentally friendly projects, utilizing socio-environmental risk assessment criteria It is essential to evaluate projects based on these criteria, as banks play a crucial role in directing investment capital towards sustainable initiatives For both individuals and businesses, integrating environmental considerations into financial decisions must be a top priority to foster a transition to more eco-friendly practices.

To transform into green banks, commercial banks must prioritize environmentally friendly products and services by enhancing investment policies and preparing reports aligned with "green" standards, verified by government agencies This approach will not only raise consumer awareness about environmental pollution but also encourage responsibility for environmental protection Additionally, banks should innovate modern banking services to minimize cash circulation and support the growth of green products while improving their financial capacity through resource mobilization from international financial institutions and foreign donors.

To maximize the benefits of banking products and services, the commercial banking sector must foster a culture of environmental awareness among customers, encouraging the responsible use of financial services beyond mere trends Most banks maintain average withdrawal fees, which helps customers become accustomed to cash transactions, promoting a seamless integration of banking practices into their daily lives.

72 while commercial banks should develop an online transaction system to save costs on printing paper, and protect the environment

To enhance green credit activities, banks should develop interest rate policies that prioritize support for environmentally friendly investment projects Additionally, it is essential for banks to establish a comprehensive environmental and social risk management system, which includes guidelines for assessing environmental and social risks and integrates environmental risk assessments into the overall credit risk evaluation process.

Technology is crucial for the development of digital banks and enhancing bank management capabilities, making it essential for banks to invest in order to remain competitive While each bank may adopt unique strategies based on their business activities, all must align advanced technology implementation with specific strategies and skilled human resources Commercial banks should focus on improving electronic transactions for customer safety, digitizing credit institutions, and strengthening telecommunications infrastructure to support diverse, eco-friendly services Additionally, banks need to proactively engage in research and mobilize investment in digital technology to stay ahead in the evolving market.

Vietnamese commercial banks must prioritize mobilizing investment capital for modern scientific and technical applications, clearly defining investment goals for high technology in strategic documents while aligning their initiatives with the principles of 'Green Banking.'

Recommendations for the Government

The government must establish a robust legal framework that outlines the environmental and social responsibilities of the banking sector in credit allocation, ensuring that sponsors and lenders are accountable for projects that negatively impact the environment This will help banks recognize their duty to address environmental and social risks in their operations Additionally, the government should enhance support initiatives to encourage commercial banks to provide green credit, facilitating the adoption of 'Green Banking' practices Financial incentives, such as tax breaks and cost support, are essential to promote these green initiatives Furthermore, policies should be developed to foster medium and long-term capital availability, including preferential measures to expedite the establishment of corporate bond markets, reducing reliance on foreign capital Banks can also issue green bonds to fund their own sustainable projects.

To attract foreign investment while prioritizing environmental protection, the government must implement preferential policies that alleviate existing restrictions and barriers, ensuring compliance with international trade laws Additionally, fostering collaboration among large, medium, and small enterprises is essential, as it enables smaller businesses to gain experience, innovate, and integrate into global value chains The government should also develop comprehensive support packages for investors, which include reducing site clearance costs, enhancing infrastructure—particularly for energy projects—and offering other incentives Furthermore, it is crucial to strengthen the decentralized management system from central to local levels to effectively oversee the approval and granting of construction and investment permits, thereby minimizing environmental impacts and enhancing the environmental and social risk management frameworks within Vietnamese commercial banks.

The government prioritizes research and modern technology applications to promote sustainable development, which in turn boosts the demand for green credit loans Additionally, it encourages multinational corporations to invest in innovative technologies like artificial intelligence and cloud computing, paving the way for 'Green Banking' and fostering green growth.

The government should enhance green human resources by collaborating with universities, particularly prominent economic institutions like the Banking Academy and National Economics University, as well as technology schools such as Polytechnic University and National University This partnership should also involve large companies and corporations to establish a training framework that aligns with Vietnam's socio-economic conditions and promotes green growth and sustainable development.

Recommendations for the State Bank of Vietnam

To advance green banking in Vietnam, the State Bank of Vietnam must enhance and refine banking and credit regulations to align with green growth objectives.

The State Bank must establish a green banking development orientation by creating effective mechanisms and policies to support green growth goals It should issue directives to commercial banks in Vietnam to enhance the implementation of 'Green Banking,' thereby improving environmental and social risk management Additionally, the bank should encourage financial institutions to provide credit for environmentally friendly and renewable energy projects, ensuring sustainable investment capital allocation Measures should also be implemented to facilitate financial access for businesses with environmentally aligned policies, ultimately raising societal awareness of environmental issues.

The State Bank of Vietnam (SBV) should collaborate with relevant ministries to establish clear regulations prioritizing specific sectors for credit support while identifying industries that should face lending restrictions This framework will enable commercial banks to effectively assess and approve credit applications Additionally, SBV can promote green banking initiatives by directing credit towards projects that address climate change, fostering investment in sustainable industries, and advancing modern banking services that utilize environmentally friendly technologies to support green growth.

The State Bank of Vietnam (SBV) should issue a circular mandating environmental and social risk assessments for all credit institutions, ensuring the adoption of standardized principles in credit granting and investment activities This will establish a legal framework for promoting green credit initiatives Additionally, it is essential to hold commercial banks accountable for financing projects that negatively impact the environment and society, thereby enhancing the management of environmental and social risks within these institutions Furthermore, implementing policies, recommendations, and incentives for banks that support projects meeting environmental protection criteria will encourage sustainable lending practices.

The State Bank of Vietnam (SBV) should enhance the banking system's capacity to implement "Green Banking" practices by providing training and development for personnel involved in these initiatives This includes establishing clear mechanisms, policies, and programs, as well as promoting green credit products Additionally, it is essential to raise awareness among officials, civil servants, and banking employees about the objectives of the national green growth strategy, emphasizing the importance of efficient energy use, natural resource conservation, and environmental protection in both daily operations and public procurement activities.

Research Summary

Research has been conducted to identify the factors influencing green banking practices in Vietnam, focusing on policies, employee engagement, daily operations, and customer involvement, all of which impact the environmental performance of commercial banks.

The study is conducted in two phases comprising four processes to achieve its objectives Phase 1 summarizes the research, developing models, scales, and hypotheses based on theoretical frameworks and questionnaires In Phase 2, data analysis evaluates these hypotheses through descriptive statistics, Cronbach's Alpha, exploratory factor analysis (EFA), and regression model analysis Key factors influencing banks' environmental performance included in the research model are "Banks' Policy Related Practices" and "Employee Related Practices."

The study investigates "Customer-related practices" and "Daily Operation-related practices" to enhance the accuracy of results It incorporates employee insights on "Green Banking" practices alongside demographic factors such as workplace, position, gender, age, education, and work experience A research model is constructed to develop a scale, integrating observed factors, formulating hypotheses, and examining the scale The findings reveal that all four factors positively influence the environmental performance of commercial banks in Vietnam.

The study conducted a quantitative analysis to assess the current state of 'Green Banking' in Vietnamese commercial banks, identifying both positive and negative influences on their environmental policies The findings confirm the proposed model, highlighting the importance of adopting appropriate operational models that consider environmental factors This approach is essential for banks aiming to achieve green growth and sustainable development by thoroughly examining the relevant factors affecting their environmental performance.

77 affecting environmental performance based on "Green Banking" activities at commercial banks in Vietnam

Based on the research findings, the author suggests several policy implications for authorities and banks to enhance "Green Banking" initiatives The study has developed a research model, established a scale, formulated research hypotheses, and conducted scale testing to identify the key factors influencing these activities.

The environmental performance of commercial banks in Vietnam is crucial for advancing "Green Banking" initiatives This study provides a comprehensive overview of the current state of these activities, enabling banks to develop clear strategies and policies By leveraging these research findings, commercial banks can effectively promote green growth and contribute to sustainable development in the region.

Research limitations and proposals

In Vietnam, the absence of specific regulations and definitions for evaluating green businesses and banks poses challenges for commercial banks in assessing and monitoring environmental performance The lack of a legal framework and established criteria for measuring a bank's environmental impact results in reliance on subjective assessments in this study.

The limited availability of research space poses a significant challenge in studying "Green Banking," as many managers and employees still lack a basic understanding of the concept Additionally, the diverse strategies and implementations across different banks, coupled with the small sample size of the studied banks, hindered a comprehensive assessment of the factors influencing the growth of "Green Banking."

While the research has yielded valuable results, it still faces limitations that require improvement, particularly regarding the quality and quantity of questionnaires The low number of collected surveys and the superficial nature of some responses indicate a need for more in-depth and logically connected answers To enhance data reliability, the research has filtered out unreasonable surveys, focusing on gathering the most accurate information possible.

In order to overcome the above limitations and increase the persuasiveness and objectivity of the research results, the study makes recommendations and directions for further research

Firstly, conduct research in a broader scope, a larger sample size (Not only within the scope of Vietnamese commercial banks but also policy banks, development banks )

Secondly, research on other groups of factors besides “Green Banking” that affect banks' environmental performance

Thirdly, the study assesses the impact of government policies on the development of criteria for evaluating banks' environmental performance

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APPENDICES APPENDIX 1: SUMMARY OF RECENT EMPIRICAL STUDIES Source Variables Methodology Main Findings

 Environmental performance data: primary; sample: 352; analysis: SEM approach

The study revealed that green banking practices significantly enhanced banks' environmental performance and their sources of green financing Additionally, it found that the sources of green financing played a crucial role in influencing the performance of green banks Furthermore, the relationship between green banking practices and environmental performance was mediated by green funding.

 Daily operations- related practic es

 Environmental performance data: primary; sample: 200; analysis: SEM approach

The adoption of green banking practises has a significant impact on its environmental performance in emerging economies This impact is influenced by policy, daily operations, and investments

 Environmental performance data: primary; sample: 143; analysis: multiple regression

The study's findings indicated that green projects, energy- saving techniques, and environmental training had a big impact on the environmental performance of banks

 Environmental performance data: primary; sample: 189; analysis: multiple regression