Greening credit decisions: barriers to ESG integration and a proposed standardized appraisal process in Vietnamese commercial banks

This study analyzes the current state of integrating Environmental, Social, and Governance (ESG) criteria into credit appraisal processes in Vietnamese commercial banks during the period 2021 - 2026. Using a qualitative approach combined with gap analysis and theoretical synthesis, the study clarifies the mechanisms through which ESG risks are transmitted into credit risks via both micro and macro channels. The findings indicate that although the legal framework has been significantly strengthened through Circular No. 17/2022/TT-NHNN and Decision No. 21/2025/QD-TTg, practical implementation capacity still faces three core gaps: (1) information asymmetry and the risk of greenwashing from borrowers; (2) shortages of interdisciplinary human resources; and (3) limitations in quantifying ESG factors into parameters within credit scoring models. Based on these findings, the study proposes a standardized five-step ESG-integrated appraisal process, an internal ESG risk scoring matrix, and policy recommendations for both commercial banks and regulatory authorities.