Abstract
The Environment Fund is a state financial institution and a non-profit organization, operating mainly in concessional loans with low-interest rates for green investment projects, working towards sustainable development. There have been no studies to assess the firms’ ability to access environmental finance from these Environment Funds. This study uses a combination of both qualitative and quantitative methods. We initially identified the determinants of access to green finance and financing constraints that firms face by in-depth interviews with 32 individuals from the six largest Environment Funds in Vietnam and their clients. Secondly, by surveying 213 firms that had loan request from 26 Environment Funds, we investigated the factors affecting access to environmental finance by the Ordered Probit model. The findings show that firm characteristics and environmental project characteristics have a relationship vis-a-vis access to green finance. We did not find evidence that supports state-owned firms experiencing less financing constraints than other types of firms. Collateral requirements, excessive paperwork requirements, and insufficient capital from Environment Funds are the three main obstacles to green financing. Environment Funds should design loan packages that are more diversified and suitable for different types of environmental projects. At the same time, a more relaxed collateral policy should be applied in Environment Funds to enhance firms’ ability to obtain green finance. We suggest that Environment Funds cooperate with commercial banks to provide financial support for the environment to compensate for capital size constraints and asymmetric information.
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Lam Hai Le and Anh Hoang Thi Pham contributed equally to this work.
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Appendices
Appendix 1. In-depth interview questionnaires for credit officers from Environment Funds
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1.
Please tell us which difficulties and obstacles the firms were facing when accessing concessional loans (from the borrower's perspective). What are the specific difficulties? What is the most significant constraint?
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2.
Do you think the firm characteristics, such as firm size, operating time, type of ownership, business lines, geographical location of the firm, etc., impact access to concessional loans? Please explain and clarify.
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3.
Do you think the owner/manager characteristics, such as leadership qualifications, management experience, and environmental sector experience, influence access to concessional loans? Please explain and clarify.
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4.
Do you think the financial status of the firms affects access to concessional loans? If yes, what specific financial criteria affect access to concessional loans?
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5.
Do you think the audited and non-audited financial statements affect access to concessional loans? Please explain and clarify.
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6.
Do you think the business plan of the enterprise affects access to concessional loans? Please explain and clarify.
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7.
Do you think history credit information affects access to concessional loans? Please explain and clarify.
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8.
Do you think the type of loan projects (wastewater treatment, industrial and hazardous solid waste treatment, waste collection vehicles, renewable energy, energy efficiency, environmentally friendly products, etc.) affect access to concessional loans? Do you think project feasibility criteria such as NPV, IRR affect access to concessional loans? Please explain and clarify.
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9.
Do you think the investment legal procedures such as EIA, construction permit, investment policy, etc. affect access to preferential loans? Please explain and clarify.
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10.
Do you think the project's technology affects access to concessional loans? Please explain and clarify.
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11.
Do you think collateral requirements affect access to concessional loans? Please explain and clarify.
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12.
Do you think the enterprise's relationship with the state agency, the Environment Funds, influence access to concessional loans? Please explain and clarify.
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13.
From the lender's side, do you find that the conditions, criteria, and policies make it difficult for firms access to concessional loans? Please explain and clarify.
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14.
From the lender's side, do you find that the loan application, evaluation time, and procedures cause difficulties for firms access to concessional loans? Please explain and clarify.
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15.
From the lender side, do you think the lack of capital causes difficulties for firms access to concessional loans? Please explain and clarify.
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16.
From the lender side, what issues do you think need improvement to accelerate firms access to concessional loans?
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17.
Develop additional questions based on individual interviewees' responses.
Appendix 2. In-depth interview questionnaires for firms that borrowed from Environment Funds
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1.
What are the difficulties and advantages that firms encounter in accessing concessional loans? Difficulties on the business side and from the Environment Fund's requirements?
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2.
Do you think the owner/manager characteristics, such as leadership qualifications, management experience, and environmental sector experience, influence access to concessional loans? Please explain and clarify.
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3.
Do you think that investment legal procedures such as EIA, construction permit, investment policy, etc. may affect access to concessional loans? Please explain and clarify.
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4.
Do you think the project's technology affects access to concessional loans? Please explain and clarify.
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5.
Do you think collateral requirements affect access to concessional loans? Please explain and clarify.
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6.
Do you think the relationship between firms and the Environment Funds, State Agency influences access to concessional loans? Please explain and clarify.
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7.
Do you find that the conditions, criteria, and policies make it difficult for businesses access to concessional loans? Please explain and clarify.
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8.
Do you find that the loan application, review time, and procedures cause difficulties for firm access to concessional loans? Please explain and clarify.
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9.
Do you feel that the lack of capital causes difficulties for firm access to concessional loans? Please explain and clarify.
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10.
From the borrower's side, what do you think needs to improve the firm access to concessional loans?
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11.
Develop additional questions based on individual interviewees' responses.
Appendix 3. The questionnaires for survey with firms that borrowed from Environment Funds
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1.
The firm's age from which it was established is: … (years).
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2.
According to the financial statements on 31st December 2020, the firm's total assets are: … (VND billion).
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3.
The type of ownership of firm according to the government legislation:
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(a)
Joint-stock Enterprise
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(b)
Limited Enterprise
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(c)
State-owned Enterprise
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(d)
Other
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(a)
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4.
The core business of the firm is in the sector:
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(a)
Environmental Sector
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(b)
Other
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(a)
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5.
Does the firm's environmental protection investment project generate revenue directly?
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(a)
Yes. It is a commercial environmental project.
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(b)
No. It is a non-commercial environmental project.
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(a)
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6.
Please judge on a four-point scale (from Major obstacle to No obstacle) on general financing obstacle when your firm access to concessional loans at the Environment Funds:
Major obstacle | Moderate obstacle | Minor obstacle | No obstacle |
☐ | ☐ | ☐ | ☐ |
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7.
Please judge on a four-point scale (from Major obstacle to No obstacle) how problematic are six different financing issues of your business when access concessional loans at the Environment Funds:
No. | Specific access to environmental finance (Financing obstacles) | Rating level | |||
Major obstacle | Moderate obstacle | Minor obstacle | No obstacle | ||
(1) | (2) | (3) | (4) | ||
1 | The level of firm access to information on preferential loans from the Environment Funds | ☐ | ☐ | ☐ | ☐ |
2 | Collateral requirements from the Environment Funds | ☐ | ☐ | ☐ | ☐ |
3 | Environment Funds paperwork/bureaucracy requirements | ☐ | ☐ | ☐ | ☐ |
4 | The long appraisal time (evaluation time) of Environment Funds | ☐ | ☐ | ☐ | ☐ |
5 | The Environment Fund lack of money to lend | ☐ | ☐ | ☐ | ☐ |
6 | The financing support policies/mechanisms of the Environment Funds and Government | ☐ | ☐ | ☐ | ☐ |
Appendix 4. Ordinal Probit model diagnostics by plotting surrogate residuals
Plotting surrogate residuals for general access model
Plotting surrogate residuals for information model
Plotting surrogate residuals for collateral requirements model
Plotting surrogate residuals for paperwork requirements model
Plotting surrogate residuals for time evaluation model
Plotting surrogate residuals for lack of money to lend model
Plotting surrogate residuals for access state policy model
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Le, L.H., Pham, A.T.H. Determinants of environmental financing constraints: a case study from Vietnam. Environ Sci Pollut Res 29, 81234–81255 (2022). https://doi.org/10.1007/s11356-022-21583-2
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DOI: https://doi.org/10.1007/s11356-022-21583-2