Green credit's impact on pollution and economic development: A study from Vietnam

Abstract

Vietnam is actively pursuing sustainable economic development while transitioning to a greener economy, facing challenges in balancing economic growth with environmental sustainability. The evaluation of current sustainable development efforts and the identification of effective green financial tools are critical for Vietnam's progress. This study introduces the Sustainable Economic Development (SED) Index, a comprehensive measure of sustainable economic development quality across Vietnam's 63 provinces from 2015 to 2022. Using a range of analytical techniques, we explore the relationships between green credit, environmental pollution, and sustainable economic development during this period. Our findings indicate rapid growth in sustainable economic development until 2019, followed by a deceleration due to the COVID-19 pandemic and the Ukraine war. Green credit emerges as a pivotal factor in supporting sustainable economic growth, managing climate risks, and mitigating environmental pollution, particularly during times of uncertainty. Additionally, we observe spatial spillover effects, where the benefits of green credit and the challenges of environmental pollution transcend provincial boundaries. The study recommends promoting green credit policies, fostering regional cooperation, and enhancing local competitiveness, digital transformation, and social equality to advance Vietnam's journey toward sustainable economic development.