Title: ASSESSING THE IMPACT OF ESG INTEGRATION ON CREDIT RISK IN VIETNAMESE COMMERCIAL BANKS

Author: Tran Thi Hai Yen

Abstract: This article examines the integration of environmental, social, and governance (ESG) factors into credit risk assessment at commercial banks in Vietnam. It is edited from the original student research report into a condensed journal-style manuscript while preserving the complete research logic: problem statement, literature review, theoretical framework, methodology, empirical results, discussion, implications, conclusion, and references. The empirical analysis uses balanced panel data from 20 Vietnamese commercial banks during 2017–2023, while the policy and practical discussion is extended to the 2020–2025 period because this is when Vietnam accelerated green growth, sustainable finance, and environmental risk management in lending. Credit risk is measured primarily by the non-performing loan (NPL) ratio. Supplementary indicators such as the capital adequacy ratio (CAR), leverage ratio (LEV), liquidity ratio (LIQ), return on assets (ROA), loan-to-deposit ratio (LDR), bank size (SIZE), and GDP growth are used to interpret bank-specific and macroeconomic conditions. The findings indicate that stronger ESG performance is associated with a lower NPL ratio. Among the three pillars, Governance has the strongest negative relationship with credit risk, followed by Environmental, while Social has a weaker but still meaningful effect. The results imply that ESG should not be treated merely as disclosure or corporate social responsibility. It should be embedded in borrower screening, internal credit ratings, risk-based pricing, credit conditions, and post-disbursement monitoring.

Keywords: ESG; credit risk assessment; commercial banks; non-performing loan ratio; green credit; environmental and social risk management.

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