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according to the European Central Bank (ECB, 2021), are loans unable to be repaid
within the agreed timespan.

In Vietnam, from the viewpoint of the State Bank, NPLs are defined as loans
classified into the group of substandard loans (group-3), doubtful loans (group-4), and
potentially lossable loans (group-5). NPLs are classified according to two criteria:
quantitative and qualitative. Regarding quantitative criteria, group-3, group-4, and
group-5 loans are overdue loans from 90 days to 180 days, from 181 days to 360 days,
and more than 360 days, respectively. Meanwhile, qualitatively, NPLs are sub-prime
debts, with doubts about both repayment ability and collection ability recovery of
creditors' capital (Dinh, 2012). In addition, in this study, to have an overall perspective,

the authors are interested in the Gross NPLs (including group-2 loans) indicator to
observe non-performing loans more fully.
2.2. Impact of CO2 emissions on NPL
The issue of global warming is a significant concern; environmentally friendly
energy sources are creating opportunities to reduce CO2 emissions and promote
economic growth (Ben Nasr et al., 2015). Carbon emissions and ecological footprints,

especially in the high industrialization and commercialization activities, are the major
indicators for economic growth in Southeast Asia, where transport, energy, agriculture,
forestry, fisheries, and technology are contributing sectors in achieving economic
growth and integrated markets under the ASEAN Economic Community. It seems that
the indicators used to measure environmental degradation, in which an increase in both
could increase the likelihood of climate change that led to an increase in credit risk
(Jessika & Kevin, 2022). Thus, the integration of environmental sustainability principles

in credit structure policy and regulation on the transition to low-carbon energy to
minimize loan defaults and non-performing loans is essential.
Carbon emissions also have a direct impact on human beings. People mainly rely
on planting crops to maintain their daily life needs. Urban and suburban residents can
get a stable salary by working at an enterprise, which lets them buy other goods, conduct
their investments, and even enjoy life. However, the threat to human life due to these

emissions is a grave concern. Residents can lose jobs, suffer from famine, and suddenly
have no permanent residence, and even their health and life will be threatened. In
addition, people may reduce their savings and be unable to repay loans from banks, thus
non-performing loans may increase (Zhang et al., 2022).
Vietnam is an emerging economy that has experienced rapid growth and
industrialization in recent years. However, this growth has had adverse impacts on the
environment due to the country's increasing dependence on fossil fuels. This reliance on
fossil fuels could negatively impact Vietnam's long-term growth goals, especially since

the economy is very vulnerable to environmental impacts. According to Guan et al.
(2017), there is a relationship between the increase in carbon intensity of loans and the
non-performing loan ratio of banks. Studies by Katircioglu & Celebi (2018) show a
positive relationship between CO2 emissions and loans. As CO2 emissions increase,
there is a greater need for loan capital to invest in innovation, upgrade outdated

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