Vietnam is among 38 emerging market economies to have initiated key banking reforms to drive development and fight climate change.
These reforms require banks to assess, manage, and report on environmental, social and governance (ESG) risks in their lending operations and put market incentives in place for banks to lend to green projects.
In 2018, the State Bank of Vietnam approved the program on green bank development and an action plan to realize Vietnam’s sustainable development goals by 2030.
To enforce the incorporation of ESG risks into lending decisions, the regulator has set two targets by 2025, including the setting up of an E&S management system in all financial institutions and integrating environmental and social risk assessment into credit risk assessment.
Further, it is a priority to establish specialized units for environmental and social risk management and green finance in at least 10 to 12 banks.
A recent survey by the State Bank of Vietnam in early 2019 revealed that 76 per cent of participating banks have had sustainable finance strategy in place.
17 banks had set up E&S systems to comply with the regulatory requirements and 25 banks had conducted risk-based E&S due diligence for their corporate and project financing transactions.
“It is encouraging to see Vietnam’s major progress among its peers in this report—the most comprehensive benchmark of regulatory and industry-led initiatives on sustainable finance across emerging markets,” said Nguyen Quoc Hung, Director at department of credit policies for economic sectors, State Bank of Vietnam.
Vietnamese banks have shown their readiness in pursuing a sustainable finance agenda, which is essential for capturing new business opportunities.
Of the 38 countries, 22 have adopted national sustainable finance policies and voluntary principles, seven of which were launched in 2019 alone.
The report also captures the progress made by 14 countries to actively grow their green bond markets and data shows increasing innovation by financial institutions to green their lending portfolios.