|A bank employee counts Vietnamese banknotes. Vietnam is among 38 emerging market economies that have initiated key banking reforms to drive development and fight climate change - Photo: Thanh Hoa
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.
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.
“SBN members have demonstrated that transforming financial markets toward sustainability is possible,” said Georgina Baker, vice president of IFC, World Bank Group.
“Emerging markets are on the forefront of this shift, and SBN’s tools and guidance have laid the groundwork for more countries to follow suit,” she added.
In 2018, the State Bank of Vietnam (SBV) 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 for 2025. The first involves setting up an E&S management system at all financial institutions and integrating environmental and social risk assessment into credit risk assessment.
Secondly, 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 SBV in early 2019 revealed that 76% of participating banks have a sustainable finance strategy in place. Some 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 of the Department of Credit Policies for Economic Sectors at SBV.