Significant progress in sustainable finance reforms

11:10 | 08/11/2019 Economy

(VEN) - Vietnam is among 38 emerging market economies to have initiated key banking reforms to drive development and fight climate change.

significant progress in sustainable finance reforms

According to the second Global Progress Report of the IFC-facilitated Sustainable Banking Network (SBN), Vietnam is among 38 emerging market economies to have initiated key banking reforms. 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.

Georgina Baker, vice president of the IFC, said emerging markets are on the forefront of transforming financial markets toward sustainability, and SBN’s tools and guidance have laid the groundwork for more countries to follow suit.

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 - setting up an environmental and social 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 percent of participating banks have had sustainable finance strategy in place. Some 17 banks had set up environmental and social systems to comply with the regulatory requirements and 25 banks had integrated environmental and social risk assessment into credit risk assessment.

“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 under the State Bank of Vietnam.

Imansyah, Deputy Commissioner of International and Research under Indonesia’s Financial Services Authority (OJK),

and a co-chair of the SBN Measurement Working Group, said SBN represents 38 countries and US$43 trillion (85

percent) of total banking assets in emerging markets. Sharing lessons and knowledge among members has been an

important catalyst to drive finance reforms, particularly as countries embark on these efforts.

Ngoc Thao