In the 2021 – 2030 period and towards 2050, the banking sector is focusing on issuing regulations that encourage credit institutions to finance and provide preferential loans for projects on the green taxonomy list, and on guiding environmental risk management in lending… The SBV continues to direct and guide credit institutions to allocate appropriate capital for preferential lending, encouraging investors to carry out projects on the green taxonomy list in line with the Prime Minister's Decision on environmental criteria and the certification of projects granted green credit; to issue green bonds; to coordinate with the Ministry of Finance and the Ministry of Planning and Investment in helping credit institutions receive aid and foreign concessional loans to finance projects on the green taxonomy list; and to research and develop the banking sector's action plan to implement the National Green Growth Strategy for 2021 – 2030, with a vision to 2050. (Banking Times, 05/05/2024).
Sustainability standards are now regarded as one of the most pressing issues of our time. More and more financial institutions are applying environmental, social and governance standards (ESG: Environmental – Social – Governance) in their practice, in keeping with the shared message of working together for sustainable development. According to research by DARA International, Vietnam could suffer losses of around USD 15 billion a year due to climate change, equivalent to about 5% of GDP. Applying ESG criteria is a way for the banking sector to help drive green growth and sustainable development, as well as to enhance its reputation and standing both at home and internationally.
Vietnam is currently considered one of 38 emerging markets that have made significant progress in promoting a sustainable finance and banking sector, and is ranked among the countries at the implementation stage of the Sustainable Banking Network (SBN) Progress Matrix; it also ranks highly compared with Asian and global peers in policies related to Nationally Determined Contributions (NDCs).
In the 2017 – 2022 period, outstanding credit to green sectors grew at an average rate of more than 23% per year. As of 30/9/2023, outstanding green credit reached more than VND 564 trillion, accounting for about 4.4% of total outstanding credit in the economy. Of the 12 green sectors in which the SBV guides credit institutions to lend, outstanding loans are concentrated mainly in renewable and clean energy (nearly 45%) and green agriculture (over 30%). (According to the Banking Times)
However, the difficulties and challenges of high-quality ESG personnel with internationally standardised qualifications for ESG transformation in banks remain a key factor. In addition, some banks have not yet implemented a Green Credit Governance – Risk Management Framework. This includes:
- A framework for identifying Green elements in the process of developing green credit products
- A framework for identifying Green customers using a “Set of ESG maturity assessment criteria”.
- A framework for defining and assessing the Green Credit appraisal process
- A framework for identifying and assessing credit risk
- A framework for assessing whether customers' use of bank credit products in their production activities genuinely meets Sustainable Development requirements.
At VietESG, we have a team of ESG experts accredited by the ESG organisation EFFAS, who also have experience in Risk Management and Credit Product Development in the Banking sector. After a long period of research and practical application through Training and Consulting for banks in Vietnam, VietESG has officially launched the “Green Credit Governance – Risk Management Framework” – Banking Sector Application, with the aim of accompanying joint-stock commercial banks in their ESG transformation by:
- Providing banks with: the Green Credit Governance – Risk Management Framework.
- Consulting/Training bank staff on the Green Credit Governance – Risk Management Frameworks.
The goal of applying ESG in the banking sector, the most important capital channel of the economy, is seen as one of the global trends, contributing directly and indirectly to achieving the sustainable development goals and the commitments under the Paris Agreement on climate change set out by the State Bank of Vietnam.
For details, please contact: Ms. Nguyễn Quỳnh Hoa – CEO of VietESG – Phone 0977064965
Email: quynhhoa@vietesg.com
Website: Vietesg.com
Fanpage: Vietesg
