Customers make transactions in HDBank's branch. Viet Nam is among 38 emerging market economies to have adopted significant banking reforms to boost development and combat climate change. — Photo thoibaonganhang.vn

Viet Nam is among 38 emerging market economies to have adopted significant banking reforms to boost development and combat climate change, the second Global Progress Report of the IFC-facilitated Sustainable Banking Network (SBN) revealed.

These reforms require banks to assess, manage and report on environmental, social and governance (ESG) risks in their lending operations and offer market incentives 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.

In 2018, the State Bank of Viet Nam approved the green bank development programme and an action plan to realise Viet Nam’s sustainable development goals by 2030. The regulator has set two targets by 2025.

First, all financial institutions will set up an environmental and social (E&S) management system and integrate E&S risk assessment into credit risk assessment.

Second, at least 10 to 12 banks will establish specialised units for E&S risk management and green finance.

A recent survey by the State Bank of Viet Nam in early 2019 revealed 76 per cent of participating banks have had sustainable finance strategies in place. Seventeen 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 Viet Nam’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 under the State Bank of Viet Nam.

“Vietnamese banks have shown their readiness in pursuing a sustainable finance agenda, which is essential for capturing new business opportunities.”

“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.”

Established in 2012, SBN now represents US$43 trillion (86 per cent) of banking assets in emerging markets. The report is based on an innovative results-measurement approach developed by SBN members as they work to convert sustainable finance policy reforms into practical implementation and behaviour change across the banking sector. — VNS