On October 21, 2021, in Hanoi, the State Bank of Vietnam (SBV), in collaboration with the International Finance Corporation (IFC) and the Swiss State Secretariat for Economic Affairs (SECO), held a virtual consultation workshop on the draft Circular providing guidance for the management of environmental risks in lending activities. SBV First Deputy Governor Dao Minh Tu attended the Workshop and delivered an opening speech.
First Deputy Governor Dao Minh Tu delivers his opening speech
The seminar was also attended by Mr. Kyle Kelhofer, IFC Country Manager for Vietnam, Lao PDR and Cambodia; representatives from SECO, the relevant Vietnamese Ministries and agencies, the international financial institutions, research institutes, associations, credit institutions, scientists, etc.
In his opening speech, SBV Deputy Governor Dao Minh Tu emphasized that green growth and sustainable development have become an inevitable trend and a goal that all countries are aiming for. Vietnam is one of the countries that have to face many environmental problems, and are seriously affected by climate change, causing negative impacts on the economic development and the people's lives. Therefore, over the past time, Vietnam has actively participated in the implementation of international commitments on reducing greenhouse gas emissions, mitigating the impacts of climate change, and promoting sustainable development, for example: commitments for the implementation of the 2030 Agenda for Sustainable Development at the United Nations Summit; signing the Paris Agreement on climate change; developing the National Strategy and Action Plan on green growth.
As an important financial supply channel of the economy, the banking industry has always defined clearly its role and responsibilities in "greening" the investment capital flows for sustainable development. Since 2015, with the technical assistance from the IFC, the SBV has issued multiple documents directing the banking activities toward green areas, limiting capital flows into projects that may cause negative impacts on the environment, such as the issuance of Directive No.03/CT-NHNN dated March 24, 2015 on promoting green credit growth and managing environmental and social risks in lending activities; the promulgation of the Environment and Social Risk Management Handbook for 15 economic sectors; joining the Sustainable Banking and Finance Network to learn and exchange experience in sustainable development policies in the banking operations.
SBV Deputy Governor Dao Minh Tu speaks at the Workshop
According to the SBV Deputy Governor, the National Assembly of Vietnam has recently passed a newly revised Law on Environmental Protection. This is the legal basis for the SBV to issue a Circular guiding the credit institutions to manage environmental risks in lending activities. The SBV’s Circular shall come into effect on January 1, 2022, the same time with the effective date of the new Law on Environmental Protection, and shall be binding to all credit institutions.
The contents in this Circular are new and related mostly to technical factors about the environment, and will make a great impact on the operations of the credit institutions. Therefore, the Consultation Workshop on this draft Circular was an opportunity for the SBV and the credit institutions to obtain updated information from the international experience and expertise in developing and implementing policies on environmental risk management in lending activities, aiming for the objectives of environmental protection and sustainable development.
The SBV Deputy Governor emphasized that the SBV wished to receive comments and suggestions from all relevant Ministries, agencies, the credit institutions, as well as national and foreign experts in the environment areas in order to finalize the draft Circular, creating favorable conditions for the credit institutions to implement it in the future.
On this occasion, on behalf of the SBV Board of Management, Deputy Governor Dao Minh Tu also expressed his wishes to receive further support from the IFC and SECO through cooperation agreements on green growth and environmental protection in lending activities, as well as through cooperation activities to strengthen the development of Vietnam’s banking system in general in the coming time.
Mr. Kyle Kelhofer, IFC Country Manager for Vietnam, Lao PDR and Cambodia, speaks at the Workshop
At the Workshop, Mr. Kyle Kelhofer, IFC Country Manager for Vietnam, Lao PDR and Cambodia, shared the IFC's experience in developing operational standards for the sustainable management of environmental and social aspects within the framework of the IFC's investments in the emerging markets. These standards form a robust risk management framework that is applied extensively, and has changed the perspectives of the banking industry toward non-financial risks and finance allocation in the emerging markets.
Also at the Workshop, several experts made presentations on the topics related to review of the current legal framework for lending activities of Vietnamese credit institutions; the international experience in developing regulations on environmental and social risk management; the implementation process and how to monitor the performance of the banking system; the implementation of the 2020 Law on Environmental Protection, etc.
Ms. Pham Thi Thanh Tung, Deputy Director General of the SBV Department of Credit for Economic Sectors, moderated the discussion session to collect comments on the 2nd version of the draft Circular on environmental risk management in lending activities, and also provided some explanations on the SBV side. The comments at the Workshop would be the basis for the SBV to finalize the draft Circular, ensuring its issuance as scheduled, creating favorable conditions for the implementation by the credit institutions in line with the international practices and the practical conditions of the credit institutions in Vietnam.
Le Hang