On 19 November 2024, in Hanoi, the Vietnam Investment Review (VIR) organised a Seminar themed "ESG in Banking: Leading Through Implementation". First Deputy Governor Dao Minh Tu of the State Bank of Vietnam (SBV) attended and delivered a speech at the event.
First Deputy Governor Dao Minh Tu speaks at the Seminar
In his speech, Deputy Governor Dao Minh Tu emphasised that green growth and sustainable development have become inevitable trends and the goals for all nations.
Over the past years, Vietnam has actively participated in the international commitments to environmental protection, green transformation, greenhouse gas emission reduction, and human right protection in the pursuit of sustainable and inclusive growth. Vietnam is committed to implementing the 2030 Agenda for Sustainable Development adopted at the United Nations Summit in 2015, and is also a signatory to the Paris Agreement on Climate Change adopted in 2016.
Besides, Vietnam is also one of the countries that have taken quick and timely actions to implement those international commitments by adopting several policy frameworks, such as the National Green Growth Strategy, the National Strategy on Climate Change, the National Financial Inclusion Strategy, the National Target Programmes, the Action Plan for the implementation of the commitments made at COP26, and the 2020 Law on Environmental Protection etc. Those legal documents have created favourable conditions to promote the economic tools for green growth and ESG implementation, such as green credit, green bonds, and the management of environmental risks in the lending operations of the credit institutions.
A clear shift from awareness to action
According to the SBV Deputy Governor, the banking sector has always been at the forefront in applying the ESG standards. The SBV has introduced a lot of solutions, guidelines and directions related to ESG in the banking operations, such as the issuance of a Directive on promoting green credit and managing environmental risks in the lending operations; the approval of a Scheme on Green Banking Development in Vietnam, and the banking sector’s Action Plan for the implementation of the National Green Growth Strategy for the 2021-2030 period. Additionally, the SBV has also issued Circular 17/2022/TT-NHNN dated 23 December 2022 regulating the environmental risk management in the credit operations, which came into effect on 1 June 2023, as part of the legal framework for the implementation of the Law on Environmental Protection.
An overview of the Seminar
Deputy Governor Dao Minh Tu affirmed that under the guidance and the instructions of the SBV, the ESG implementation has shown clear progress, from awareness to actions. The results of the ESG implementation are clearly reflected in the growth rate and the proportion of loans assessed for environmental and social risks in the banking sector. As of 30 September 2024, the loan outstanding assessed for environmental and social risks had reached over VND 3,200 trillion, accounting for more than 22% of the total loan outstanding of the economy, representing an increase of 15.62% as compared to the end of 2023, which is higher than the overall credit growth rate of the economy
According to Deputy Governor Dao Minh Tu, enhancing the ESG implementation requires the credit institutions to comply with and continuously update the new regulations to demonstrate their responsibilities towards the environment and the society. Moreover, the ESG implementation can also raise the prestige and the brands of the credit institutions by making their governance, environmental, and social policies transparent, thereby enhancing their operational quality and profitability. By adopting the ESG standards, the credit institutions also have the opportunities to expand their markets, attract more investment capital, and receive more technical support from the international financial institutions, as well as develop more credit products.
ESG implementation helps improve the efficiency of the risk management
At the Seminar, the participants also had the chance to listen to the opinions of several domestic and foreign experts, bankers and entrepreneurs, focusing on a number of key topics such as: the SBV’s solutions to promote the ESG implementation in Vietnam towards the goals of green growth and sustainable development; the ESG implementation status and the priorities of the credit institutions in Vietnam, considering the macroeconomic contexts, the financial capabilities, and the current governance levels; the policies and programmes of banks, from technical assistance to funding for businesses engaged in green, sustainable projects; and the challenges and obstacles that need to be addressed, and the recommendations to promote the ESG implementation in Vietnam, towards the goals of green growth and sustainable development.
Also at the Seminar, Mrs. Ha Thu Giang, Director General of the Department of Credit for the Economic Sectors, mentioned that through the review and evaluation of implementation results between 2014 to 2020, and the SBV’s supervision since 2021, the credit institutions have recognised the importance of the ESG implementation in their banking operations. As a result, they have proactively researched, developed and improved their ESG systems to be more comprehensive, including specific actions, such as integrating the ESG commitments into the banks’ strategies and business plans; considering the international ESG regulations and standards to develop their internal ESG implementation practices as well as their environmental and social risk management policies; improving the organisational models by establishing specialised units responsible for the ESG implementation; and proactively engaging in the international cooperation to mobilize resources, with priority given to green and climate-smart projects.
HP