On December 21, 2023, in Hanoi, the Banking Magazine under the State Bank of Vietnam (SBV) organized a Conference themed "Implementing ESG in the Banking Industry: Opportunities, Challenges and Solutions”. The Conference was chaired by Dr. Dao Minh Tu, SBV First Deputy Governor.
SBV First Deputy Governor Dao Minh Tu speaks at the Conference
Vietnam's banking industry is making great efforts in ESG transition
In his opening speech at the Conference, Dr. Dao Minh Tu, SBV First Deputy Governor, said that the ESG (Environment, Social and Governance) Index is both an opportunity and a challenge for the banking sector, and the sector should take prudent but also urgent steps in the implementation in order to contribute to realizing the Government's commitments at COP26. Vietnam's banking industry plays a crucial role in leading the economy by providing and coordinating capital resources based on the credit risk appraisal process. Therefore, the banking sector should play a pioneering role in implementing ESG, creating a great push for the businesses that are the banks’ clients in the establishment of new standards for sustainable development.
However, according to Deputy Governor Dao Minh Tu, the application of ESG to the business operations of the domestic banks is only in an early stage, with some reforms in the credit granting process, so there would be many difficulties and challenges that the banking industry must address in the process of applying ESG to the business operations, such as the implementation, the assessment of environmental impacts, the risks related to investment portfolios, governance, ESG risk assessment, the development of professional and experienced staff in ESG activities, etc.
Sharing at the Conference, Ms. Pham Thi Thanh Tung, Deputy Director General of the Department of Credit for Economic Sectors, said that since 2015, the SBV had included ESG in Directive No. 03 on promoting green growth and social and environmental risk management in credit granting activities, and most recently the SBV had issued Circular No. 17/2022/TT-NHNN dated December 23, 2022 of the SBV Governor providing guidance for the implementation of environmental risk management in credit granting activities of the credit institutions and the foreign bank branches. The SBV's guiding documents have gradually become more legally-binding in alignment with the laws, and approach closer to the international practices; increasingly demonstrating the banking industry's responsibility towards social and environmental issues. Through the monitoring process, the credit institutions have made a lot of significant changes.
At the Conference, the scientists and experts all assessed that the implementation of ESG in the banking sector in Vietnam has achieved encouraging results over the past time. However, to comprehensively aim at ESG goals in the banking sector, there are still many challenges. If there is a close coordination among the competent authorities and with the banks’ efforts, the ESG goals set at Vietnamese banks can be achieved.
In addition, the opinions exchanged by the speakers at the discussion session promptly supplemented and clarified more information based on the topics of the Conference; suggesting some new issues about the trends of implementing ESG at Vietnam’s banks for reference and further studies.
Putting ESG goals at the center in the development strategy
According to Ms. Michele Wee, CEO of the Standard Chartered Bank Vietnam Ltd., in order to enable the banks to actively implement ESG in the coming time, the Government, the Ministries and agencies in Vietnam need to continue accompanying and coordinating harmoniously in the formulation and improvement of the specific legal frameworks for green credit, as well as the business investment projects that may make impacts on the environment; setting standards for green credit, building a list of green industries and fields. The commercial banks can use these standards to evaluate when granting green credit.
Toward the end of the Conference, First Deputy Governor Dao Minh Tu emphasized that the great efforts of relevant parties would enable Vietnam’s banking industry to gradually overcome the challenges and make ESG goals become the center in the development strategy in the next decade. With the targeted strategy and the coordination efforts, the banks can overcome the obstacles to fully integrate the ESG factors as a core priority in all of their business operations.
Le Hang