On June 30, 2020, Governor Le Minh Hung of the State Bank of Vietnam (SBV) attended an online roundtable discussion on the role of the central banks in responding to climate change risks between the Representative of the Government of the United Kingdom and the ASEAN Central Banks’ Governors.
At the discussion, Mr. Mark Carney, former Governor of the Bank of England and the Bank of Canada, Assistant to the Prime Minister of England in the 26th United Nations Conference on Climate Change (COP26) and the UN Special Envoy on Climate Action and Finance for climate change, outlined a number of issues related to the role of the central banks in managing climate change related risks based on his rich research and experience. Accordingly, to address the challenges related to climate change, the central banks need to consider and assess the impacts on financial stability from three key risk aspects, namely Physical risks (losses of assets, infrastructure, land,...), Transition risks (losses due to changes in climate policies, technology, market sentiment and consumers in the process of transition to a low carbon economy in order to achieve socio-economic development goals and reduce greenhouse gas emissions), and Liability risks (financial losses from the damage claims of those organizations/businesses affected by the above physical and transition risks).
Participants in the virtual roundtable discussion
Based on the experience of the Bank of England, Mr. Mark Carney recommended that the ASEAN central banks need to develop a policy framework to improve the management of environmental and social risks, develop and apply models and methods of measuring risks, and conduct stress testing related to climate change in making monetary and credit policies in line with the new challenges, focusing on sustainability factors in investment decisions. At the discussion, the Governors of the ASEAN central banks discussed with the UK Representative about the advantages and disadvantages of the green financial transition, the opportunities and challenges in the process of the post-coronavirus economic recovery after, the means of cooperation between the central banks and other financial management agencies in order to have a unified approach to addressing climate change risks, as well as relevant cooperation opportunities between the ASEAN and COP26.
On the SBV’s side, Governor Le Minh Hung shared the situations about the green credit implementation in Vietnam over the past time and the results of cooperation on green credit, the response to climate change risks in the framework of the ASEAN financial cooperation. The SBV Governor also mentioned the issue of how to develop a suitable roadmap for developing countries in order to apply the standards and requirements related to climate change risks to the safety regulations at the financial institutions. This is an important and practical issue, and it opens up the potential for further specific cooperation among the ASEAN central banks, as well as between those management agencies and other central banks in the world, those which are leading the banking and finance sector in responding to climate change risks.
Le Hang