On September 25, 2024, the State Bank of Vietnam (SBV) and the Korean Financial Services Commission (FSC) jointly held a seminar on “Towards a Sustainable Future: Enhancing Vietnam-Korea Financial Synergies” under the chair of Deputy Governor Pham Quang Dzung. Also attending the seminar, there was Mr. Lee Hyung Ju, Standing Member of the Executive Board of the FSC; Mr. Lee Hang-yong, Chairman of the Council for International Financial Cooperation of Korea (CIFC).
Participants at the seminar on “Towards a Sustainable Future”
In his opening speech, Deputy Governor Pham Quang Dzung emphasized that, as a pioneering force in the transformation process and an important financial supply channel for the economy, the banking sector always identifies its role and responsibility in “greening” the investment capital flows and applying Environmental, Social and Governance (ESG) criteria to contribute to the implementation of the sustainable development goals.
Deputy Governor Pham Quang Dzung delivers his opening speech at the Seminar
The Deputy Governor stated that the regulations and orientations on green banking and green credit have been basically completed in line with the goals of green growth and sustainable development. This once again affirms the determination of the banking industry in promoting green capital flows for the sustainable development goals, while orienting Vietnamese banking activities to increasingly approach international standards and practices on ESG.
Changing perceptions of sustainable green finance
Mr. Lee Hyung Ju, Standing Member of the FSC, highly complimented the application of ESG in the operations of the credit institutions and the businesses in Vietnam. He also said that climate change and ESG implementation are global issues with many challenges. Over the past time, the two countries have been cooperating very well in this field, and Mr. Lee expressed his hope that, in the coming time, there would be more exchanges and experience sharing between the two countries for sustainable green finance development.
Mr. Lee Hyung Ju, Standing Member of the FSC’s Executive Board, speaks at the meeting
According to Mr. Pham Minh Tu, Deputy Director of the Banking Strategy Institute under the SBV, the SBV has formulated and strengthened the legal corridor at an early stage. By the end of 2023, 100% of the commercial banks had developed their internal regulations and conducted environmental risk assessments in the credit granting operations; 17 commercial banks have established specialized units/departments in charge of environmental and social risk management. As of March 31, 2024, 47 credit institutions had generated green credit outstanding worth total VND 636,964 billion, accounting for about 4.5% of the total loan outstanding of the entire economy.
Many credit institutions have proactively cooperated with, and received green capital resources and technical assistance from the international financial institutions, as well as developed their internal regulations, to implement environmental and social risk management for a number of credit granting operations to customers. In addition, the credit institutions have also paid much attention to ‘greening’ banking operations through promoting the digital transformation, developing the internal guidelines for green working environment, and actively participating in supporting environmental community projects.
The above results show that the solutions implemented by the banking industry in the recent time have contributed to promoting the ‘greening’ of banking operations, promptly meeting the capital demand to implement green, environmentally-friendly projects; improving the awareness and the implementation of the regulations on environmental protection and the corporate social responsibility of the businesses using resources from the banking system, thereby adjusting the behaviors towards practicing ESG standards, greening the production and business activities of the businesses.
Although the achieved results are relatively positive, the application of ESG standards in the operations of Vietnamese credit institutions is still at the early stage, and is facing many difficulties and challenges. The relevant policies and the legal corridor for ESG are currently in the process of being completed. Up to now, the national regulations on green classification and the list of projects which can receive green credit, or are allowed to issue green bonds, have not been issued yet. ESG is still a new term for many businesses and credit institutions. Limited awareness of ESG is still an obstacle to the strategic vision, slowing down the transition to a sustainable business model. In addition, the transition towards sustainable development requires large investments, requiring the credit institutions to have certain financial capabilities to invest in technology, staff training, database development, etc.
Strengthening cooperation in ESG implementation
According to Mr. Kim Young-do, Senior Researcher at the Korea Institute of Finance (KIF), sustainability is becoming an essential element, not an option. Therefore, financial institutions need to proactively prepare themselves for possible changes in the policies and the legal frameworks. Climate and ESG risk management in financial institutions should be addressed in stages, taking into account the reality, the management capacity, and the infrastructure state of each institution.
Participants at the seminar
During the two discussion sessions at the seminar, many credit institutions and experts from Vietnam and Korea also discussed about several topics, such as “ESG initiatives of Shinhan Bank” “Environmental - Social - Governance initiatives of Agribank” “KODIT Green Finance and ESG Rating System” “Analysis of ESG initiatives of Vietnam” “Enhancing Sustainability through Carbon Pricing Models”, etc. In addition, the participants also had the opportunity to listen to the valuable opinions of the Korean experts, opening up new and creative perspectives on how to implement ESG in practice, from Korea's experience in implementing ESG in the banking system, to the models for the assessment of the performance of ESG models by the Korean financial institutions, as well as the proposed practical and feasible solutions for applying these standards to the banking operations in Vietnam, contributing to further promoting the sustainable development of the economy, and strengthening the friendly cooperative relationship between the two countries.
Le Hang