Vietnam is among 38 emerging market economies to have adopted significant banking reforms to boost development and combat climate change, the second Global Progress Report of the International Finance Corporation- (IFC-) facilitated Sustainable Banking Network (SBN) shows.

These reforms require banks to assess, manage and report on environmental, social and governance (ESG) risks in their lending operations and offer market incentives for banks to lend to green projects.

Of the 38 countries, 22 – which include Cambodia – have adopted national sustainable finance policies and voluntary principles, seven of which were launched this year alone. The report also captures the progress made by 14 countries to actively grow their green bond markets.

Last year, the State Bank of Vietnam (SBV) approved the green bank development programme and an action plan to realise Vietnam’s sustainable development goals by 2030. The regulator has set two targets by 2025.

First, all financial institutions will set up an environmental and social (E&S) management system and integrate E&S risk assessment into credit risk assessment.

Second, at least 10 to 12 banks will establish specialised units for E&S risk management and green finance.

A recent survey by the SBV early this year revealed 76 per cent of participating banks have had sustainable finance strategies in place.

Seventeen banks had set up E&S systems to comply with the regulatory requirements and 25 banks had conducted risk-based E&S due diligence for their corporate and project financing transactions.

“It is encouraging to see Vietnam’s major progress among its peers in this report – the most comprehensive benchmark of regulatory and industry-led initiatives on sustainable finance across emerging markets,” said SBV Department of Credit Policies for Economic Sectors director Nguyen Quoc Hung.

“Vietnamese banks have shown their readiness in pursuing a sustainable finance agenda, which is essential for capturing new business opportunities.”

“SBN members have demonstrated that transforming financial markets toward sustainability is possible,” said Georgina Baker, vice-president of IFC, a member of the World Bank Group. “Emerging markets are on the forefront of this shift – and SBN’s tools and guidance have laid the groundwork for more countries to follow suit.”

Established in 2012, SBN now represents $43 trillion (86 per cent) of banking assets in emerging markets.

VIET NAM NEWS