Emerging markets have become a major force driving development and fighting climate change, as 34 countries, including Vietnam, have initiated banking reforms to expand sustainable lending, according to the first comprehensive Global Progress Report from the Sustainable Banking Network (SBN), an IFC-supported organization of banking regulators and associations.

Those 34 countries account for $42.6 trillion in bank assets; more than 85 per cent of the total in emerging markets. Some are wealthier than others, but all have made progress in advancing sustainable finance.

Vietnam, together with seven other countries - Bangladesh, Brazil, China, Colombia, Indonesia, Mongolia, and Nigeria - have reached an advanced stage, having implemented large-scale reforms and put in place systems for results measurement. These reforms require banks assess and report on environmental and social (E&S) risks in their lending operations and put market incentives in place for banks to lend to green projects.

“This progress is an important step towards achieving the Sustainable Development Goals by 2030,” said Mr. Ethiopis Tafara, IFC’s Vice President for Legal, Compliance Risk and Sustainability. “It shows that both middle and low-income countries can adopt sustainable finance reforms. The SBN has demonstrated in a short time how much can be achieved when regulators, policymakers, trade associations and development institutions collaborate to advance sustainable finance.”

The report provides practical indicators and tools for countries to apply to their own domestic markets, regardless of their size or stage of development. This is important because it facilitates learning by all members and accelerates the pace of change. It is based on an innovative results-measurement approach that has been agreed to by all 34 member countries - a remarkable achievement that is breaking new ground for measuring progress at the global level.

The report recognizes the comprehensive nature of the efforts of the State Bank of Vietnam (SBV), including the Directive on Promoting Green Credit Growth and Environmental and Social Risks Management in Credit Granting Activities, released in 2015. The Directive seeks to promote the green economy and encourages all credit institutions to incorporate E&S risks into their transactions.

The report notes that the Directive also includes a reporting template that requires credit institutions report quantitative data quarterly to the SBV. This reporting covers both E&S risk evaluations of credit, other financial products, and green finance flows. The Directive covers the banking sector but could be extended to other financial industry activities, such as insurance and asset management.

The SBV’s efforts, including training programs on sector-specific E&S checklists, have provided specific guidance to banks in managing E&S risks in ten high risk sectors. To further stimulate green lending, the central bank has released a Green Project Catalogue that defines green sectors and plans to publish guidelines on reporting green finance flows. Additional financial incentives, such as a grant program, are under consideration, to increase green lending.

“For the first time, the report provides a concrete picture of what Vietnam has been doing in the area of sustainable finance reform,” said Ms. Ha Thu Giang, Deputy Director of the SBV’s Department of Credit Policies for Economic Sectors. “We appreciate that the report also identifies areas of further focus for Vietnam to continue to promote the growth of financing for green projects.”     

VN Economic Times