Banks Required to Assess Environmental, Social Goals in Vietnam

Banks Required to Assess Environmental, Social Goals in Vietnam

For several years, the worldwide financial crisis that began in 2008 had little effect on Vietnam’s banks. That is not because its banks were stronger than the U.S banks that created the crisis. It was mostly because of the country’s lack of international trade.

But today, Vietnam does much more trade around the world. And the government is taking steps to make sure its banks can deal with a financial shock.

The government, for example, is asking banks in Vietnam to look at environmental, social and governance risks, ESG, when considering credit risk. The State Bank of Vietnam says that every bank will create a unit for ESG analysis by 2025. ESG risk must be considered in all decisions.

Seventeen banks in Vietnam have set up these units to analyze the environmental and social effects of their lending. Twenty-five banks have made such analysis so far, the central bank said.

Nguyen Quoc Hung is a director of credit policies at the State Bank of Vietnam. Nguyen said Vietnamese banks are ready to create “sustainable finance,” which is important for finding new business opportunities.

The push for banks and other businesses to consider their effects on the environment has created new expressions like “green finance” and “green bonds.” Green finance means, for example, giving a loan to a business that provides wind power.

Green finance is important to Vietnam; it considers itself one of the countries most threatened by the effects of climate change.

The government is strengthening its banks because of its membership in the Sustainable Banking Network, SBN. That is a group of 38 developing countries pushing ESG rules. The World Bank’s International Finance Corporation also supports the group.

The 38 nations share ideas about green finance, said Imansyah. He is on the SBN working group. Like many Indonesians, he goes by one name.

“Sharing lessons and knowledge among members has been an important (way) to drive finance reforms,” Imansyah said.

His country, along with China, is among the leaders of the 38 countries. Both Indonesia and China have started using many of the planned ESG policies. These include government financial support for green investments.

Vietnam may soon be among the leading countries, too. A World Bank report said of the country, “Vietnam is one of the few SBN members to require (banks) to report the quantities and values of their green loans.”

Considering the social value of loans is much harder to measure. But Vietnam’s banks want to avoid the kind of risky loans that led to the near-collapse of the U.S. housing market in 2008.

I'm Susan Shand.

VOA’s Ha Nguyen reported this story. Susan Shand adapted it for VOA Learning English. Ashley Thompson was the editor.

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Words in This Story

analysis - n. an examination

sustainable – adj. involving methods that do not completely use up or destroy natural resources

assess - v. to make a judgment about (something)

green – adj. person or organization that considered the good of the environment when making decisions

quantity - n. an amount of something

opportunity - n. a situation in which something can be done​