The second Global Progress Report of the IFC-facilitated Sustainable Banking Network (SBN) says that of the 38 countries, 22, including Vietnam, have adopted national sustainable finance policies and voluntary principles, seven of which were launched in 2019 alone.

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

“In 2018, the State Bank of Vietnam (SBV) approved a green bank development scheme to incentivize credit flows towards green projects and an action plan to realize Vietnam’s sustainable development goals by 2030,” the report said.

To enforce the incorporation of ESG risks into lending decisions, the SBV has set two targets, the first being that all financial institutions must set up Environmental and Social Risk Management Systems (E&S) and incorporate E&S assessment into credit risk assessment by 2025.

It also made it a priority to have at least 10 to 12 banks with specialized units for E&S management and green finance by 2025, the SBN report added.

A survey by the central bank in early 2019 revealed that 76 per cent of participating banks have implemented some sustainable finance strategy.