Korea shares experience in implementing ESG in banking system

The seminar was chaired by Deputy Governor of the State Bank of Vietnam Pham Quang Dung with the participation of representatives of state management agencies, credit institutions, enterprises, experts and scientists from Vietnam and Korea.

Speaking at the seminar, Deputy Governor of the State Bank of Vietnam Pham Quang Dung emphasized: Facing many prominent environmental and social issues, governments of countries have been focusing on transforming to a sustainable economic model, both pursuing economic value and ensuring commitments for the benefit of the community. In that context, the banking industry has emerged as a pioneering force in the transformation process. As an important financial supply channel of the economy, the banking industry always identifies its role and responsibility in "greening" investment capital flows and applying Environmental, Social and Governance (ESG) criteria to contribute to the implementation of sustainable development goals.

Deputy Governor of the State Bank of Vietnam Pham Quang Dung speaks at the seminar.

In Vietnam, the State Bank of Vietnam has recognized the importance of ESG practices in banking operations from a very early stage. Up to now, the State Bank of Vietnam has basically completed regulations and orientations on green banking and green credit in line with the goals of green growth and sustainable development. Notably, Circular No. 17/2022/TT-NHNN dated December 23, 2022 guiding the management of environmental risks in credit granting activities of credit institutions and foreign bank branches to implement the assigned tasks in the Law on Environmental Protection (2020). Most recently, the State Bank of Vietnam issued Decision No. 1663/QD-NHNN dated August 6, 2024 on amending and supplementing a number of articles of Decision No. 1604/QD-NHNN issued in 2018 on approving the Green Banking Development Project in Vietnam to suit the context and green development trends in the country and the world.

Through the annual summary and assessment of the State Bank of Vietnam, the system of credit institutions has fundamentally changed its awareness towards sustainable operations. Many credit institutions, based on the regulations of the State Bank of Vietnam, have proactively cooperated and received green capital sources and technical support from international financial institutions to develop internal regulations to implement environmental and social risk management for a number of credit granting activities for customers. By the end of 2023, 100% of commercial banks have developed internal regulations and conducted environmental risk assessments in credit granting activities; 17 commercial banks have specialized units/departments in environmental and social risk management.

In the period 2017-2023, the system's outstanding credit balance for green sectors had an average growth rate of more than 22%/year. By March 31, 2024, 47 credit institutions had generated outstanding green credit balances with outstanding loans reaching VND 636,964 billion, accounting for about 4.5% of the total outstanding loans of the entire economy. Outstanding credit balances assessed for environmental and social risks of the credit institution system have grown steadily over the years, reaching about VND 2.9 million billion, accounting for more than 21% of the total outstanding loans of the economy. Credit institutions are also interested in promoting green banking activities through accelerating digital transformation, developing internal guidelines on green working environments, and actively participating in supporting environmental community projects.

The above results show that the solutions implemented by the banking industry in recent times have contributed to promoting the greening of banking operations, promptly meeting the demand for capital to implement green, environmentally friendly projects; At the same time, raising awareness and enforcing regulations on environmental protection and social responsibility of enterprises using resources from the banking system, thereby adjusting behavior towards practicing ESG standards, greening production and business activities of enterprises.

Delegates and speakers attending the seminar.

However, the application of ESG in the operations of Vietnamese credit institutions is still in its early stages and faces many difficulties and obstacles, such as: The legal corridor for ESG is in the process of being completed; Limited awareness of ESG is still an obstacle to strategic vision, slowing down the transition to a sustainable business model; The transition towards sustainable development requires credit institutions to possess certain financial potential to invest in technology, train employees, build databases, etc.

At the Seminar, speakers, experts, and scientists also focused on exchanging and discussing to clarify general theoretical issues about the role of ESG in banking operations; sharing lessons learned from Korea on implementing ESG in the banking system; effective ESG assessment models at Korean financial institutions, thereby proposing practical and feasible solutions for applying these standards to banking operations in Vietnam.

Source: https://nhandan.vn/han-quoc-chia-se-kinh-nghiem-thuc-thi-esg-trong-he-thong-ngan-hang-post833093.html