Hanoi, Vietnam, August 21, 2012—A
new survey from IFC, a member of the World Bank Group, and the State Bank
of Vietnam has found that most of the country’s banks would benefit from
better environmental and social risk assessment standards in loan approvals
to improve the sustainability of the projects they finance.
The survey conducted in June, which
examined 54 Vietnam-based financial institutions, found that few Vietnamese
banks have a formal policy, procedures or system to manage the environmental
and social risks faced by their clients. One of the key constraints hindering
the banks is the lack of specific guidelines on identifying and managing
environmental and social risks in project financing.
“Financial institutions can reduce
their own risks and seize business opportunities by encouraging sustainable
business practices among companies,” said Cat Quang Duong, deputy head
of the Credit Department at the State Bank of Vietnam, the country’s central
bank. “The State Bank of Vietnam will work with IFC to strengthen environmental
and social standards in the banking sector.”
The survey showed that many banks are
not fully aware that environmental and social risks could affect the financial
performances of their clients’ businesses and, in turn, those of the banks
themselves. The banks called on the State Bank of Vietnam to work with
the Ministry of Natural Resources and Environment in developing mandatory
guidelines for identifying and managing environmental and social risks
in project financing so as to create a more level playing field.
“It is important for banks to adopt
prudent environmental and social risk assessment standards during the lending
process. A client’s business viability rests not only on its financial
health but also on how well it manages the impact of its operations on
the environment and the community,” said Simon Andrews, IFC Regional Manager
for Vietnam, Cambodia, Lao PDR, Myanmar, and Thailand. “Addressing environmental
and social sustainability issues also opens a new business opportunities
for banks, such as energy-efficiency and renewable-energy financing, for
Working with the State Bank of Vietnam
on improving environmental and social risk management is part of IFC’s
advisory program to promote sustainable growth in the country. IFC has
partnered with Canada, Finland, Ireland, the Netherlands, New Zealand,
and Switzerland in implementing its advisory program in Vietnam.
IFC, a member of the World Bank Group,
is the largest global development institution focused exclusively on the
private sector. We help developing countries achieve sustainable growth
by financing investment, mobilizing capital in international financial
markets, and providing advisory services to businesses and governments.
In FY12, our investments reached an all-time high of more than $20 billion,
leveraging the power of the private sector to create jobs, spark innovation,
and tackle the world’s most pressing development challenges. For more
information, visit www.ifc.org.