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 the banks.”
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.
About IFC
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
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