Last updated: Wednesday, April 24, 2019


Promoting Sustainable Finance for Climate and Energy

Posted: Thursday, April 05, 2018

The Vietnamese financial sector needs to demonstrate its role in helping transform the domestic economy into a low-carbon model by investing in green development projects, with environmental and social risks taken into account.

This is the main message of the Sustainable Finance Workshop on Climate and Energy organised in Hanoi by the WWF - Vietnam in cooperation with the International Finance Corporation (IFC), the Vietnam Bankers Association (VNBA) and the Vietnam Business Council for Sustainable Development (VBCSD) under the Vietnam Chamber of Commerce and Industry (VCCI) in Hanoi.

Climate change is no longer a new concept for governments and people around the globe. Climate impacts on the economy, culture and daily life are clear. According to a United Nations research, climate change claims US$300 billion of damages to the world economy and Vietnam is among the hardest-hit countries. Extreme weather, frigidity and snow in the north, and drought and salinity intrusion in the southern central region and the Mekong Delta seriously affected daily business and livelihoods of millions of people.

Facing this global challenge, 180 countries in the world signed the Paris Agreement in 2016 in which each country pledged to specifically reduce greenhouse gas emissions - the main cause of the climate change. Vietnam, when signing the agreement, aimed to cut greenhouse gas emissions by 8 per cent by 2030 and by 25 per cent if there are international supports.

“As climate change has an impact on every aspect of life, it is extremely important to consider environmental and social risk factors in assessing an investment project. This will reduce the risk that banks are caught in bad debt or incapable of taking back funds,” said Benjamin Rawson, Conservation and Programme Development Director at WWF. “This also means that the financial and banking sector plays a key role in deciding whether a project can be deployed or not. And, if they decide to only invest in projects that do not harm the environment, the ecosystem and the social security, it is sustainable financing,” he added.

Sustainable finance is a global trend that major banks and financial institutions around the world are carrying out. In 2003, the Equator Principles for risk assessment framework for social and environmental elements in financial projects were adopted by financial institutions. As of January 2018, up to 92 financial institutions in 37 countries officially adopted the principles. Major financial institutions that adopt the Equator Principles include HSBC Holdings Plc, Standard Chartered PLC, Citigroup, and Westpac Banking Corporation.

Vietnam has a good policy and strategic basis to carry out the Paris Climate Agreement, for example, the Prime Minister's Decision 1393 on the Green Growth Strategy promulgated in 2012 where low-carbon growth is one of three main goals. And, the financial and banking sector has also made policy progress to keep up with international situations. The State Bank of Vietnam cooperated with IFC to develop environmental and social risk assessment guides for 10 economic sectors in credit operations.

“Vietnam has policies and regulations to promote sustainable finance but enforcements are not really good. In the coming time, WWF will work with banks, associations and partners to promote sustainable financial performance in Vietnam by building capacity and developing tools and guides for assessing environmental and social risks in banking operations,” said Benjamin.

The Sustainable Finance Workshop on Climate and Energy is also part of WWF's capacity building programme. At the workshop, international and domestic financial experts shared movement trends of low carbon economies in the world, risk assessment experience in environmental investment projects, sustainable financing as well as difficulties and opportunities of sustainable financing.

Mr Nguyen Quang Vinh, Secretary General of the Vietnam Chamber of Commerce and Industry (VCCI) and Vice Chairman of the Vietnam Business Council for Sustainable Development (VBCSD), said, “Vietnam and other countries in the region will not be able to enforce the Paris Climate Agreement and the United Nations Agenda 2030 if the financial - banking sector does not play its role. Only when the financial - banking sector says no to projects that have negative impacts on the environment and society, can we then build a sustainable economy.”

This workshop also focused on issues related to sustainable energy, a strength of Vietnam if we are serious about investing. According to the “Sustainable scenario for Vietnam Power Industry - Vision to 2050” Report by WWF and the Alliance for Sustainable Energy Vietnam, by 2050, renewable energy could meet 100 per cent of Vietnam's electricity demand while significantly reducing harmful carbon emissions related to climate change. Then, investment in renewable energy may be the first priority of the financial and banking sector and coal-fired power plants, which currently account for 53 per cent of Vietnam's total electricity production output, should be gradually eliminated.

Thu Ha

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