Tuesday, January 11, 2022
In this blog, Hoang Thu Trang - Programme Officer, Oxfam in Vietnam - discusses the findings from Fair Finance Vietnam's first bank policies assessment report. She also shares lessons learnt and how they plan to continue their constructive dialogue with relevant stakeholders, while always putting the voice of affected communities at the heart of the coalition’s work.
In April 2021, Fair Finance Vietnam (FFV) launched the report "Towards Sustainable Finance – Environmental, Social and Governance commitments in the banking industry” which has been considered the first-of-its-kind assessment in Vietnam. The report assessed ten commercial banks in the country. After the launch, FFV received recognition from the State Bank of Vietnam, positive responses from the banks and more opportunities to contribute to policy development in this area. This inspired FFV to work on the second bank assessment in 2022 as well as on related relevant studies. This work takes place alongside continuing constructive dialogue with the banks, policy regulators and CSOs with input from affected communities.
Vietnam is a fast and emerging market, with political stability in the eyes of foreign investors. Between 2002 and 2020, GDP per capita increased 2.7 times, reaching almost US$2,800. Vietnam has been deepening its international integration and been more proactive in global governance through its international commitments to environmental protection and human rights, which has helped set the ground for comprehensive action at country level. Vietnam has ratified fundamental United Nations’ human rights conventions; it participates in international protocols such as becoming a member of APEC in 1998, of the World Trade Organization in 2006, and a non-permanent member of the United Nations Security Council (UNSC) during 2020 - 2021. At COP26, Vietnam committed to climate change mitigation, such as stopping deforestation by 2030, and phasing out coal-fired power generation by 2040. FFV can use these commitments as leverage in its influencing.
To promote green growth and sustainable development, the Government of Vietnam has promulgated multiple regulations and policies reflecting Environment – Social – Governance (ESG) criteria. From assessing current ESG commitments in policies of the ten Vietnamese commercial banks, the report finds that the government’s ESG-reflecting policies have been partially translated into action by the Vietnamese commercial banks. The report highlights, however that the ten assessed commercial banks are at a very nascent stage concerning ESG policy commitments. In other words, in the "race to the top", these ten banks have just entered the race.
At the beginning, the journey was not easy. The capacity of the assessment team was one of the first difficulties encountered. Although the team are experts from Vietnamese civil society organizations who have good knowledge and experience in environmental protection and social development, they lacked understanding about the financial sector, from the financial terms to banking and financing mechanisms and practices. We did, therefore, conduct a series of capacity building and technical support sessions for the team before the assessment started.
In addition, it was the first time that FFV established a connection with the banks, the team was not confident in communicating the technical content with the banks despite the fact that assessments were quality checked. However, after much work and reflections during the assessment period, we gradually found an effective way to move forwards with our task.
FFV deployed a constructive approach to carrying out the assessment as part of our long-term influencing strategy. During and after the assessment process, FFV developed two-way communication with the banks, not only informing them about their scores but also explaining and recommending specific strategies for improvement of each bank based on its own characteristics and advantages. This helped break the banks’ misperceptions of FFV’s stance in this mission and encourage them to be open to communicate about the scores.
In the end, hard work paid off and Fair Finance Vietnam completed a robust ESG assessment of the ten top commercial banks of Vietnam with the aim of influencing fair finance in the banking sector of Vietnam in general and in the energy sector in particular. The report was launched in April 2021 and received attention from CSOs and media in Vietnam. Following this public launch, FFV sent recommendations along with the assessment report and the policy brief to the State Bank of Vietnam and the ten commercial banks of Vietnam who were assessed, and other relevant government agencies.
The bank assessment report and case studies on the impact of banks’ investments in the energy sector, which highlighted the voices of affected communities, especially those of women; have become prominent pieces of evidence in FFV’s influencing work. FFV received encouragement and recognition from the State Bank of Vietnam, and witnessed changes by commercial banks and greater opportunities to contributing to policy development.
Two months after the public launch, on 28 June 2021, FFV received a letter from the State Bank of Vietnam (SBV) conveying appreciation for the recommendations on Environmental – Social – Governance (ESG) criteria in the banking sector of Vietnam. The central bank acknowledged that the work of FFV is a valuable reference for the State Bank in its policy development which includes the Banking Development Strategy to 2025 with a view to 2030 and other SBV’s polices and documents. Although ESG criteria has now been put at the center of these policies, the concept and framework remains new to SBV, therefore SBV needs to continue to work on the policy development process to meet international standards and to learn from good practices. SBV expressed their willingness to receive further information from FFV through sharing materials, collaborating on the topic, and maintaining regular communication with the Banking Strategy Institute.
This letter indicates, however that substantial changes have been triggered for both SBV and the commercial banks in terms of addressing sustainable finance issues.
Furthermore, following discussions evidence-based arguments and recommendations with banks in 2019 and 2020, three Vietnamese commercial banks disclosed more ESG information in their 2020 annual reports, such as commitments on human rights, consumer protection, labor rights, and non-discrimination. This led to twelve of FFV’s recommendations being taken up and reflected in their 2020 annual reports.
Findings and recommendations serve as useful sources for FFV to continue its influencing work with SBV on the regulations on environmental risks management applied to financial institutions in Vietnam. Recently on 21 October 2021, FFV was one of a few CSOs invited by SBV to attend the consultation workshop, in which FFV presented toplines from the bank policy assessment together with the case studies.
At the close of 2021, we are pleased to see Fair Finance Vietnam’s efforts are recognized, which has re-affirmed that the coalition approach is effective in promoting sustainability in the banking and financial industry in Vietnam. With our commitments fueled and strengthened, we are looking forward to working together with our partners and communities on the second bank assessment in 2022.
The assessment report develops recommendations to the State Bank of Vietnam and the commercial banks.
The recommendations to the State Bank of Vietnam are as follows:
The recommendations to the commercial banks of Vietnam are as follows:
Fair Finance Vietnam (FFV) is the creation of the collective efforts of several civil society organizations, including the Center for Water Conservation and Development (WARECOD), the Center for Education and Empowerment of Women (CEPEW), and Oxfam in Vietnam. They are currently active in the field of environmental protection and community development for sustainable development.
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