Environmental and social risk management policy

The environmental and social (E&S) risk management policy is central to sustainable governance and is key to pushing VPBank to improve its sustainability efforts today and in future.

In 2016, VPBank was one of the leading banks to develop an Environmental and Social Risk Management System (ESMS) and issued policies based on compliance with national laws and IFC Performance Standards. Since then, ESMS has become an indispensable part of VPBank's credit risk management activities.

With a broad range of businesses in many industries with diversified products, VPBank adopts a balanced approach when integrating E&S risk management factors into credit operations. VPBank believes to make a positive contribution to a sustainable environment by developing business ways to protect and conserve natural resources, and by exploring investment opportunities in new products, services and partnerships. Most importantly, VPBank maintains customer supervision combining awareness of their social and environmental impacts to ensure that the community and the environment are protected from potential negative impacts. The E&S risk management policy is central to sustainable governance and is key to pushing VPBank to improve its sustainability efforts today and in future.

PRINCIPLES FOR IMPLEMENTING ENVIRONMENTAL AND SOCIAL RISK MANAGEMENT MEASURES IN CREDIT GRANTING AT VPBANK

1. The E&S compliance activities in VPBank must be implemented in accordance with the Law of Vietnam and VPBank’s commitments with partners.

2. VPBank does not engage in any activities on the Exclusion List or provide funding or other supports to customers engaged in any of the activities on the VPBank’s Exclusion List. VPBank monitors approval limits for cases on the E&S Restricted List.

3. VPBank has the right to refuse to grant credit to customers whose investment projects or business plans do not meet social environment requirements or violate the provisions of law on social environment.

4. ESMS shall be integrated into business activities and general risk management programs at VPBank.

 

IMPLEMENTING E&S RISK MANAGEMENT IN CREDIT GRANTING ACTIVITIES

1.Objective and scope of application

• E&S risk management is the responsibility of all units and individuals involved in credit activities at VPBank.
• VPBank applies E&S risks management to all businesses and households requesting for credit at VPBank.

2.E&S risk management process flowchart

3. E&S Initial Screening

VPBank undertakes E&S screening of each project that is proposed for VPBank financing to identify the risks and classify E&S risk levels, thereby determines appropriate E&S risk management for the risk level of the project on a consistent principle. Projects which are subject to VPBank Exclusion List/Restricted List or associated with unrecoverable E&S risks will not be considered for credit extension.

4. E&S due diligence

VPBank conducts E&S risk assessment for customers based on consideration of the following factors:

• Customer past and current compliance with E&S laws and standards;
• Customer internal framework related to E&S risk management, effective solutions for managing and minimizing E&S risks that customers apply;
• Potential impacts on environment, society and climate; and
• Ensure the rights and participation of stakeholders.

In addition, VPBank may trigger an in-depth due diligence and consultation with independence experts on projects with complex E&S risk identification.

5. Environmental and Social Action plan

An Environmental and Social Action Plan (ESAP) will be developed if gaps are identified between customer’s business plan and VPBank's E&S policy requirement. ESAP brings the project into compliance with the E&S Policy within a reasonable timeframe. In project-related loans, the ESAP becomes a binding covenant of the loan agreement that requires the customer adherence to and report the results to VPBank on a regular basis to confirm compliance.

6. E&S monitoring

VPBank monitors customer’s operations to ensure their compliance with E&S conditions during the loan period. Monitoring frequency takes into account customer’s potential risks, loan value and term, and compliance history with E&S laws and regulations.

7. Engagement, transparency and reporting

VPBank's sustainability priorities, transparency and reporting are aligned with business objectives and periodically reported to our stakeholders.

• Stakeholder engagement: including customers, shareholders, employees, regulators, suppliers, communities, and other stakeholders. VPBank is also an active member of several industries and stakeholder groups focusing on the environment, society and sustainable development, regularly engages with academic and multilateral institutions to better understand on evolving standards and help promote better practices.
• Employee participation: VPBank understands the importance of enhancing employees' awareness of environmental initiatives and performance through communication and training.
• Reporting: VPBank reports periodically on issues covered in the Environmental Policy Framework in accordance with International Standard, such as ESG report (Environmental, Social and Governance report), and reports to the State Bank of Vietnam and partners as committed.

 

E&S RISK MANAGEMENT TOOLS

1. E&S Initial Screening

• VPBank’s Exclusion List

2. E&S Due Diligence

• Evaluation and classification result
• Declaration on E&S compliance
• E&S Action Plan
• E&S On-site investigation

3. E&S Monitoring

• Monitoring of E&S compliance after disbursement

4. Reference standards

• IFC Performance Standards on Environmental and Social Sustainability