What are the investment projects requiring environmental risk management in credit extension in Vietnam?
On December 23, 2022, the State Bank of Vietnam issued Circular No. 17/2022/TT-NHNN providing guidelines on environmental risk management in credit extension by credit institutions and foreign bank branches.
What are the rules of environmental risk management in extending credit in Vietnam?
First of all, environmental risk management in extending credit defined in Clause 5, Article 3 of Circular No. 17/2022/TT-NHNN refers to the process of identifying and assessing environmental risks in extending credit, monitoring, controlling and taking appropriate measures for minimizing environmental risks in extending credit.
In particular, environmental risk in extending credit means the probability of causing adverse impacts on the environment during the implementation of an investment project resulting in increased costs, reduced incomes or loss of capital and/or assets of the client that is the project owner.
- Credit institutions shall manage environmental risks in extending credit based on the rules specified in Article 4 of Circular No. 17/2022/TT-NHNN, specifically as follows:
+ Credit institutions shall be responsible for the environmental risk management in extending credit which must be conformable with regulations of law on credit extension and credit risk management in banking sector.
+ Credit institutions shall carry out environmental risk assessment in extending credit to investment projects in order to determine credit risks, determine conditions and manage credit risks for credit amounts extended to clients.
+ The credit institution shall organize assessment of environmental risks for every investment project, or use the report on assessment of environmental risks for that investment project given by a qualified environmental risk assessment service provider or by another credit institution under terms and conditions of the signed service contract.
+ If the investment project is found to have environmental risks in extending credit according to the assessment report, the credit institution shall reach an agreement with its client on addition of measures to be taken by the client to minimize the environmental risks in extending credit to the credit extension agreement.
+ Clients shall provide all information necessary for the environmental risk management in extending credit at the request of credit institutions and assume responsibility for the accuracy of provided information.
What are the rules of environmental risk management in extending credit in Vietnam? What are the investment projects requiring environmental risk management in credit extension in Vietnam?
What are the investment projects requiring environmental risk management in credit extension in Vietnam?
Pursuant to Article 1 of Circular No. 17/2022/TT-NHNN stipulating that the scope of regulation of this Circular is investment projects requiring environmental risk management in credit extension as prescribed in Clause 1 Article 3 of this Circular.
According to that, Clause 1, Article 3 of Circular No. 17/2022/TT-NHNN stipulates:
Investment projects requiring environmental risk management in credit extension refer to the investment projects defined in Appendixes III, IV, V enclosed with the Government’s Decree No. 08/2022/ND-CP dated January 10, 2022 on elaboration of the Law on Environmental Protection (hereinafter referred to as “investment projects”).
Thus, investment projects that must implement environmental risk management in credit extension are investment projects including:
- Projects in Appendix III issued together with Decree 08/2022/ND-CP: Group I investment projects have a high risk of adverse impacts on the environment specified in Clause 3, Article 28 of the 2020 Law on Environmental Protection in Vietnam.
- Projects in Appendix IV issued together with Decree 08/2022/ND-CP: Group investment projects with risks of adverse impacts on the environment specified in Clause 4, Article 28 of the 2020 Law on Environmental Protection in Vietnam, except for projects specified in Appendix III above.
- Projects in Appendix V issued together with Decree 08/2022/ND-CP: Group III investment projects with little risk of adverse impacts on the environment specified in Clause 5, Article 28 of the 2020 Law on Environmental Protection in Vietnam, except for the project mentioned in the above 2 Appendices.
What is the information serving the environmental risk management in extending credit in Vietnam?
Pursuant to Article 5 of Circular No. 17/2022/TT-NHNN, information serving the environmental risk management in extending credit includes:
- Environmental information about the investment project.
- Decision on approval of appraisal results of preliminary environmental impact assessment report or environmental impact assessment report as prescribed by laws, environmental license and environmental registration certificate (if any).
- Reports on inspection of compliance with regulations on environmental protection by the investment project given by competent environmental protection authorities (if any).
- Information on site surveys, information provided by regulatory authorities, social organizations, residential communities and individuals under direct environmental impact of the client’s investment project in respect of the compliance with regulations on environmental protection (if any).
- The environmental protection reports submitted by the client to competent authorities in accordance with regulations of law on environmental protection.
- The reports sent by the client to the credit institution on its commitments to minimize the environmental risks in extending credit specified in the signed credit extension agreement.
- Environmental protection reports of relevant authorities and organizations as prescribed in the law on environmental protection (if any).
- Other information concerning environmental protection activities.
Circular No. 17/2022/TT-NHNN takes effect from June 1, 2023.
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