In early July, Viet Nam’s Green Taxonomy (GT) was promulgated under Decision No. 21/2025/QD-TTg (dated July 4, 2025) on “Regulations on Environmental Criteria and Certification of Investment Projects under the Green Taxonomy”.

According to FinnRatings, the taxonomy will provide a useful common language for investors, credit institutions, and regulatory agencies, while also serving as a technical foundation to support businesses in finding financing solutions for green projects and assets. This is a positive signal for the strong development of Viet Nam’s sustainable infrastructure market in the near future.

Enterprises make efforts, banks stand ready

The taxonomy defines 45 sectors and project types across seven industry groups, creating a solid legal foundation for the domestic green finance market, including green credit and green bonds. The unified set of environmental criteria helps identify and select projects eligible for green funding, thereby promoting sustainable transformation in Viet Nam’s key industries. The green project verification mechanism has been flexibly adjusted, enabling enterprises to access green capital more easily while enhancing transparency and reliability for lenders and investors.

The GT also opens major opportunities for credit institutions and enterprises to participate in the green finance market. Through credit channels, supporting policies such as the 2% annual interest rate subsidy under Resolution 198/2025/QH15 of the National Assembly and directions from Resolution 68-NQ/TW on private sector development will provide strong momentum. In the bond market, many Vietnamese enterprises are already applying international green bond principles on a voluntary basis to raise capital. The issuance of the GT will be a key platform for establishing concrete support mechanisms, helping to foster a more robust green bond market.

Dr Nguyen Quoc Hung, Vice Chairman and General Secretary of the Viet Nam Banks Association, stated that the GT forms a fundamental legal corridor to help credit institutions identify eligible green investments and develop appropriate policies. Although there had previously been a directive to promote green credit, credit institutions remained hesitant due to the lack of clear criteria for identifying eligible entities. This taxonomy, he said, will help credit institutions invest in the right direction and facilitate sustainable enterprise development.

Nguyen Van Bach, Head of the Credit Policy Department at Agribank, commented that the GT, in combination with the Prime Minister’s Decision 21, provides an important legal framework to clearly define sectors and projects suitable for green credit. He noted that the verification mechanism by competent authorities or third-party organisations will offer a transparent basis for granting green credit, thereby enabling banks to implement their policies more objectively and clearly.

According to FinnRatings, outstanding green credit had reached 679 trillion VND by the end of 2024, a 4.39% increase from the previous year. However, the classification of green credit faced challenges, as banks had to develop their own criteria, posing risks in assessing and monitoring asset quality. The application of the GT is necessary for building an environmental and social risk management system (ESMS) in bank lending operations, while also enhancing the capacity of credit officers in appraising and categorising green credit.

The GT brings numerous opportunities for credit institutions, particularly in terms of operations, by standardising definitions, criteria and project classifications suitable with Viet Nam’s economic context and reduces the risk of “greenwashing”. Strategically, the GT helps banks expand their green credit products, boost competitiveness, and build a sustainable brand identity. This creates favourable conditions for banks to enhance their access to foreign capital from international financial institutions, especially in the context that financing for emission reduction projects has become a global trend.

Challenges remain

Speaking on the major challenges in implementing the new policy, Dr Nguyen Quoc Hung voiced concerns about the resources needed and the coordination among relevant agencies across various sectors.

“In addition to green credit policies, it is vital to combine them with policies supporting green production models to ensure the effective use of capital, avoid bad debt, and prevent new non-performing loans for the economy,” emphasised Hung.

Hung also noted that, as these sectors involve many ministries and agencies with varying levels of risk, general regulations should be further specified through more detailed criteria, providing credit institutions with a clear basis for accurately identifying the intended purposes and beneficiaries.

According to FinnRatings, Viet Nam is currently in the early stages of implementing purely green projects. However, the development of transition finance is inevitable, with an upcoming phase of accelerated adoption of green and low-carbon economic models aimed at delivering real and measurable impact. A major challenge lies in the inconsistency of technical capacity across market players, and Viet Nam currently lacks many verification and certification organisations with recognised international credibility.

Despite the considerable challenges in implementation, many experts consider the issuance of the GT as an important step forward in the strategy towards achieving net-zero emissions by 2050. If implemented in a well-structured manner, this catalogue will not only serve as a “passport” for green projects to access funding, but it will also lay the foundation for Viet Nam’s deeper integration into global sustainable finance standards. In the near future, the green finance market will no longer be a trend but rather an essential component of a developed economy.