Vietnam’s Green Taxonomy: A New Legal Framework for Green Credit and Green Bonds29 August 2025

BACKGROUND

The Law on Environmental Protection No. 72/2020/QH14 (“Environmental Protection Law 2020”) establishes the legal basis for green credit¹ and green bonds.² This framework is further developed under Decree No. 08/2022/ND-CP guiding the Environmental Protection Law 2020 (“Decree No. 08”), which details the implementation, including the roadmap and incentives for green credits and bond issuances.³ Importantly, under Article 154.1 of Decree No. 08, investment projects must meet certain environmental criteria to qualify for green credit or green bonds.

Building on this legal foundation, on 4 July 2025, Vietnam issued Decision No. 21/2025/QD-TTg (“Decision No. 21”), effective from 22 August 2025, introducing the country’s official framework for confirming investment projects as part of the green project classification list (Danh mục phân loại xanh). This represents Vietnam’s first legally binding green taxonomy, providing statutory authority and procedural guidance for determining whether a project qualifies as ‘green’ and thus eligible for green credit and green bond financing.

This article outlines Vietnam’s classification methodology introduced under Decision 21 and compares it to the State Bank of Vietnam’s (“SBV”) existing guidance on green credit, particularly under its Environmental and Social Risk Management Handbook (“SBV ESRM Handbook”), the State Securities Commission (“SSC”) guidance on issuing green, social, and sustainability bonds (“SSC Bond Guide”), as well as international approaches, particularly the EU Taxonomy.

EXISTING SBV AND SSC GREEN CREDIT AND GREEN BOND GUIDANCE

SBV Green Credit Guidance

Prior to the issuance of Decree No. 21, SBV has taken steps to promote green credit through policy instruments such as Directive No. 03/CT-NHNN,⁴ Decision No. 1552/QD-NHNN,⁵ Decision No. 1604/QĐ-NHNN⁶ and Decision No. 34/QĐ-NHNN.⁷ These policies encourage credit institutions to support environmentally sustainable projects by increasing lending to environmentally sustainable sectors. However, they have not yet established a unified guidance on green taxonomy.

Besides, the Environmental Protection Law requires credit institutions to assess environmental risks when lending to investment projects.⁸ In line with this, under Circular No. 17/2022/TT-NHNN on providing guidelines on environmental risk management in credit extension (“Circular No. 17”), SBV mandates that credit institutions must evaluate environmental risks to inform creditworthiness, set lending conditions and manage credit risk.⁹ To guide implementation for environmental risks assessment, SBV introduced the SBV ESRM Handbook which incorporates international standards from institutions like the International Finance Corporation (“IFC”) and the European Bank for Reconstruction and Development. It provides guidance on assessing environmental and social risks, categorising projects by risk level and promoting due diligence, risk mitigation and sustainable governance.

However, although the SBV Handbook serves as a risk assessment guidance, it is not a formal green taxonomy. It does not define what constitutes a ‘green’ project eligible for green credit under the Environmental Protection Law. In practice, financial institutions rely on their own internal criteria to determine green project eligibility, a mechanism permitted under Circular No. 17.¹⁰ While this allows flexibility, it may lead to inconsistent interpretations across the banking sector.

SSC Green Bond Guidance

In parallel with the SBV’s initiatives to promote green credit, the SSC, in collaboration with international organisations including the IFC, Climate Bonds Initiative and the Swiss State Secretariat for Economic Affairs, has issued the SSC Bond Guide to support market participants understand and apply best practices for the issuance of green, social and sustainability bonds.

Notably, the SSC Bond Guide also references the Climate Bonds Initiative (“CBI”) Taxonomy,¹¹ which offers sector-specific technical criteria to define eligible ‘green’ projects. The CBI Taxonomy covers screening criteria for eight sectors: energy, transport, water, buildings, land use and marine resources, industry, water and pollution control and ICT, based on their ability to contribute to a low-carbon economy and adaptation in line with the Paris Agreement. For each sector, the taxonomy sets quantitative thresholds, such as greenhouse gas emission limits or energy efficiency benchmarks.

Whilst the SSC encourages the use of these international standards, its guidance remains voluntary and non-binding. As the SSC Bond Guide itself acknowledges, Vietnam has not yet established its own national green taxonomy, resulting in a lack of clear definitions for ‘green’ projects.

THE VIETNAM APPROACH (DECISION NO. 21)

Decision No. 21 introduces a significant policy shift by establishing Vietnam’s first comprehensive and legally binding green taxonomy. It operationalises the Environmental Protection Law’s requirements in a consistent and enforceable manner. It fills a gap in defining green project and lays the foundation for standardising green finance in Vietnam, aligning the banking and capital markets in the pursuit of sustainable development.