The green criteria outlined in Decision 21/2025/QD-TTg are established within the broader context of international efforts to develop green classification systems—such as the EU Taxonomy Regulation and the Korea Green Taxonomy. These instruments are regarded as foundational tools for enhancing transparency in sustainable capital flows and preventing “greenwashing.”
In response to the mounting challenges of climate change and Vietnam’s commitment to achieving net-zero emissions by 2050—pledged at the COP26 Climate Change Conference—Vietnam is compelled to restructure its growth model toward sustainability. Green finance, particularly green credit, has emerged as an indispensable lever for mobilizing resources to support this transition.
Despite proactive measures by the Government and the State Bank of Vietnam—including the National Strategy for Green Growth, the Green Bank Plan, and the circular on environmental risk management in credit provision—a persistent bottleneck remains: the absence of a unified set of criteria to define a “green project.” This lack of clarity not only hinders businesses from accessing preferential funding but also leaves the market vulnerable to “greenwashing,” where unsustainable projects are misclassified as green initiatives.
A significant milestone was reached on July 4, 2025, when Deputy Prime Minister Tran Hong Ha signed Decision 21, marking the first official establishment of environmental criteria for classifying green projects. This decision is poised to serve as a cornerstone for green credit in Vietnam, offering a clear legal and technical framework for credit institutions, businesses, and relevant stakeholders to systematically define, assess, and monitor green projects.
Main contents and highlights
For the first time, the concept of a “green project” is clearly defined through two distinct groups of criteria, helping to standardize the examination and classification process within the financial system. As stipulated in Article 3 of Decision 21, a project must satisfy two mandatory conditions to be recognized as “green.”
First, the project must demonstrate full legal compliance with environmental procedures. This includes possessing all required documentation in accordance with the 2020 Environmental Protection Law—such as approval of the environmental impact assessment report, an environmental permit, or an environmental registration—except in cases explicitly exempted by law.
Second, the project must deliver tangible environmental benefits aligned with clearly defined areas outlined in Appendix I of Decision 21. These areas span seven priority pillars: efficient resource utilization, climate change adaptation, waste management, pollution control, enhancement of environmental quality, ecological restoration, and biodiversity conservation. This framework is consistent with Article 149 of the Environmental Protection Law.
The decision also states clearly the process to certify green projects. The certification can be done by the competent State authority to ensure legality and strictness, and the independent organization to ensure meeting international standards like the TCVN ISO/IEC 17029:2020 or ISAE 3000.
Decision 21 is regarded as a pivotal step in shaping the green credit market in Vietnam with four notable highlights:
Criteria unification, market standardization
For the first time, Vietnam has established a clear legal framework to define “green projects.” This decision eliminates previous ambiguity and fragmentation, enabling credit institutions to evaluate and classify green credit using a unified legal standard. It also offers businesses clear guidance for designing eligible projects and facilitates effective oversight by regulatory agencies, allowing for streamlined monitoring and assessment of the system’s overall efficiency.
Enhancing transparency, preventing “green washing”
The requirement for lawful environmental documentation under the 2020 Environmental Protection Law, combined with the mandate for independent certification aligned with international standards, serves as a robust safeguard against false “green labeling.” These measures are critical for maintaining market integrity and protecting investor confidence.
Approaching international norms
By aligning independent certification organizations with international standards, Decision 21 brings Vietnam’s green credit framework closer to global practices—such as the Green Bond Principles (ICMA) and the sustainable finance principles of UNEP FI. This harmonization enhances Vietnam’s credibility and competitiveness in the global financial landscape, creating favorable conditions to attract green capital from major institutions like the World Bank, the Asian Development Bank, and international ESG-focused investment funds.
Removing the bottleneck for Circular 17
Previously, Circular 17/2022/TT-NHNN required credit institutions to establish criteria for assessing environmental risks, yet lacked concrete guidance for implementation. Decision 21 fills this critical gap by providing a foundational framework that enables credit organizations to develop internal criteria in a consistent and legally robust manner—thereby strengthening the effectiveness of environmental risk management in credit operations.
Many loopholes to solve
Though Decision 21 is assessed as a big step forward in building the legal framework for green credit, it faces many challenges in practice. Three notable issues which need improvement are:
Criteria are still general, lack quantitative measurement
The most significant shortcoming lies in Appendix I, which outlines “green” areas but lacks concrete quantitative indicators to evaluate sustainability. For instance, renewable energy projects are not subject to clear benchmarks for transformation efficiency or CO2 emission reductions, while waste treatment initiatives lack defined standards for minimum recycling rates or treatment quality. This absence of technical detail creates uncertainty for credit institutions during project evaluation, potentially leading to subjective and inconsistent assessments across banks. In contrast, frameworks like the EU Taxonomy and the Korea Green Taxonomy employ rigorous technical screening criteria—such as a CO2 emission threshold of under 100g/kWh for renewable energy—making Vietnam’s criteria appear largely conceptual by comparison.
Legality not binding enough
Although Decision 21 is a legal document, its provisions remain largely recommendatory. The “certification” of green projects serves as a reference point but lacks mandatory enforcement or concrete sanctions. Currently, there is no regulation requiring credit institutions to allocate a specific proportion of their lending portfolio to green projects, nor are they held legally accountable for failing to conduct environmental risk assessments or submit comprehensive reports. In contrast, the European Union’s Sustainable Finance Disclosure Regulation (SFDR) mandates the compulsory publication of sustainability-related information. The absence of binding obligations or preferential mechanisms in Vietnam means that the advancement of green credit continues to depend primarily on the goodwill and internal policies of individual credit institutions.
Unsynchronization with the credit legislation system
Another challenge is that green credit in Vietnam currently applies only to lending activities, while green criteria have yet to be integrated into other financial instruments such as bank guarantees (Circular 61/2024), factoring (Circular 20/2024), and transfer instrument discounts (Circular 04/2013). Moreover, the amended Law on Credit Organizations (2024) lacks specific provisions for green credit. This regulatory fragmentation results in an incoherent legal ecosystem, limiting the potential for a comprehensive “greening” of financial services and diminishing the spillover effect of green capital across the broader economy.
(*) University of Economics and Law, HCMC National University Arbitrator, Vietnam Traders Arbitration Center (VTA)
