Absence of a Taxonomy: No common standard, fragmented Green capital development

The Governor of the State Bank of Vietnam once acknowledged that significant obstacles remain in channeling capital into green sectors, the most notable being the lack of concrete guidance for credit institutions on green classification. The delay in issuing a national green taxonomy is hindering investment flows into sustainable projects. On this issue, Mr. Nguyen Tung Anh—Head of Sustainable Finance Services at FiinRatings—sat down with VietnamFinance magazine to discuss these challenges. 

The Governor of the State Bank of Vietnam once acknowledged that significant obstacles remain in channeling capital into green sectors, the most notable being the lack of concrete guidance for credit institutions on green classification. The delay in issuing a national green taxonomy is hindering investment flows into sustainable projects. On this issue, Mr. Nguyen Tung Anh—Head of Sustainable Finance Services at FiinRatings—sat down with VietnamFinance magazine to discuss these challenges. 

Q: Why does Vietnam urgently need to issue a national green taxonomy at this time? And what will happen if the market continues to lack a common standard for defining “green” projects?  

Mr. Nguyen Tung Anh: Issuing a clear green taxonomy is critically important for Vietnam right now for three main reasons. 

First, to meet the COP26 Net Zero by 2050 commitment, Vietnam will need to mobilize approximately USD 350–400 billion in sustainable-development investment by 2040. A well-defined taxonomy will unlock not only domestic capital—via bank lending and corporate bonds with preferential incentives—but also the growing international ESG investment flows.  

Second, without a unified standard, the risk of greenwashing will rise. Many projects labeled “green” may deliver negligible environmental benefit, eroding investor confidence and stalling the development of Vietnam’s green finance market.  

Third, major trading partners such as the EU are rolling out the Carbon Border Adjustment Mechanism (CBAM) and tightening ESG requirements. Taxonomies provide a reference framework for companies and sectors to assess their own eligibility without incurring excessive costs. Without one, Vietnamese enterprises will face disadvantages accessing these markets and joining global supply chains. 

If Vietnam continues without a unified standard, the green capital market will grow in a fragmented, inefficient way. Many companies, though eager to issue green bonds, will have to wait—fearing that today’s investments may not meet tomorrow’s criteria. International investors will hesitate without clear verification mechanisms. Most importantly, Vietnam risks falling behind in the global green transition race, undermining the economy’s long-term competitiveness. 

Q: How do you assess the structure and scope of investment project categories in the draft national green taxonomy? Are these categories comprehensive and appropriate for Vietnam’s context?  

Having reviewed the various draft versions of Vietnam Taxonomy, I believe they represent a noteworthy step forward in tailoring a classification system to our country’s specific needs. 

Regarding structure, the current draft builds on international best practices—namely the EU and ASEAN taxonomies—by centering on two core principles: “substantially contribute to environmental objectives” and “do no significant harm.” This dual-pillar approach aligns Vietnam’s taxonomy with regional and global frameworks and makes it easier for domestic firms to engage with international investors.  

For investment projects, the draft covers six priority sectors: renewable energy, energy efficiency, green transportation, sustainable water management, sustainable agriculture and forestry, and waste management/circular economy. These sectors are vital given Vietnam’s pressing climate and environmental challenges. 

However, I do notice some areas that need enhancement. Firstly, biodiversity and ecosystem protection: we should introduce detailed criteria to safeguard biodiversity and ecosystems, since Vietnam is both highly biodiverse and facing serious ecological degradation. Next, the draft does not provide clear guidelines for “transition pathways” in hard-to-abate sectors such as steel, cement, and chemicals—sectors critical to Vietnam’s economy. Finally, the taxonomy must be more flexible to accommodate varying development stages, to avoid imposing undue barriers on regions or enterprises early in their green journey. 

Q: In your view, what support mechanisms should the State design to enable independent rating agencies like FiinRatings to truly serve as “green referees” in the sustainable finance ecosystem? At the same time, what actions should these agencies themselves take to strengthen their capacity and credibility? 

Viewing independent agencies as “green referees” is an interesting perspective, but I believe our role goes beyond assessment—we are also catalysts for market development and trust-building among investors and issuers.  

But to address the main point of the question, rating agencies must collaborate closely with regulators to become effective ‘green referees’. 

First, the State must establish a clear legal framework with detailed standards, evaluation procedures, and guidance. This framework should not only ensure transparency but also explicitly define the legal responsibilities of rating agencies, raising the bar for professionalism and rigor.  

Second, quality-control mechanisms are needed to prevent issuers from “shopping” for lenient evaluators. Granting access to national environmental data and modern assessment tools via open-data platforms will further enhance transparency and technical accuracy for all parties involved. 

Third, the State should incentivize smaller enterprises—especially SMEs—to undergo independent green certification by offering tax breaks or fee waivers. Such measures will encourage broader participation and drive more substantive growth in green finance. 

From the perspective of a rating agency, FiinRatings is taking concrete steps to elevate our sustainable finance practice. We have established a dedicated Sustainable Finance Services team staffed by interdisciplinary analysts in finance, environment, climate change, and sustainability, rigorously trained with practical experience in ESG and green finance. We have also standardized our methodologies on internationally recognized frameworks—such as the Climate Bonds Initiative (CBI) and ICMA Green Bond Principles—while tailoring them to Vietnam’s unique market context. 

Not stopping there, FiinRatings believes transparency is paramount and has taken action by publishing our methodologies, evaluation processes, and results in a clear, accessible manner to build stakeholder confidence. Finally, we actively engage with global networks and initiatives to be up-to-date with emerging trends and best practices, focusing on enhancing our expertise and support for Vietnam’s green transition. 

Q: You mentioned SMEs earlier. Could you explain how the taxonomy will affect small and medium-sized enterprises? Is there a risk that they could be left behind because they lack the resources to meet stringent green criteria? 

This is a vital question, as SMEs account for over 97% of businesses in Vietnam. The taxonomy will influence SMEs in two main ways: 

On the positive side, a clear taxonomy can unlock new sources of capital for SMEs—especially from domestic and international green investment funds. Small and medium-sized enterprises that meet the green criteria will enjoy a competitive edge when joining the supply chains of large corporations pursuing Net Zero goals.  

However, we cannot deny that SMEs face significant challenges and risks. Compliance and certification costs—such as investing in green technologies, gathering environmental data, and hiring independent verifiers—can strain their limited financial resources. Moreover, many SMEs lack the technical expertise and personnel to manage environmental reporting and data requirements. Without a phased transition roadmap, some SMEs may be excluded from supply chains as larger firms adopt strict green standards for their partners.  

To address these hurdles, we need practical, tailored solutions for SMEs. First, the taxonomy criteria should be designed with built-in flexibility, taking into account the size and operational realities of smaller companies and allowing for a clear implementation timeline. Besides that, dedicated technical and financial support programs—such as training, advisory services, and grants—should be developed to help SMEs invest in green technologies and sustainable production methods.  

Another key measure is to promote industry-wide collaboration models that share costs, lower barriers, and enable collective compliance with environmental standards. This model will help SMEs utilize resources and experiences from other organizations.  

Finally, encouraging innovative financial instruments—such as green peer-to-peer lending platforms or pooled green bond issuances—will help SMEs access capital more easily and effectively as they transition to sustainable business models. 

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