Green Loans, Better Risk Management, and Better Business Opportunities in China: A Review of Financial Institutions

Abstract

The framework for carrying out green finance operations has been established, and Chinese banks are now required to report on any green loans they make. What's really kicking things off in China's green finance industry is the country's Green Credit Policy. Given its enormous scope (8.08 trillion RMB) and wide range of participants, China's Green Credit Policy stands as one of the most prominent empirical examples of green finance. The fact that all of the main Chinese banks issue green loans in accordance with the same guidelines is another fantastic aspect of the Green Loans Policy. Since the bank's Green Credit Policy was evaluated by the CBRC in 2013, its performance can be directly contrasted with other banks. By using its Green Credit, the Chinese government made mistakes that others could learn from.

There are several strategies used by Western financial institutions in the field of green finance. It is rare for Western bank regulators to require their institutions to use eco-friendly financing methods. China's Green Credit Policy incorporates both established and emerging procedures, which stands in contrast to the absence of standards in the field of green finance. Not even in Western institutions is the definition of "green financing" widely agreed upon.

There are simply too many synonyms (covered in section 2.1) that can be used in its place. The UNEP, EP, and UNGC guidelines do nothing to promote the growth of green finance, but they do help lay the groundwork for it.

In China, government regulations drive green finance, while decision-makers at Western banks rely on their expertise in areas such as corporate social responsibility and sustainable development. Whatever the reasons behind China's policymakers' actions, the nation's green finance industry expanded from zero to 8.08 trillion RMB in 2015. The financial institutions' positive response to incentives is indicated by the green financing sector's rapid expansion.