Financing a Green Future: An examination of China’s banking sector for green finance

Abstract

With the rapid economic development, China has accelerated its trade and investment at home and abroad. China’s banking sector, in supporting financial activities with capital flow, has become an emerging force at international financial stage. Meanwhile, this numerous amount of cashes provide banks an environment for excessive lending and investments. The increasing environmental accidents have shown that banks’ reckless decisions in lending to companies or project with environmental risks might lead to irretrievable environmental problems. To tackle the growing environmental threats and to build Chinese banks with social and environmental responsibilities, three Chinese government departments jointly released the “Green Credit policy” in 2007. To date, the policy, being implemented for its fifth year, has been proved effective in restricting bank lending to energy intensive and high polluting projects within China. Based on the policy, many banks have established own internal policies and measures for incorporating environmental aspects into current practices. Besides, some banks have proactively issued CSR reports and adopted international initiatives to improve their environmental performances. Nevertheless, the barriers are still remained. Towards green finance, China’s banking sector, in partnership with the government and civil society, has to address the emerging challenges and opportunities, such as improving transparency in information disclosure, monitoring environmental conducts in overseas lending. Ultimately, Chinese banking will realise financing for sustainability.

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