Green finance has developed rapidly in China in recent years. Just like other elements of Chinese policymaking, the development has been top-down, with high-level directives guiding market development. Once there was high-level political buy-in, the market response was fast.
This report provides an overview of the development of green banking practices in China, identifying major policies and practices, performance to date, as well as barriers to further expansion. It also explores green banking practices within one of China’s largest banks—the Industrial and Commercial Bank of China (ICBC)—providing practical development and management examples of green banking practices. Through this work, policymakers can better understand green banking’s successes to date, and what barriers need to be addressed to further scale green banking in China.
This report also provides a first look at the performance of green credit portfolios of China’s major banks. Our analysis indicates that green portfolios, to date, perform better than a benchmark of traditional portfolios in terms of non-performing loans. Although just one indicator, it suggests that expanding green banking in China could improve risk management. Taken together, the findings of this report show that a solid foundation for green banking is now established. Although the impact of green banking has been relatively small to date, there is significant potential to scale, which would have major impacts on the availability of financing for sustainable infrastructure around the world.