Green Loans, Improved Risk Management, and Expanded Business Opportunities in China: A Case Study of Financial Institutions
Abstract
Mandatory reporting requirements for green loans made by Chinese banks have been set up, and the infrastructure for conducting green finance operations has been built. China's Green Credit Policy is what's really getting things moving in the green finance sector in the country. China's Green Credit Policy is a leading empirical example of green finance due to its massive scale (8.08 trillion RMB) and numerous participants. Another great thing about the Green Loans Policy is that all the major Chinese banks use the same standards when issuing green loans. Since the CBRC assessed the bank's Green Credit Policy in 2013, its performance may be directly compared to that of other banks. Others may learn from the mistakes made by China's government with its Green Credit Policy.
Western financial organisations have a number of approaches when it comes to green finance. Western bank regulators do not often mandate that their institutions engage in environmentally friendly financing strategies. In contrast to the lack of standardizations in green finance, China's Green Credit Policy includes both established and emergent procedures. The definition of "green financing" is not universally accepted, even among Western institutions.
There are just too many interchangeable phrases that may be used in its place (discussed in section 2.1). While the UNEP, EP, and UNGC guidelines all contribute toward establishing a foundation for green finance, they do nothing to foster its development.
When it comes to green financing, Western banks are led by the knowledge of their decision-makers in areas like sustainable development and corporate social responsibility, whereas in China, green financing is led by government mandates. Regardless of the motivations of China's policymakers, the country's green financing sector grew from zero to 8.08 trillion RMB in 2015. The rapid expansion of green financing suggests that financial institutions are responding favorably to incentives.
Keywords
Credit Policy, , Financial Institutions, , Sustainable DevelopmentHow to Cite
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