Bank green lending and credit risk: an empirical analysis of China’s Green Credit Policy

Aug 3, 2023

This study empirically investigates the relationship between banks’ green lending and their credit risk, and how Chinese green finance regulations contribute to the solvency of individual banks and the resilience of the financial system. Analysing a sample of 41 Chinese banks from 2007 to 2018, we find that the association between a bank’s (relative) green lending as a proportion of its overall loan portfolio, and its credit risk, depends critically on the size and structure of state ownership. While the implementation of China’s Green Credit Policy reduces credit risk for the major state-controlled banks, it increases credit risk for the city and regional commercial banks. This performance difference appears largely due to information and expertise asymmetries, with the city and regional commercial banks having less access to information and expertise necessary to evaluate the credit risk of green lending. Understanding this phenomenon can help policymakers tailor green finance policies according to banks’ characteristics. It also suggests that mechanisms and platforms for the city/regional commercial banks to learn from the major state-controlled banks could be beneficial.

Publication details
Theme(s)
The urgency of zero
Type(s)
Research paper
Author(s)
Caldecott, Ben
Year(s)
2022
Business Strategy and the Environment

Latest news

Oxford Net Zero launches autumn webinar series
Oxford Net Zero launches autumn webinar series

Join us this autumn for a series of webinars led by Oxford Net Zero fellows! Read more

Professor Myles Allen appointed Fellow of the Royal Society
Professor Myles Allen appointed Fellow of the Royal Society

Professor Myles Allen appointed Fellow of the Royal Society Read more

Oxford Net Zero is Hiring – Join as Fossil Fuel Fellow
Oxford Net Zero is Hiring – Join as Fossil Fuel Fellow

Oxford Net Zero has an exciting opening for a Research Fellow on Net Zero for the Fossil Fuel Sector and non-stipendiary Research Fellowship at Kellogg College. We are seeking to appoint a Research Fellow on Net Zero for the Fossil Fuel Sector ... Read more

See more news and events