Exploring Green Finance Incentives in China

Climate change is a major contemporary issue. In response, financial institutions offer green financing to fund low-carbon investments to those organizations who want to help mitigate this issue. Nevertheless, a lack of green credit remains the case. Therefore, to learn how to close this financing gap, this empirical study explores China's green finance through the lens of the Chinese banks who are the providers of such loans. Green finance has been growing rapidly in China since the Chinese government issued the Green Credit Policy. Previous studies have posited that banks have incentives in the form of credit risk management, new business opportunities, corporate reputation, and compliance risk to offer green loans. The objective of this research is to ascertain whether green loans provide better risk management and more business opportunities in practice. As a part of the research, this thesis explores China's banking system and the development of, and current research into, China's Green Credit Policy. This study identifies a distinct characteristic of the Chinese banking system and posits how the government may influence the development of Green Finance in China.