The negative environmental impact of many economic activities has been problematic for Chinese economic growth. In 2007, the People’s Bank of China established an internationally recognized program on green finance — the Green Credit Policy, which introduced guidelines and regulations for integrating environmental issues into financial decision making, in particular in commercial lending decisions that focus on banks and other lenders directly. The results of the analysis presented in the policy brief suggest that the environmental and social performance of Chinese banks improved significantly between 2009 and 2013 because the Green Credit Guidelines require banks to become active with regard to integrating environmental risks into their credit risk assessment procedures.

  • Financial sector sustainability regulations are an efficient policy to support the green economy and to foster financial sector stability.
  • The central banks of the G20 countries should introduce green banking policies similar to the Chinese policy to support the financial sector financing the green economy.
  • The FSB and G20 should develop case studies that show the benefit of green economy finance.
  • Olaf Weber is a CIGI senior fellow and an expert on sustainability and the banking sector. He is currently a professor in the School of Environment, Enterprise and Development at the University of Waterloo and a University of Waterloo Research Chair in Sustainable Finance.