This paper investigated the evolution of Green Credit policy in China and the progress of its implementation by Chinese banks. Confronted with increasing degradation of the environment and the poor energy and resource efficiency in China, Chinese government introduced the Green Credit policy in 2007 to tackle these problems by adopting market-based mechanisms to channel capital to energy-saving and environmental protection companies and projects while curbing credit loans to companies and projects with poor environmental performance. The results of this paper show that a top-down system of Green Credit policy has taken shape in China, and Green Credit has proved to be an effective tool in combating environmental degradation and spurring sustainable finance in China with encouraging initial results. This study also reveals that in providing loans to energy-saving and environmental-friendly enterprises, state-owned banks made noticeable progress and did much better than joint-stock banks. Joint-stock banks in general were more conservative and cautious in providing loans to environment-friendly enterprises. The only exception is Industrial Bank, which adopted the Equator Principles in 2008. In exiting or withdrawing loans for “two high” sectors, there is a wide variation among banks, and there is no significant difference between state-owned banks and joint stock banks or between banks which are EPFIs and which are Non-EPFIs in this part.

Yes / We assess, for the first time in the literature, the impact of green credit on bank efficiency. We find that green credit has a negative impact on bank efficiency. However, the effect is heterogeneous among different types of banks. While small and low capitalized banks are more affected, the impact is lower in banks with higher levels of risk. On the other hand, we find that highly capitalized banks can offset the negative effects of green credit, while large banks and those highly involved in green credit, benefit from this activity.

No / In the context of global climate change threatening human survival, and in a post-pandemic era that advocates for a global green and low-carbon economic recovery, conducting an in-depth analysis to assess whether green f inance can effectively support low-carbon economic development from a dynamic perspective is crucial. Unlike existing research, which focuses solely on the average effects of green credit (GC) on carbon productivity (CP), we introduce a non-parametric panel data model to investigate GC’s impact on CP across 30 provinces in China from 2003 to 2021, verifying a significant time-varying effect. Specifically, during the first phase (2003–2008), GC negatively impacted CP. In the second phase (2009–2014), this negative influence gradually diminished and transformed into a positive effect. In the third phase (2015–2021), GC continued to positively influence CP, although this effect became insignificant during the pandemic. Further subgroup analysis reveals that in the regions with low environmental regulations, GC did not significantly boost CP throughout the sample period. In contrast, in the regions with high environmental regulations, GC’s positive effect persisted in the mid to late stages of the sample period. Additionally, compared to the regions with low levels of marketization, the impact of GC on CP was more pronounced in highly marketized regions. This indicates that the promoting effect of GC on CP depends on strong support from environmental regulations and well-functioning market mechanisms. By adopting a non-parametric approach, this study reveals variations in the impact of GC on CP across different stages and under the influence of the pandemic shock, offering new insights into the relationship between GC and China’s CP.