Does green credit promote green sustainable development in regional economies?—Empirical evidence from 280 cities in China

Abstract

Background China has been exploring a sustainable development path that harmonizes economic growth and environmental protection, targeting to build a beautiful China. The role of green finance in adjusting the misallocation of financial resources and leading the green sustainable development of the real economy is receiving increasingly more attention. Currently, green credit accounts for more than 90% of the total green finance funding in China and constitutes the most significant component of the green finance matrix. Whether green credit effectively promotes the green and sustainable development of the regional economy largely determines the success of China’s economic green transformation. Objective Existing studies of green credit mainly focus on its influences on financing, investment, and emission reduction of environmental pollution industries or companies. Extending the literature by exploring whether green credit is effective in promoting green sustainable development and what impact green credit exerts on the upstream (energy inputs), midstream (technological innovation), and downstream (pollution outputs) stages of the green sustainable development value chain, is the leading research objective of this paper. Methods This paper discusses the impact of green credit on green sustainable development based on city panel data from 2012 to 2019. The level of green sustainable development is calculated by the GML index based on SBM directional distance function. The city-level green credit scale is calculated from the green credit issued by banks, weighted by the density of bank branches in a city. Synthetic control methods are employed in the robustness analysis to reduce the impact of endogeneity issues. Results and conclusion The results of this paper indicate that green credit can promote green sustainable development and the impact gradually strengthens over time as the incremental implementations of complementary policies with substantial constraints and incentives, through which pollution control and economic growth achieve a "win-win" situation. Furthermore, the results indicate that green credit reduces the overall amount of energy inputs while optimizing the energy input structure. However, green credit does not boost the green technological level and even crowds out high technical value green innovations. Besides, the pollution reduction effects of green credit are associated with the strength of green credit constraints and the importance of pollution industries in the local economy, which means green credit performs better pollution reduction effects in regions with relatively strong green credit binding effects or in regions where pollution industries are not local economic pillars. The empirical results are further validated through robustness tests, including changing scope and measurement variables and applying the synthetic control method. Limitations Although this paper provides valuable contributions to the research area of green credit and green sustainable development, specific limitations exist in the current study. Firstly, as the official information disclosure of green credit in China is not sufficient, existing studies, including ours, could only use estimation methods through different perspectives to measure green credit, which is overall logical and reasonable but may lose some accuracy. Secondly, since there might be a certain degree of lag in the effect of green credit on the economy, the dynamic impact and long-term effects of green credit deserve further study. Thirdly, considering the characteristics of the Chinese administrative systems, introducing the behavior of local governments and local officials into the analysis of green credit and green sustainable development could be valuable.

Perspectives by green financial instruments – a case study in the Hungarian banking sector during COVID-19

“…The sustainability attitude assessment of both residential and corporate survey participants resulted in an over 90 percent share of generally eco-conscious respondents, even with a slight improvement from one year to the next. The CBH Report pointed out that there is a correlation between environmental awareness and the households' fihttp://dx.doi.org/10.21511/bbs.18 (1).2023.10 nancial attitude, just as mutual positive feedback can be assumed between the market presence of green financial products and the sustainability attitude of the stakeholders; financially conscious households make more environmentally friendly consumer decisions, based mainly on savings considerations. Among the environmentally conscious actions, the population takes those that have tangible financial benefits even in the short term (CBH, 2022a).…”

“…In the case of corporate leader respondents, Cao et al (2022) identified that an increase can be idenhttp://dx.doi.org/10.21511/bbs.18 (1).2023.10 tified by their environmental commitment, which helps make their businesses greener, forming a higher demand for green banking instruments as sustainable development tools. Based on a survey involving more than 400 corporate members, Khan et al (2021) pointed out that making use of green banking instruments not only supports the sustainable transition of the company but also enhances the formation of a positive corporate image, which then ends in an elevated demand for the company's services.…”

“…Source: Self-edited.Figure 2. The problems of GHP from the customers' point of view as of June 2022Banks and Bank Systems, Volume 18, Issue 1, 2023 http://dx.doi.org/10.21511/bbs.18(1).2023.10…”

An Empirical Study on the Impact of Green Credit on Financial Performance of China’s Listed Banks

“…The results of AR(2) test for equation 6 indicated that equation 6 accepted the original hypothesis of no autocorrelation of the random disturbance term at the 5% significance level, and the results of AR(3) test indicated that equation 6 accepted the original hypothesis of no autocorrelation of the random disturbance term at the 0.1 significance level. The Sargan test for equation 6 indicates that equation 6 accepts the hypothesis that 'the instrumental variables are used reasonably and there is no over-identification' at the 10% level of significance, and the Hansen J test for equation 6 indicates that equation 6 accepts the hypothesis that 'the instrumental variables are used reasonably and there is no over-identification' at the 10% level of significance.…”

“…Aims to build a green credit system with economic and environmental development together through the implementation concepts between promoting green innovation, sustainable development, industrial transformation, supply-side structural reform and other requirements. At present, the financial institutions that are most concerned about green credit are the banks, which is reflected in the various credit businesses related to the environmental protection industry launched by the banking industry, collectively known as "green credit business" (Bao and He, 2022). China has been concerned about the development of green credit business since 2007, when the three departments of the China Banking Regulatory Commission (CBRC), the People's Bank of China (PBOC) and the State Environmental Protection Administration (SEPA) jointly proposed the Opinions on the Implementation of Environmental Protection Policies and Regulations to Prevent Credit Risks.…”