China’s transition towards a low‑carbon economy is unfolding within one of the world’s largest banking systems. As key providers of capital, Chinese banks play a critical role in financing industrial upgrading, enabling technological innovation and supporting the country’s long‑term decarbonization objectives.

Building a Green Banking Ecosystem in China – The Role of Financial Institutions

Over time, China’s green finance agenda has evolved from a focus on environmental risk management in banking toward a broader framework supporting climate action, ecological protection and sustainable economic development. This evolution has been accompanied by the integration of sustainability into banks’ governance, risk management and business strategies.

The scale-up of green finance has been supported by a strong policy and regulatory environment, with sustainability increasingly integrated into China’s financial supervisory frameworks. Policy direction and structural monetary policy tools such as the Carbon Emissions Reduction Facility have encouraged financial institutions to channel capital towards renewable energy, green technologies and low-carbon development. 

Over time, China’s green finance agenda has evolved from a focus on environmental risk management in banking toward a broader framework supporting climate action, ecological protection and sustainable economic development. This evolution has been accompanied by the integration of sustainability into banks’ governance, risk management and business strategies.  

Figure 2: Evolution of China’s Green Finance Framework (UNEP FI, 2026)

China’s diverse transition challenges, from industrial decarbonisation and technological innovation to the transition of small and medium-sized enterprises (SMEs), require tailored approaches across different levels of the banking system. Large commercial banks provide the scale and capacity needed to support economy-wide transformation, while regional and local banks play a critical role in addressing the specific needs of local industries and businesses. Together, these institutions translate national green finance objectives into practical solutions that support China’s green transition on the ground.  

Against the backdrop of economic restructuring and energy security considerations, the strong growth of renewable energy alongside continued expansion of coal capacity reflects the dynamic nature of China’s green transition. To align financial regulation with long-term economic and environmental objectives, China is implementing a range of measures to address transition risks and further strengthen its sustainable finance framework, with the aim of mobilizing significant capital towards sustainable economic activities. These developments highlight the complexity of balancing ambition and implementation in a rapidly changing domestic and global environment.

 

— Greening China’s Banking System: Analysis of Policy and Regulatory Measures, UNEP FI

Building on this enabling environment, Chinese banks have increasingly moved beyond policy alignment to integrate sustainability into their core governance, risk management and business strategies. ICBC, the world’s largest bank, provides a clear example. Holding over RMB6 trillion in green loans, ICBC has incorporated green finance into its overall development strategy and established a governance structure involving the Board of Directors, senior management and the Green Finance (ESG and Sustainable Finance) Committee, which oversees the implementation of the bank’s ESG and sustainable finance strategies. Sustainability performance is also incorporated into senior management assessments and subsidiary evaluations, ensuring alignment across the group.

ICBC has developed institutional capabilities through enhanced green finance policies, risk management frameworks and talent development systems, including the establishment of a dedicated green finance talent pool and the introduction of due diligence exemption mechanisms. Under this mechanism, eligible green projects that meet predefined sustainability criteria can benefit from simplified due diligence procedures, enabling faster access to financing. To integrate sustainability into credit decision-making, the bank conducts ESG assessments and incorporates climate risk stress testing, NGFS scenario analysis and ESG risk considerations into its credit approval processes. These measures help guide the allocation of financial resources to key industries undergoing green and low-carbon transition.^[1]

By strengthening sector-specific policies and product frameworks, and improving coordination across business lines and subsidiaries, CCB has built one of the largest green loan portfolios in China, deepening client relationships, expanding cross-selling potential, and fostering growth in emerging sustainable finance markets.^[2]

At the local level, Anji Rural Commercial Bank, a local financial institution in Anji, has developed a county-level green finance model that leverages the region’s ecological resources and distinctive industries. Anji is the birthplace of the “Two Mountains” concept, a key principle guiding China’s approach to green development that emphasises the balance between ecological conservation and economic growth. The bank offers products such as the “Two Mountains White Tea Loan”, “Green Factory Loan” and “Ecological Restoration Loan” which embed green production practices into credit assessments and move beyond traditional collateral-based lending to finance ecological rehabilitation and link environmental improvement with cultural and tourism development.^[3]

Together, these examples illustrate how integrated and locally tailored financial solutions can incentivize sustainable practices, and support both wide-scale transformation and rural revitalization.

Industrial Bank (CIB) illustrates how innovation in financial instruments and service models can expand the scope of green finance. A distinctive feature of CIB’s approach is its “commercial banking + investment banking” model, which combines lending capabilities with investment banking and capital market services. Through this model, the bank has developed a diversified green finance portfolio, including green loans, green bonds, asset-backed securities (ABS) and infrastructure real estate investment trusts (REITs), providing integrated solutions for clients’ financing and transition needs. Beyond product innovation, CIB has developed transition finance practices for hard-to-abate sectors such as steel, power and construction. By combining sectoral transition research with tailored financial services, CIB supports companies in these industries through solutions such as energy-saving upgrades, cleaner production technologies and transition-oriented financing, helping them gradually reduce carbon intensity and align with long-term decarbonization pathways. It has also built institutional frameworks in emerging fields such as ESG assessment, biodiversity finance and carbon finance, enabling more sophisticated evaluation of environmental risks and opportunities.^[4]

The combination of top-down and bottom-up approaches is a key feature of China’s green finance development. China’s approach to greening the financial system reflects its administrative and institutional historical traditions, combining top-down policy direction with local-level implementation and piloting. For example, many regulatory measures are issued through administrative bodies as high-level policy instruments, rather than through the legislature as legal instruments. These high-level policy instruments provide strategic guidance and serve as reference points for provinces and municipalities to adapt and pilot for local contexts.

— Greening China’s Banking System: Analysis of Policy and Regulatory Measures, UNEP FI