Research on the Impact of Green Credit on the Financial Performance of Commercial Banks in China

Abstract

Against the backdrop of China's "dual carbon" strategy, green credit has become an increasingly important financial instrument for supporting green development. It now plays a key role in helping commercial banks optimize their credit structure and enhance financial performance. Based on the conceptual framework and theoretical foundations of green credit, this study employs data from a selected commercial bank spanning the years 2016 to 2023 to conduct a systematic analysis of how green credit affects financial performance across three dimensions: profitability, asset quality, and liquidity. The results indicate that in the short term, green credit exerts downward pressure on profitability due to the reduction of loans to high-pollution and high-energy-consuming enterprises, as well as increased initial input costs. However, in the long term, profitability improves significantly as a result of the accumulation of high-quality green projects and optimized risk management. In terms of asset quality, the expansion of green credit effectively restructures credit portfolios and reduces non-performing loan risks. Regarding liquidity, although early implementation may increase liquidity stress, the gradual phase-out of high-pollution enterprise loans contributes to better control of liquidity risk and supports improved financial outcomes. Finally, the paper proposes policy recommendations such as strengthening cost control, expanding green credit scale, optimizing loan maturities, and enhancing risk management, with the aim of providing guidance for the sustainable development of green credit in commercial banks.