Does green credit improve the core competence of commercial banks? Based on quasi-natural experiments in China

• Published in: Energy economics 2021-08, Vol.100, p.105335, Article 105335
• Main Authors: Luo, Sumei, Yu, Shenghui, Zhou, Guangyou
• Format: Article
• Language: English
• Subjects: Banking; Commercial banks; Competence; Core competence; Credit policy; Credit risk; Energy economics; Environmental policy; Environmental protection; Experiments; Factor analysis; Green credit; Industrial promotion; Quasi-natural experiment; Reputations; Risk; Rural urban differences
• ISSN: 0140-9883; 1873-6181
• DOI: 10.1016/j.eneco.2021.105335

The green credit policy is one of the key components of environmental policy. It has become an important issue to study how to implement the green credit policy and to evaluate its effect. From the perspective of environmental regulation, this paper attempts to construct a comprehensive score of commercial banks' competence by factor analysis, and constructs a quasi-natural experiment based on “Green Credit Guidelines” published in 2012 and uses Differences-in-Differences (DID) to test the impact of green credit implementation on commercial banks' core competence. The results show that green credit has a significant effect on the overall bank competence. Among them, the promotion effect of urban and rural commercial banks is higher than the industry average, and the promotion effect has weakened in the years after the policy was announced. Furthermore, from the dual perspectives of credit risk and reputation risk, the Difference-in-Difference-in-Difference (DDD) is used to test the impact mechanism of green credit on the core competence of banks. The results show that, compared with banks with lower credit risk and reputation risk, banks with higher credit risk and reputation risk experience greater enhancement in core competence by green credit. •Green credit has a positive impact on the core competence of commercial banks.•Green credit has enhanced the core competitiveness of urban and rural commercial banks more obviously.•Commercial banks can cope with the green credit shock through risk control.•Green credit has enhanced the core competitiveness of commercial banks with higher risks.