Inclusive Green Finance for Small Companies: A Case Study of Pilot Cities in China’s Zheijiang Province

, and | 21 February 2025
Monetary, Discussion Notes | Tags: China, Entrepreneurship, Financial Inclusion, Green Finance

 

Green finance flows have grown significantly in recent years, yet large firms dominate this market. Micro, small, and medium-sized enterprises (MSMEs), which contribute significantly to greenhouse gas (GHG) emissions, are crucial for the transition to a sustainable economy. However, they face major challenges in accessing financing for sustainable investments.

This paper examines two key obstacles to scaling up green finance for MSMEs. First, it distinguishes between entity-based and activity-based green finance and argues that the latter is unsuitable for most MSME financial needs. Second, the study focuses on the cost of green due diligence. It analyzes how pilot zones in China’s Zhejiang province are addressing these obstacles through innovative standards, financial products, and digital platforms. The paper concludes with policy recommendations to promote broader adoption of green MSME finance in China and other emerging markets and developing economies (EMDEs).

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