The Importance and Challenges of Green Finance

Abstract

This study examines critical barriers to green finance development—essential for balancing economic growth and environmental protection—through litera-ture analysis. Core obstacles include banking sector deficiencies such as the ab-sence of dedicated institutions, insufficient expertise, and restricted financing access for green industries due to inadequate risk assessment of long-term pro-jects. Concurrently, incomplete policy frameworks lacking supportive regula-tions, market instruments, and tailored risk models contribute to risk mispric-ing, reduced competitiveness, and underinvestment. The study concludes that coordinated reforms are imperative: Banks must establish specialized green units, implement differentiated credit strategies favoring low-carbon sectors, and enhance staff training. Governments must introduce incentives like target-ed tax reductions, reform financial tools, develop long-term risk assessment models, and strengthen market regulations. Sustained governmental support is vital to realize green finance's potential for sustainable development.