Governance and Accountability Policy Innovations: Advancing China’s green finance

This report by the International Institute for Sustainable Development analyzes policy failures in the governance, accountability, and transparency of financial market actors and proposes policy innovations to advance green finance, specifically focusing on how China can adopt these measures to green its financial markets.

• The global financial system has suffered from policy failures in credit-rating agencies, specifically conflicts of interest where agencies sold ratings to issuers, leading to inflated AAA ratings for toxic assets during the securitization boom of the late 1990s and early 2000s.
• Current fiduciary duties and modern portfolio theory restrict green finance flows for pension and sovereign wealth funds by prioritizing short-term performance and standardized benchmarks over long-term sustainability and innovative green projects.
• The Basel III guidelines, while improving banking stability through liquidity buffers and leverage ratio disclosures, may inadvertently restrictS restrict green finance because green projects often require long-term horizons and carry higher risks that conflict with strict liquidity requirements.
• India's priority-sector lending model, implemented by the Reserve Bank of India, serves as a policy innovation where banks are mandated to allocate specific percentages of net bank credit to sectors like agriculture (18% for domestic banks) and other underserved areas to ensure sustainable development.
• The report suggests China could green its financial markets by adopting priority-sector lending to support its photovoltaic manufacturing advantage, integrating environmental risks into sovereign credit ratings, and implementing economically targeted investments for pension funds.

APA

Silva, M. H. (2014). Governance and Accountability Policy Innovations: Advancing China’s green finance. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/governance_accountability_en.pdf

Chicago

Silva, Mariana H. Governance and Accountability Policy Innovations: Advancing China’s green finance. International Institute for Sustainable Development, 2014. https://www.iisd.org/system/files/publications/governance_accountability_en.pdf.

Wikipedia

{{cite report |last1=Silva |first1=Mariana H. |title=Governance and Accountability Policy Innovations: Advancing China’s green finance |publisher=International Institute for Sustainable Development |date=January 2014 |url=https://www.iisd.org/system/files/publications/governance_accountability_en.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{silva2014governance, author = {Silva, Mariana H.}, title = {{Governance and Accountability Policy Innovations: Advancing China’s green finance}}, institution = {International Institute for Sustainable Development}, year = {2014}, month = jan, url = {https://www.iisd.org/system/files/publications/governance_accountability_en.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }