While Western central banks such as the Bank of England, the European Central Bank and the US Federal Reserve often talk about the dangers of climate change, new research has shown that China's central bank is the only one that has actually taken major, concrete steps to shift money toward green industries.
The findings come from an in-depth project led by Dr James Jackson from The University of Manchester and Mathias Larsen from London School of Economics (LSE).
Their research - which has been published by LSE's Grantham Research Institute - involved 93 interviews across China's financial system, including with staff inside the People's Bank of China (PBoC), the country's central bank.
Their conclusion is striking: China's central bank isn't independent from its government, and this may be the key reason it has been able to act faster and more boldly on climate change than its Western counterparts.
"There's a common belief that central banks should stay out of politics and focus only on inflation. But climate change affects everything including food prices, energy bills and economic stability," said Dr Jackson.
The study found that the PBoC uses its financial tools in very practical ways to support China's green industries. For example, it offers cheaper loans for renewable energy projects and allows banks to borrow more easily when they invest in approved green sectors. Since 2021, one programme alone has supported more than £120 billion in green lending.
By contrast, the Bank of England and European Central Bank have focused mainly on encouraging banks to think about climate risk, rather than shifting financial markets directly. The researchers describe this as an "indirect" approach that has little real-world impact.
What makes the Chinese case unique is how the government sets the direction - such as its pledge to reach carbon neutrality by 2060 - and then expects the central bank to help deliver it. The PBoC still has technical freedom to design its own tools, but its mission is clear. One PBoC staff member told the researchers: "The government sets the goal. We decide how to get there."
Dr Jackson says this offers an important lesson for the climate era. "We're not saying countries should copy China's political system, but we are saying that central banks around the world may need to rethink how they work with governments. In order to tackle climate change and adapt to its impacts, we need financial systems that can move quickly - not slowly."
