The Impact of Green Credit on the Credit Risk of Indonesian Commercial Banks

Against the backdrop of accelerating global climate change and the transition to a low-carbon economy, green finance has become a key policy tool to guide capital flow to environmentally sustainable projects. As the main form of green finance, green credit has been increasingly promoted in emerging economies including Indonesia. However, the impact of green credit development on commercial bank credit risk in the Indonesian context still lacks sufficient targeted research, which is a key gap in current academia and policy practice. This study focuses on the relationship between green credit and credit risk of Indonesian commercial banks, and explores the moderating role of bank characteristics represented by bank size. Based on systematic theoretical sorting and empirical research design, this study finds that green credit expansion has a significant impact on the credit risk of Indonesian commercial banks, and this impact shows heterogeneity among banks of different sizes. The findings of this study can provide reference for policy formulation of green finance development and risk management for commercial banks in Indonesia and other emerging market economies.