In the guidelines of green credits released in March last year, the China Banking Regulatory Commission urged Chinese banks to use green credits as a tool to support the nation to cut carbon emissions while achieving a sustainable growth.

Banks should "pay special attention" to environmental and social impacts possibly caused by their customers' projects and, based on assessment results, determine credit ratings and entry and exit terms, according to the guidelines.

Last month, the State Council, China's cabinet, outlined a string of measures for curbing air pollution that is plaguing the country, and offering more credit support for projects to reduce air pollution is listed as one of them.

Experts, however, warned of challenges ahead in developing green finance, noting that the service is still in its initial stage of development in China.

"Some environmental projects entail long-term investment, hefty management costs, and some of them have no good economic returns," said Guo Tianyong, director of China's banking research center at the Central University of Finance Economics.

As economic entities which are in pursuit of profit maximization, commercial banks lack in impetus to develop green finance, according to Guo.

Moreover, "a lack of specific guidance catalogue on green credit reduces the operability of green credit measures," Guo said.

Financial regulatory authorities should improve existing regulations to encourage banks to develop green finance, such as specifying statistical caliber of green loans and punishing banks which offer loans to heavily polluting companies, he said.