Green Loans: Expert Perspectives

Abstract

In the context of tighter regulations by European Union institutions, sustainable finance allows companies and individuals to identify environmentally friendly ways to access loans according to their sustainability priorities. The financial sector, facing increasingly stringent regulatory requirements, is adapting existing processes and developing new management tools to address the evolving environmental context. This article examines green loans as a sustainable source of finance through a structural survey of eight experts from five major banks operating in Lithuania. The following study methods are employed: systematization and comparison of theoretical literature; questionnaire survey of experts; and analysis of interviews, involving an inductive approach adopting the Gioia Methodology. The survey was carried out in 2024, and its results show that, despite a high level of uncertainty in this area, all of the banks involved are making significant efforts to develop green loans. However, progress is more rapid in sectors where there is a clearer assessment of the greenness of that sector. The article concludes by analyzing green loans in two key areas: the sectors to which the loans are issued and the most significant challenges. The analysis highlights both strengths and points for improvement, such as the need for closer communication.

1. Introduction

Today, due to the consequences of climate change and other environmental issues, the entire economy is in a green transformation phase, and the financial sector with the concept of green finance must be ahead of these processes. Green finance (GF) is the focus of policymakers and researchers. In 2019, the EU published the Communication on the European Green Deal, setting out an action plan for financing sustainable growth (European Commission, 2019). One of the objectives of the plan is to channel capital flows into sustainable investments. In addition to increasing the environmental awareness of society, tighter regulation forces banks to take more serious actions in the green transformation of the economy, which they are obliged to do under increasingly stringent requirements (European Parliament, n.d.-d); Regulation 2021/2139 of the European Parliament and of the Council on the disclosure of sustainability-related information to the financial services sector, Taxonomy (European Parliament, n.d.-c). In this context, there is a scientific and practitioners’ debate about how to use various instruments of green finance concept for the transformation processes with green loans defined as an instrument to support environmentally friendly projects.

Green loans are a prominent topic in the academic literature and are frequently discussed within the broader framework of green finance. A review of the existing literature reveals distinct research directions. One key focus is the analysis of external factors, particularly government policies (Zhang, 2022; Xu et al., 2023; Sun et al., 2025), alongside internal factors such as the policies, strategies, and means for green loans in financial institutions (Ozili, 2023; Tian et al., 2023; Wang et al., 2024; Wu & Song, 2025). A comprehensive analysis encompasses similarities and differences from various countries. Another well-established area of investigation explores the relationship between financial performance and indicators reflecting the proportion of green loans (Mirovic et al., 2023; Wu & Song, 2025). Such studies belong to wider directions of studies that analyze the relationships between sustainability performance and its impact on companies’ financial results. Additionally, some studies examine the types of products and purposes for which green loans are granted (An & Pivo, 2017; Xing et al., 2021; Morchio et al., 2024), while others present the particularities of EU regulation (Nieto & Papathanassiou, 2024). Some articles analyze issues related to green loans in particular countries (Azad et al., 2022; Riyanti et al., 2025; Lapinskienė & Danilevičienė, 2023; Sobiech & Uchida, 2025; Mirovic et al., 2023). However, theoretical and empirical gaps persist in comprehensively understanding the complexities associated with green loans. In particular, studies fixing negative results raise new ideas for future researchers. Several articles analyze issues related to green loans in specific countries (Azad et al., 2022; Riyanti et al., 2025; Sobiech & Uchida, 2025; Mirovic et al., 2023).

Specifically, in reviewing the literature, a gap regarding studies that focus more on practical problem-solving emerges. Statistical data from the Bloomberg database show an increasing trend in issues of green loans worldwide. The article analyzes the current state of green loan implementation in Lithuanian commercial banks.

This article thus presents a structured survey analyzing green loan policies and their implementation in five major banks operating in Lithuania, with the aim of discussing problems in this area via exploratory analysis. Exploring this issue should highlight the potential and limitations of green loans as a sustainable source of finance.

To achieve this goal, the objectives of reviewing scientific articles on the topic, designing interview protocols based on the Gioia Methodology, interviewing eight experts working in major banks operating in Lithuania, and systematising findings were set. The study methods included the systematization and comparison of the theoretical literature, a questionnaire survey of experts, and the analysis of interviews, which was conducted with an inductive approach adopting the Gioia Methodology. The survey was carried out in 2024 and involved eight respondents. The results of these interviews are presented based on four thematic sections, covering the external factors of environmental policies and companies, as well as the internal factors of the policies of banks and the purposes of loans.

The paper is structured as follows: the first section provides an analysis of EU policies and a review of the relevant academic literature. The methodological part provides essential steps of analysis; the remaining sections describe the main findings of the research and summarize the results, offer concluding remarks, and define possible areas for further study.

1.1. EU Green Finance Policy

Green loans are generally not classified as traditional investment products; instead, they are financing instruments. While investment products are designed to generate returns for investors (e.g., stocks, bonds, or mutual funds), green loans are a form of credit extended to borrowers to fund environmentally sustainable projects. Green loans align with the principles of sustainable finance, as borrowers (usually businesses) use them to fund projects such as renewable energy installations, energy-efficient buildings, or sustainable agriculture. The lender (usually a bank) provides the capital under conditions that ensure the project’s environmental benefits. In summary, green loans serve as financing tools rather than investment products; however, they contribute to sustainability goals by facilitating green investments. A green loan must comply with the basic principles of a loan in terms of loan disbursement, appraisal, and selection of the project to be financed, project management, and reporting (Loan Market Association, 2023). Green loans should only be used to finance projects with environmental benefits that have been properly assessed by the lender. The selection and evaluation process analyzes the borrower’s organizational principles, ability to project manage, and social risks. To ensure transparency in the use of green loan funds, the lender must ensure that the funds are used for their intended purpose. Quantitative indicators should be used to assess the usefulness of green investments. The European Banking Authority’s (2021) report on Mapping Climate Risk provides an estimated average green asset ratio for EU credit institutions of 7.9%. This indicator value is too low for the implementation of the Green Deal. In addition to traditional green transition activities, the banking sector plays a broader role in financing and investing in renewable energy and energy efficiency projects, offering environmentally friendly products and services, and working with stakeholders to promote the transition to a green economy. The banking sector has an important role to play in promoting green growth objectives, both as an organization (through the introduction of various improvements) and through its environmental commitments and the integration of green lending practices into its decisions.

The Bloomberg platform provides statistical data on green loan releases worldwide. In addition to green loans, other financial products contribute to the transformation of the green economy (Figure 1).

According to the data, the issuance of sustainable debt shows a positive trend in the EMEA region (Europe, the Middle East, and Africa). The green loan market in the Baltic states is not yet sufficiently developed. According to statistical analysis, consumers in the Baltic states, including Lithuania, have been predominantly price-driven, often prioritizing cost over sustainability. Green finance is prioritized in countries like Sweden and Finland, but Baltic consumers show less interest, emphasizing the need for incentives to promote sustainable consumption and production patterns (LRT English Newsletter, 2020).

The sustainability information to be disclosed by financial market participants and the procedures for its provision were laid down in the EU on sustainability-related disclosures in the financial services sector (European Parliament, n.d.-a). To this end, a classification system for sustainable activities has been developed. Given the scale of the challenges, the financial system is being adjusted to help the economy operate sustainably by promoting sustainable financing, taking into account the sustainability impact of financial services and products. The EU Taxonomy Regulation on establishing a framework to facilitate sustainable investment (European Parliament, n.d.-b) sets out criteria for determining environmentally sustainable practices and requirements for financial market participants to report on the sustainability achieved or implemented. This is one of the reasons for the rise in green loans (European Parliament, n.d.-b). Financial products offered by financial market participants pursue environmentally sustainable objectives. This is an effective way to channel private investments into sustainable activities. According to the Taxonomy Regulation, in 2021, the European Commission drafted the Delegated Act (European Parliament, n.d.-d), which regulates the content, methodology, and presentation of the information to be disclosed by large financial and non-financial corporates (European Parliament, n.d.-d). Annexes V and VI to this act detail the content requirements and methodologies to be provided by credit institutions. Credit institutions must disclose the Green Asset Ratio (GAR), the off-balance-sheet key performance indicator (KPI), the fees and commissions KPI, the trading portfolio KPI, and qualitative information (Lietuvos Bankas, 2021). The GAR shows the percentage of the credit institution’s assets that finance and invest in eligible taxonomic economic activities relative to total assets. The calculation of the GAR for balance sheet positions takes into account financial assets in the specified accounting categories, including loans and other advances, debt securities, equity participations, and collateral taken over (European Parliament, n.d.-d).

On 21 June 2022, the Council of Europe and the European Parliament reached a political agreement on the Corporate Sustainability Reporting Directive (CSRD) (This sets out more detailed reporting requirements and ensures that large companies are obliged to provide information on sustainability issues such as environmental rights, social rights, human rights, and governance factors. The CSRD also introduces a requirement to validate the sustainability information provided and to make the information more accessible. The directive will apply to a significantly larger number of companies, and its application will be carried out in three phases:

• From 1 January 2024, for companies already covered by the Non-Financial Reporting Directive;
• From 1 January 2025, for the remaining other large companies currently excluded from the scope of the Non-Financial Reporting Directive;
• From 1 January 2026, for listed companies, small and medium-sized enterprises, small and non-complex credit institutions, and captive insurance undertakings (European Commission, 2022).

Banks operating in the EU are therefore required to comply with said directives if they meet the established criteria. The compliance requirements will vary depending on the specific activity, size, and listing status of the bank. It is essential that banks carefully assess their obligations under both directives and ensure that they comply with the reporting and disclosure requirements imposed.

The Markets in Financial Instruments Directive (MiFID II) is the EU’s main piece of legislation regulating financial markets.1 Banks providing green loans are assessing certain aspects of this directive, especially if they provide investment advice or sell these products to clients.

Key EU directives on sustainable finance are presented in Figure 2. In Lithuania, these directives were implemented under the Republic of Lithuania Law on Markets in Financial Instruments, which has been in force since 3 January 2018.2 The Bank of Lithuania supports the approach of the EU institutions and also recommends that supervised financial market participants, which are not currently subject to mandatory requirements under EU legislation, should disclose sustainability information voluntarily, in accordance with the principle of proportionality (Lietuvos Bankas, 2021).

Thus, from 2023, banks incorporated in Lithuania that qualify as large public interest entities have been required to prepare social reporting, publish their GAR, and provide the off-balance sheet KPI, fee and commission KPI, trading portfolio KPI, and qualitative information.

1.2. Literature Review

Green loans are financial instruments designed to support environmental projects that enhance ecological conditions and mitigate adverse environmental impacts. These initiatives may involve the installation of renewable energy systems, the enhancement of waste management infrastructure, or the adoption of technologies aimed at reducing harmful emissions. Green loans are typically available to businesses and are often offered at lower interest rates compared to traditional loans. Green loans are being explored in conjunction with banks’ green lending policies as an innovative instrument to promote green transformation. When looking at green loans, many researchers go on to address the question of whether being green contributes to better financial performance. Tian et al. (2023) observed that banks with higher green credit scores have better market valuations. The authors conducted a study assessing the relationship between banks’ positions in rating tables and the number of green loans they issued from 2010 to 2020. Ozili (2023) proposed that banks should have a strong loan loss provisioning system that considers sustainable development concerns, so that they can be bolder in prioritizing the environment and society over profits. Wu and Song (2025) concluded that banks have to show an incentive to provide green loans. The authors showed that increasing such incentives can significantly enhance the carbon neutrality performance of heavily polluting enterprises. Birindelli and Palea (2023) investigated the impact of elements of banks’ social responsibility on their green product design strategy. The authors divided social accountability into the following elements: commitment to the United Nations Sustainable Development Goals (SDGs), the creation of a green team, sustainable accountability, stakeholder engagement, risk assessment in line with the concept of the environment, and social and governance strategy. According to the authors, sustainability declarations and commitments to the United Nations SDGs are the main drivers of banks’ green product strategies.

Xu et al. (2023) suggested the development of clear guidelines for cooperation, with the active involvement of local authorities, to bring together the interests of commercial banks, polluting companies, and local interests. Sun et al. (2025) suggested that the strong quality of institutions certifies that investment in green finance is effectively allocated, strengthening their favorable impacts on social and environmental outcomes. These results were confirmed through regression analysis conducted on data from 46 countries. Authors indicated that green loan policy significantly increases investments that curb pollution and encourages firms to reduce emissions, introduce new energy sources, and demonstrate greater environmental responsibility. Evidence for this was collected in China by testing the impact of the Green Loan Guide policy on the environmental performance of companies. The utilization of big data facilitates the banking sector’s access to information regarding borrowing companies, thereby lowering loan delinquency rates. This technology reduces informational and transactional costs for banks while enabling the expansion of optimal green loan portfolios (Wang et al., 2024).

Mirovic et al. (2023) conducted a regression analysis between the bank’s financial indicators (return on assets, return on equity) and an indicator showing the share of green loans in the total bank portfolio. The authors observed that the presence of green loans in a bank’s portfolio reduces the impact of bank liquidity on bank profitability. A study by Degryse et al. (2023) confirmed that companies demonstrating environmental awareness benefit from more favorable terms than companies in polluting sectors when borrowing from green banks. According to the authors, this symbiosis has become more pronounced since the Paris Agreement. An and Pivo (2017) showed that green loans are quite often focused on green real estate. Loans for buildings that are environmentally friendly at the time the loan is issued have slightly better terms than loans for buildings that do not meet these standards. According to He et al. (2019), green loans could extensively finance firms in environmentally friendly or energy-saving industries. Xing et al. (2021) investigated the question of whether sustainable disclosure guarantees green credit and concluded that only green innovation does so. Neagu et al. (2024) indicated that firms taking out green loans tend to be in better financial positions than other firms that take out bank loans.

According to Morchio et al. (2024), the green transition process is increasingly influencing the bulk shipping industry, with a focus on the practical integration of green finance solutions and the identification of key best practices within the sector. Their findings indicate that sustainability-linked financial products are viewed as the most appropriate tools for securing resources to support broader sustainable corporate objectives. In contrast, specific financial demands arising from targeted green projects tend to depend heavily on the utilization of green bonds and green loans.

Hoque et al. (2024) indicated that board characteristics—specifically board size, board independence, and gender diversity—significantly influence the banks’ propensity to offer green credit. Their analysis underscores the critical role of ownership structure in green lending practices in banks in Vietnam. Banks with a substantial proportion of government ownership are more inclined to finance green projects, whereas foreign-owned banks exhibit reluctance in supporting green finance initiatives.

The literature highlights several key areas of analysis: external factors, including policies and regulations (Zhang, 2022; Xu et al., 2023; Sun et al., 2025); internal factors such as banks’ internal policies and strategies (Ozili, 2023; Tian et al., 2023; Wu & Song, 2025); and the relationship between green lending and its influence on bank profitability (Mirovic et al., 2023; Wu & Song, 2025). It is evident that the issue of green loans and green finance holds significant importance in China, as demonstrated by the substantial number of publications authored by Chinese researchers. A summary of the observed literature is presented in

Table 1. A summary of the academic literature discussed in this article.

Main Points	Authors/Year	Keywords	Group of Factors
Clear guidelines for cooperation, with the active involvement of local authorities.	Xu et al. (2023)	Guidelines from local authorities.	External—environmental policy.
Strength of the impact of external institutions.	Sun et al. (2025)	Quality of external institutions.
Firms taking out green loans tend to be in better financial positions than other firms.	Neagu et al. (2024)	Strong financial companies.	External—strong companies, environmental responsibility.
Companies demonstrating environmental awareness benefit from more favorable conditions.	Degryse et al. (2023); Zhang (2022)	Companies demonstrating environmental awareness.
Commitments to the United Nations SDGs are the main drivers of banks’ green product strategies.	Birindelli and Palea (2023); Huang et al. (2022)	Commitments to the United Nations SDGs.	Internal–sustainability policy of banks.
Banks should have a strong loan loss provisioning system that takes into account sustainable development concerns.	Ozili (2023)	Provisioning system.
Banks have to show incentive to provide green loans.	Wu and Song (2025)	Banks’ values.
Banks’ size impact the number of green loans.	Tian et al. (2023)	Banks’ capacity.	Internal—banks’ capacity, governance policy.
Big data facilitates the banking sector’s access to information about borrowing companies and banks, while enabling the expansion of optimal green loan portfolios.	Wang et al. (2024)	IT innovations in banks.
Board characteristics—specifically board size, board independence, and gender diversity—significantly influence banks’ propensity to offer green credit.	Hoque et al. (2024)	Board size, board independence, gender diversity
Green loans are quite often focused on green buildings.	An and Pivo (2017)	Green buildings.	Purpose of loans.
Green innovation is one of the key criteria for banks when considering green loans.	Xing et al. (2021)	Green innovation.
Green loans can extensively finance firms in environmentally friendly or energy-saving industries.	He et al. (2019)	Environmentally friendly or energy-saving industries.
Analysis of the shipping industry.	Morchio et al. (2024)	Industry type.

.

In addition to the thorough analysis of research articles, a bibliographic analysis of keywords was performed (Figure 3). From the Web of Science database, 514 articles were attained from the 2022–2025 period using green loan as the main keyword and limiting the search to the title and abstract fields. Using VOSviewer for visualization, the data were restricted to sources where the number of occurrences was ten or more. A relevance score was thus calculated, and 40% of terms were excluded based on their relevance scores.

It can be seen that green loan analysis covers broad concepts such as sustainability and green finance, as well as other related aspects such as green financial policy, carbon emissions, green innovation, etc. It can also be seen that this topic has been analyzed in sectors such as banking, agriculture, and enterprises in general. The most relevant topics in 2024 were big data, sustainability, green financial policy, and green innovations. On the basis of this literature analysis, the following four blocks of questions were then used to structure the interviews: quality and roles of external institutions; bank policy and governance; characteristics of companies; and purpose of loans.

2. Materials and Methods

Eight experts from five banks operating in Lithuania were selected to review the green loan management environment in the country.

In 2024, there are twelve licensed banks in Lithuania. The banks for the analysis were chosen based on the following criteria: strong sustainability reports, which indicate a particular development level of sustainability in those banks (Swedbank, SEB, Luminor, Šiaulių, and Urbo).

The aim of the survey was to explore the content, environment, popularity, and trends of green loans offered by Lithuanian credit institutions. Based on the analyzed literature, the following questions were raised: What are the main external motivators? What types of companies are seeking green loans? What are the main aspects of banks’ sustainability policies? And how do banks manage their green loans?

The survey was conducted from January to July 2024. Respondents were experts with at least 5 years of experience in managerial positions in banks and other credit and financial institutions operating in Lithuania. The anonymity of the experts was guaranteed during the survey. Expert evaluation is one of the most widely used scientific techniques, aiming at the acquisition, systematic organization, structuring, and interpretation of knowledge accumulated by an individual over a long period of time using mathematical and logical methods. The experts were selected on the basis of the following criteria: at least 5 years of experience in the banking sector in senior positions; and working as sustainability managers, bank branch managers, credit experts, or customer service managers. The experts involved in the study are responsible for the development of sustainable financial products in the bank and the implementation of the bank’s sustainability strategy, integrating the environmental, social, and governance strategy into the bank’s core activities and processes in the bank’s structural units.

The purposive sampling approach was adopted to build the sample of interviewees, with the aim of increasing the depth of the topics covered rather than the size of the sample selected (Andreoli et al., 2024; Campbell et al., 2020). A semi-structured questionnaire was then developed. While there is no fixed rule, qualitative research emphasizes depth of understanding over large sample sizes, so the aim is to reach data saturation—the point at which additional interviews provide little new information. This typically involves 5–15 experts. This range is often sufficient when the study seeks in-depth insights from participants with specialized knowledge. The selected individuals have specific practical knowledge on the topic of green loans as they work in institutions that are particularly advanced in the green economy sphere. The interview protocol involved discussions revolving around four topics, which were formulated based on the literature review. All questions were non-leading and were clearly formulated (Astedt-Kurki & Heikkinen, 1994; Andreoli et al., 2024) to allow interviewees to openly express their personal experiences and opinions, favoring the development of new themes and concepts. The interviews were conducted remotely via video calls, with an average length of around 45 min. After obtaining consent from the respondents, the interviews were audio-recorded, and verbatim transcripts were subsequently generated.

The analysis of the interviews was conducted with an inductive approach, adopting the Gioia Methodology (Gioia & Chittipeddi, 1991; Gioia et al., 2013) to expand the knowledge around the topic of green loans. Such a methodology consists of developing theories grounded in the informants’ experiences and their understanding of that experience (Gioia et al., 2013). This involves three standard processes: (1) a first-order, informant-centered stage; (2) a second-order, theory-centered stage; and (3) aggregate analysis, the findings of which explain or describe a phenomenon. The data structure represents the process by which raw concepts emerging from the interviews were transformed into significant themes and dimensions of analysis.

Following the development theories, an interview protocol outlining the interview questions was created. The questions were designed to complement the directions of the factors in the research. The interview conditions were adapted to the experts’ preferences by means of teleworking tools. The knowledge supplied by the experts during the study was structured, processed, and interpreted using logical methods. For this exploratory study, the authors designed 19 questions organized into four groups (Appendix A). The questions were selected following theoretical analysis and based on economic logic. The survey thus aimed to highlight the most important aspects of the phenomenon under study. The steps for analyzing the collected data were organized as outlined below:

• Thorough analysis of collected interview material to understand its overall content;
• Identification of meaningful topics in the data and assignment of short labels or codes to summarize their content—a first-order concept;
• Grouping of similar or related codes into broader categories—a second-level concept that reflects patterns across the data;
• Refining and validating themes to ensure that they accurately represent the data and research questions.

3. Results

The interviews with experts sought to discuss the problems of green loan management in Lithuania and highlight the critical aspects of green loans. However, they also outlined prospective solutions for preventing or managing them. The results of these interviews are presented based on four thematic sections, covering the external factors of environmental policy and companies, as well as the internal factors of the policy of banks and purpose of loans.

3.1. External Factor—Regulations and Policies

According to the respondents, international banks implement directives and try to follow other international sustainability incentives as quickly as possible, as they are presenting themselves as market leaders, and, for them, it is very important to be seen as proactive. Local banks tend to be somewhat more cautious, waiting for recommendations from the central bank. These recommendations are also based on EU directives, but in both cases, EU regulations are the main drivers impacting transformation. Government support and the green priorities that they outline impact banks’ preferences. Discussing benefits, the respondents more strongly emphasized that it is necessary to follow regulations—in some cases, to enhance their reputation. The interviewees indicated that banks are proactive in adopting initiatives that enhance their sustainable operations, reinforcing their credibility and image as responsible institutions. Large international banks excel in providing detailed sustainability reporting, adhering to robust frameworks such as the EU Taxonomy and directives such as the Sustainable Finance Disclosure Regulation, the CSRD, and the MiFID II. These reporting standards ensure transparency and accountability, which are essential for maintaining trust among stakeholders. Such practices highlight how ESG principles have become a strategic priority for banks, driving their efforts to embed sustainability and greenness into their core operations.

3.2. External Factor—Peculiarities of Companies

Climate change has had a tightening effect on lending to brown companies over the past 12 months, with both lending standards and conditions becoming stricter. The tighter impact on corporate lending means that banks are imposing stricter credit standards, such as requiring a higher level of creditworthiness or more collateral, and stricter conditions, such as higher interest rates, shorter repayment terms, or higher service charges. This tightening effect makes it more difficult and costlier for brown enterprises to obtain or refinance loans. Bank lending standards and conditions for green businesses have eased, as reported by two banks. This easing helps green businesses to demonstrate more flexibility in accessing the finance they need from banks to finance their operations.

On the other hand, as the European Union (EU) intensifies the implementation of sustainability requirements in its transition to a climate-neutral economy, companies are modifying their operational processes to adapt to these changes. According to data reported by the banks participating in the survey, Lithuania currently leads the region in terms of investment growth in renewable energy and energy efficiency. Notably, the green business loan portfolio expanded by nearly threefold in 2024.

With regards to bank lending for green transformation, it is important to focus on lending to firms in transition, who are the main recipients of transition finance. These are companies that are currently considered to be polluting but are gradually transforming their activities towards greener ones. Lithuania has seen no change in lending to firms in transition over the past 12 months, and banks are expected to see a more stringent impact on such loans over the next 12 months.

Despite advancements, challenges remain in extending green financing to all economic sectors equally. The agricultural sector poses unique difficulties due to the lack of uniform certification standards and regulatory frameworks. The survey findings indicate an uneven distribution of green lending across sectors, with a natural inclination toward areas and programs that are actively promoted by government policies. This sectoral disparity points to the need for targeted measures to address gaps in less-regulated industries and ensure the more equitable allocation of green financing. Strengthening support for sectors such as agriculture, through the development of certification systems and tailored financing mechanisms, could help broaden the impact of green loans and enhance their contribution to sustainability goals.

3.3. Internal Factor—Policy of Banks

According to the experts, sustainability awareness and the implementation and deepening of sustainability strategy provisions and measures in banks is a daily process at all levels of management and responsibility, including the issuance of green loans. The most commonly used international commitments are the Global Reporting Initiative and the United Nations SDGs. ESG principles have been adopted by banking institutions as a key instrument.

Currently, banks are in the process of refining the calculation of GARs—key metrics used to assess the proportion of environmentally sustainable assets within a financial institution’s portfolio. This process is pivotal in enhancing transparency and accountability in green finance. However, it also presents a host of challenges, including the standardization of methodologies, data availability, and compliance with evolving regulations. Green loans do not merely introduce credit risk for banks. They also give rise to reputational, compliance, operational, and business model risks. The evolving regulatory environment, together with heightened stakeholder scrutiny, necessitates the adoption of robust internal processes, transparent reporting, and continuous oversight to mitigate these risks.

The most significant challenges facing banks today are those that require them to assess the greenness of their performance and to adequately disclose results to customers, shareholders, regulators, partners, and all stakeholders. The quantitative and qualitative analysis and assessment of a bank’s balance sheet and other data aims to substantiate and provide evidence to illustrate the greenness of the bank’s activities. Providing green loans to customers is just one of the tools available for implementing a sustainability strategy.

3.4. Internal Factor—Purpose of Loans

One requirement of a green loan is that the funds are used only for a green project that meets specific ecological parameters. The project must be subject to regular and transparent monitoring and accountability. Currently, green loans can also be granted by some banks subject to sustainability requirements. Thus, the concepts of greenness and sustainability are often used synonymously.

Green loans are available to both retail and corporate clients. Experts point out that assessing the greenness of a new loan for a specific project is less complicated than assessing the greenness of a sector-wide loan portfolio. This is related to the quality of historical data on loans previously issued by the bank and the change in the approach to appraisal between today and, for example, over 10 years ago. Currently, the assessment of the greenness of credited projects takes into account a wide range and variety of sustainability eligibility criteria. There is no one criterion that is more exclusive or significantly more important than others. All sustainability eligibility criteria are acceptable and important to banks, including reducing CO₂ emissions, fostering biodiversity, improving water quality, saving resources, using renewable energy, adapting to climate change, and consuming zero waste, etc. The bank’s representatives communicate this to clients, educate and encourage clients to apply for business loans, and inform them about other activities and projects. Banks offer better lending terms to their customers when providing green loans. In this case, cooperation is based on win-win arrangements: customers win with better credit terms, and banks win with the opportunity to increase the share of green loans and thus successfully meet the objectives of their sustainability strategy.

Green real estate loans are particularly well developed in Lithuania, as the practice of certifying the energy performance of buildings works well. The experts noted that the smoothest work is observed in sectors where there is a regulated certification system, such as construction. The documentation issued by certifying professionals lends weight to the assessment of the greenness of the loans, which banks use to assess the overall greenness of their real estate loan portfolio.

In contrast, there are many challenges in working with the agricultural sector. Banks face greater challenges in assessing the greenness of their agricultural loan portfolio for a number of reasons: the variety of documentation on seeds, crops, fertilizers, chemicals, irrigation, processing techniques, storage conditions, etc.; the lack of documentation to assess the greenness of the loan; the lack of a systematic approach to assessment; and the lack of dissemination of good practices, etc. This lack of a coherent approach leaves a lot of room for interpretation by the banks. International standards are being developed, such as the Methodology for Improved Agricultural Land Management, which facilitates the assessment of green projects in a specific sector (Verified Carbon Standard, 2023).

4. Discussion

Regading the prospects for the growth and mainstreaming of green loans in the banking sector, the experts noted that a breakthrough is yet to be observed. As attitudes towards sustainable living change among people and businesses, credit policies are also changing. Banks are gearing up for the transformation by developing new green products for a wide range of customers, communicating them, carrying out public education activities, upskilling staff, promoting and supporting sustainable skills, and fostering traditions in the bank’s internal culture. The experts agree that there is a cost to going green. However, this is a price worth paying in order to grow the bank’s reputation, secure the leadership and the trust it gains, and enhance the social responsibility it assumes in creating a sustainable ecosystem for the country.

The results of the interview analysis were aggregated, as is visualized in

Table 2. Interview results formatted based on the Gioia Methodology.

First-Order Concepts (Raw Terms and Ideas)	Second-Order Concepts	Aggregated Dimensions
Daily process of sustainability	Sustainability integration in banking operations	Sustainability policy implementation
Role of legal frameworks
Green loan provisions
Sustainability eligibility criteria	Standardization and criteria for sustainability
International standards
Cost of sustainability	Costs and value of sustainability
Monetary value of greenness
Future prospects for green loans	Green loan implementation and challenges	Implementation and assessement of green loans
Real estate green loans
Sector-wide loan portfolio challenges	Challenges in assessing greenness
Challenges in assessing greenness
Agricultural loan challenges
Sector-wide loan portfolio challenges assessment
Communication with clients	Client engagement and communication	Working with clients for a win-win situation
Win-win arrangements

. The raw terms and ideas presented in the first column were selected from the interview material as the most important highlights. After the aggregation and systematization of keywords, the following important topics were defined: sustainability integration in banking operations; standardization and criteria for sustainability; costs and value of sustainability; green loan implementation and challenges; challenges in assessing greenness; and client engagement and communication. These green loan issues are strongly related to the broader picture of sustainability policy and management in banks. Hence, aggregated dimensions on which banks should concentrate to improve green loan management include sustainability policy implementation, implementation and assessment of green loans, and working with clients to achieve a win-win situation. These results demonstrate hierarchical stages, beginning from the strategic level of sustainability policy implementation and smooth management in all functions of banks before moving into the technical problems of assessing green loans and communicating and creating value with clients. All of these challenges lead to additional intellectual and financial investments for banks. The development of green loans in other countries is also impacted by various incentives. In Ukraine, there are certain types of incentives to enhance green loan usability. Customers are offered lower interest rates for purchasing energy-efficient homes and/or investing in modernization, energy-efficient measures, and buying cars with high economic and environmental efficiency. Priority lending is provided to construction companies that use energy-saving and resource-saving technologies (Sloboda et al., 2024). In Japan, green loan users have better conditions of lending. Green loan users exhibit better ex-post performance and lower default probability (Sobiech & Uchida, 2025). In Bangladesh, commercial banks offer lower interest rates for projects like renewable energy and waste management, but the situation is still far behind the SDGs’ goal that must be achieved by 2030 (Azad et al., 2022). It is seen that banks’ policies in different countries are similar enough, and green loan lending is largely concentrated in special areas like energy efficiency and waste management (global issues). Worldwide experience suggested that only tighter regulations and special incentives can impact these internal transformations when seeking stronger green results. Cross-border green loan initiatives and sharing experience could encourage the acceleration of these processes.

5. Conclusions

Green loans are specially designed financial instruments that require their funds to be exclusively used for projects that meet predetermined environmental parameters. These projects are subject to ongoing monitoring and transparent accountability mechanisms, ensuring that the objectives of environmental sustainability are met. While green loans are traditionally associated with environmental initiatives, some banks have expanded their offerings to include loans linked to broader ESG requirements. This highlights the increasing convergence of the concepts of greenness and sustainability, which are often used interchangeably in financial discourse. Such an alignment underscores the evolving role of green loans in promoting environmental and sustainability goals within the financial sector. Special incentives to enhance green loan usability are offered by Lithuanian banks, and such practices are in line with other studies conducted in the EU, Ukraine, Japan, and Bangladesh (Sloboda et al., 2024; Sobiech & Uchida, 2025; Azad et al., 2022; Zhang, 2022).

The analysis shows that banks are keen to take all initiatives into account and integrate them into their sustainable operations to foster their credibility and responsible image. Large international banks provide particularly detailed sustainability reporting in accordance with the EU Taxonomy, the directive on sustainability-related disclosures in the financial services sector, the CSRD, and the MiFID II.

The exploratory analysis of selected banks reveals the significant intensification of efforts to enhance the management of green loan issuing processes. This trend is driven by the need to comply with stringent regulatory frameworks, sustain market leadership, maintain a strong reputation, and fulfill commitments to sustainable business development. Banks are very careful choosing investment areas in order not to sacrifice profitability (Sobiech & Uchida, 2025; Riyanti et al., 2025; Mirovic et al., 2023; Wu & Song, 2025). Green loans have emerged as an integral component of green financing strategies within banks, with green real estate loans standing out as a particularly well-developed area in Lithuania. The efficient certification of buildings’ energy performance has facilitated the growth of this segment. The experts highlighted that the most streamlined operations are observed in sectors with regulated certification systems, where established frameworks simplify the process of assessing risks and financing green projects.

In the analysis of green loans in Lithuanian banks, three topics were identified as most important, and they are in line with other studies: sustainability policy implementation (Xu et al., 2023; Sun et al., 2025); the implementation and assessment of green loans (Sobiech & Uchida, 2025; Riyanti et al., 2025); and working with clients to achieve a win-win situation (Degryse et al., 2023; Zhang, 2022). Despite the high sustainability performance of the banking industry, there is still a need for more clarity in the implementation of a general sustainability policy, beginning with the resolution of such technical issues as assessing green loans and enhancing communication with clients, seeking mutually beneficial outcomes.

6. Recommendations

Seamless collaboration between banks, government bodies, and academic institutions is essential for accelerating the transition to sustainable and green financial practices. Each stakeholder has a distinct role to play: banks as implementers, the government as regulators and policymakers, and academics as providers of research and innovation. Strengthening partnerships can foster a more integrated approach to green finance, ensuring that policies, financial products, and practical implementation align effectively. The Green Finance Institute in Lithuania, tasked with executing the Lithuanian Green Finance Action Plan for 2023–2026,3 has significant potential to act as a catalyst in this collaboration. However, in the authors’ opinion, its proactive involvement in assisting the transformation of the financial sector could be further intensified. By offering more guidance, resources, and forums for stakeholder engagement, the institute can help banks and other institutions adopt green practices more efficiently and effectively.

GARs remain an under-researched area, offering numerous opportunities for future academic inquiry. Studies could explore the best practices for calculating GARs, their implications for financial performance, and their role in driving sustainable investments. Furthermore, research could investigate how variations in GARs impact investor perceptions, regulatory compliance, and the broader goals of sustainable development.

Regulation constraint is the main drive in accelerating these processes. Future research could compare international and EU regulation systems and their impact on international and local banks’ performance. At the same time cross- border comparison analysis of various incentives could enrich academic discussion too. Therefore, the task is very complex, and one analysis could not encompasses various factors varying across countries.

Geopolitical factors have reshaped the economic structure, leading to the expansion of the military industry not only in the Baltic States but also across other EU countries. Despite that, the greening economy is also the preference in the EU region, and its acceleration is affected by technological advancements, regulatory changes, and shifting investor preferences. The role of central banks may be more active in encouraging commercial banks’ collaboration with businesses and educating market participants to see the benefit in choosing green decisions.