In the meantime, the structure of the green bond market has undergone significant changes.

Banks were previously the major issuers of green bonds for capital raising activities, but starting from 2019, banks have helped underwrite more green bonds issued by non-financial corporates than they have issued themselves, the Goldman Sachs report showed.

However, the huge development potential may also pose challenges for China's banks, analysts said, and non-performing loans will matter most. That will influence the sustainability and healthy growth of green finance.

Vigna said this is consistent with the PBOC's financial deleveraging campaign, which started in 2017, to abate systemic risk and encourage an appropriate risk pricing mechanism.

During the next five years, China is expected to officially launch a nationwide emission trading system after nearly a decade of pilot testing and discussions, experts said.

The PBOC's Zhu also suggested charging carbon taxes and injecting carbon tax incomes into social security funds.

And a system of policy incentives and constraints should be established, with more loans issued at preferential rates to carbon emission reduction programs and the risks of green assets weighted scientifically, Zhu quoted PBOC Governor Yi as saying during the annual work conference in January.