Green markets remain niche markets: green bonds still account for less than 2% of global debt issuance.xvii The success of the transition will also depend on our ability to broaden the sources of financing: we should not rely solely on green bonds. We also need more green loans, and more green financing in general, accessible to individuals, SMEs and start-ups. Green financing requires an innovation-friendly framework: green securitisation, green covered bonds, green derivatives, green crowdfunding platforms and green private equity should all be promoted. In addition, we have to carefully assess the impact of existing regulations. In the face of strong pressure from the financial industry, we must not however lose sight of our main goal as supervisors, which is financial stability. So far, there is no empirical or theoretical evidence that “green” assets are less risky and could warrant lower risk weights in the form of a “green supporting factor”. We should instead target brown assets with a “brown penalising factor”, because the transition risks will at some point materialise. This could be designed either as a dedicated Systemic Risk Buffer or be integrated into Pillar 2 requirements. The latter would have the advantage of spurring banks to improve their risk management capabilities for climaterelated risk. This leads me to the qualitative challenge. [slide 6] The risk of green washing may undermine the reputation of green markets and impede progress. To me, the prerequisite for an orderly development of the markets is a clear and harmonised taxonomy of green assets and sectors.
As that uncertainty dissipated and households began to feel more confident about the outlook, so the saving rate fell back (Chart 1). There is probably some scope for it to fall a little further, but continued firm consumption growth really depends on us seeing a pickup in household income growth, of which I will say more shortly. There is more scope for housing investment to continue driving growth. Housing starts and the level of housing transactions are still respectively around 25% and 10% below their averages during the pre-crisis decade (Chart 2). But the supply of new housing is not as elastic as one would like, because of planning restrictions and the like. Consequently there is a risk that increased demand for housing ends up mainly in higher house prices rather than more houses. In turn, if associated with excessive expansion in mortgage lending, that may create future financial stability risks. For that reason, the Bank’s Financial Policy Committee, which is charged with maintaining the overall stability of the financial system, is keeping a beady eye on the housing market. BIS central bankers’ speeches  1  For the recovery to be both sustained and sustainable, however, we really want to see three things happen. First, business investment needs to pick up the baton in supporting demand growth. Second, we need to see a revival in productivity growth, which in turn would sustain both higher real wages and higher profits, thus supporting continued household and business spending growth.