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.

Converting our quantitative and qualitative challenges into unprecedented opportunities 2/4  BIS central bankers' speeches  Our objective is to enhance the role of the financial system, not only to manage climate change– related risks, but also to “mobilise capital for green and low-carbon investments.”14 But  financing the transition to a low-carbon economy is both a quantitative and qualitative challenge. [slide 5] The quantitative challenge is linked to the massive investment required in three areas: first, infrastructure and technical solutions, especially in transport, energy production and consumption and agriculture; second, intangible goods, including continuous training and research; and third, the adaptation and improvement of existing structures, notably the thermal rehabilitation of buildings. The needs are so considerable that public financing alone will never be sufficient: as an illustration, the estimated global needs could reach USD 90 trillion over the next 15 years for new green infrastructure alone.15 Fortunately, the private sector is already showing a growing interest in green finance. I could cite many examples, including the sharp rise in the global green bond market, +78% in 2017,16 or the success of the issuance of France’s first green sovereign bond in January 2017 with EUR 7 billion allocated and total demand of more than EUR 23 billion, and supplemented yesterday. All this looks very promising… but it is still insufficient. The systematic oversubscription of green bonds at issuance is actually a sign that there is a lack of green financial products.