search for key words such as'green'and'environmental'in funds ’ prospectuses. controls include fund age, fund size, lagged flows and standard deviation of returns. share and interaction - time - esg fixed effects are included and standard errors are clustered at share level. emir : european market infrastructure regulation. promisingly, green bonds are roughly twice as likely to be held cross - border than other european bonds. and esg funds appear more stable, with investors less likely to withdraw funds following negative performance than investors in other types of funds ( chart 3, right panel ). scaling up green finance could therefore generate the twin benefits of supporting the low - carbon transition and supporting financial integration in the euro area. but it is important to avoid complacency. further growth in sustainable finance may be inhibited if concerns about greenwashing are not adequately addressed. there are substantial data gaps surrounding direct and indirect emissions and forward - looking information such as targets for emission reduction. these gaps should be closed as a matter of urgency, which requires mandatory, harmonised and audited disclosure standards. moreover, green finance remains a relatively small segment of the market. for europe to unleash its full potential for financing the green transition, it will need to redouble its efforts to mobilise capital market funding. in particular, equity funding has been shown to be important for incentivising green innovation and supporting the reallocation of resources to greener activities. [ 8 ] yet further growth in green finance is likely to be constrained by the same shortcomings that hinder integration in eu financial markets more generally. so progress towards a genuine capital markets union is vital. climate risks do not stop at national borders. the capital markets architecture in the eu needs to recognise that and adapt accordingly. products with official eu seals, such as the forthcoming eu green bond standard, will need proper monitoring to ensure compliance and build trust. further efforts are required to harmonise the tax treatment of capital market assets, to better align the efficiency of national insolvency frameworks and to ensure similar levels of investor protection across countries. conclusion let me conclude. strengthening financial integration within the european union is vital to protect our economy from shocks and financial instability. the risks posed by climate change make action more urgent. but they also provide an opportunity. putting in place the necessary architecture for a full capital markets union can help promote green finance – an area where the eu is already a leader. this will not

the disaster on the year - on - year annual growth rate at the end of that quarter. in principle, one mitigating factor may be insurance, which in the past has helped support aggregate demand and hastened reconstruction following disasters, reducing the overall impact on economic activity ( chart 2, right panel ). in practice, however, there is already a substantial insurance “ protection gap ”. only one - third of climate - related economic losses in the euro area are currently insured, a situation that could worsen with climate change. more frequent and severe natural disasters are likely to increase insurance claims, which may result in higher insurance premiums and potentially lead to lower insurance coverage, further widening the protection gap. green finance as a driver of financial integration a substantial amount of finance will be needed for there to be a smooth transition to meet the ambitious goals for a carbon neutral economy. but we also need a robust financial system capable of maintaining the flow of credit even if asymmetric shocks happen or if the transition is a little bumpy. that brings me back once more to the importance of financial integration. progress has certainly been made in stepping up sustainable finance. since 2015, the assets under management of environmental, social and governance ( esg ) [ 7 ] funds have almost tripled, the volume of outstanding green bonds has risen tenfold, and the amount of catastrophe bonds has almost doubled ( chart 3, left panel ). chart 3 investments in esg funds sources : artemis, bloomberg finance l. p., emir data, epfr global, lipper and ecb calculations. notes : left panel : data on catastrophe bonds are copyright to www. artemis. bm, steve evans ltd. to avoid end - of - year effects, the outstanding amount of emission - related derivatives is the notional value of open positions reported under emir as at the end of november. 2015 values are not included due to data unavailability. see footnote 19 in alogoskoufis et al ( 20201 ), op. cit. for data limitations. the right panel shows the relationship between net flows as a share of a fund ’ s lagged total net assets and lagged fund returns. it is based on a sample of 1, 452 and 8, 337 nonesg fund shares, and 131 and 1, 017 esg shares, of corporate bond and equity funds domiciled in the euro area between january 2016 and september 2020. green funds are identified using text