"Green financial markets are growing rapidly. Funds with an environmental, social and corporate governance mandate have grown by 170% since 2015 and 57% of them are domiciled in the euro area. The outstanding amount of green bonds issued by euro area residents has grown ten-fold over the same period. The large flows into ESG funds and green assets are expected to be sustained over time by increasing concerns around climate change, a gradual generational transfer of wealth towards millennials, and better disclosure and understanding of ESG risks. Given the financial stability risks from climate change, this box aims to understand the performance of such products and their potential for greening the economy. It focuses on the resilience of ESG funds and the absence of a consistent “greenium” – a lower yield for green bonds compared with conventional bonds of similar risk profile – reflecting the fact that green projects do not enjoy benefit from cheaper financing."

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