Andrew Marsden, general manager, treasury and securitisation at Resimac in Sydney, told the ASJ roundtable: “A national standard would certainly be very helpful for us, given mortgage lenders have diverse asset portfolios. It would also help us develop new and innovative products and bring a lot of efficiency and motivation around distribution of those products – perhaps with some economic incentives for householders.”

This seems to be the approach much of the rest of the world is pursuing. Rob Fowler, head of certification at the Climate Bonds Initiative, says parts of Europe, China and – at state level – the US are experiencing a “strong drive” towards government incentives for low-emissions homes.

He suggests that a “green homeowners’ grant” along the same lines as the first homeowners’ grant could fulfil this role in Australia.

“There is a range of initiatives the government could take to make it easier for consumers to realise the benefits of going green,” Fowler said. “There would be a lot of work to do around integrity of labelling, but these conversations are happening elsewhere in the world and confidence is growing where they do.”

In the ongoing absence of this type of government leadership, it falls to the private sector to find incentives for borrowers to seek low-emissions housing or to improve the energy efficiency of their homes.

“At root, the incentive for homeowners is the potential for a materially cheaper cost of funding and the question is how we get to the point where this is possible,” said David Jenkins, director, sustainable capital markets at National Australia Bank (NAB). “Putting aside what might or might not come from government, it should be cheaper to run a more energy-efficient house.”

The link could be whether borrowers seeking energy efficiency can be demonstrated to have superior credit performance than ‘normal’ mortgagees. In fact, pricing advantages could rest on whether this performance advantage is provable.

NAB’s head of group funding, Eva Zileli, explained: “The question is what will entice banks to offer a discount for green loans – and whether a national assessment system could be sufficient. My sense is that, absent third-party incentives, there needs to be an established connection between green mortgages and credit performance in order to persuade banks to offer discounted pricing.”

In theory, the value chain could be reversed – in the sense that banks might be able to provide cheaper rates for green mortgages even if they do not offer incrementally superior performance if the bank can fund these loans cheaper in wholesale markets.

But market participants are wary of predicting significantly tighter pricing for green bonds. QIC’s head of credit research and strategy, Phil Miall, said: “Growing demand for green product could see a price differential at some point but the domestic market isn’t there yet. From our perspective, while we have a strong ESG [environmental, social and governance] framework across all our portfolios we don’t have ESG-specific mandates at this stage. The case for paying up to invest in green assets is probably clearer for mandated funds.”

As well as government involvement and pure private-sector plays, there may be a role for the regulator in incentivising sustainable finance. Jenkins explained that, once again, Europe is leading the way in this respect.

“We could ask if there should be a regulatory penalty for brown assets or an incentive for green assets,” he said. “If the dial is shifted such that there is a policy framework that rewards assets that contribute to a low-carbon future, conceptually this should allow banks to lend at a lower cost to those assets.”