The Bank for International Settlements, considered the central bank of central banks, warned Monday of a potential bubble forming around the boom for so-called green investments.

In its quarterly review out Monday, BIS said the financial markets have been sending "mixed signals" in recent months, reflecting "investor unease" about the economic prospects ahead.

The institution focused in on green investments, along with technology stocks, which are also in very high demand.

"Demand for investment products classified as delivering environmental, social and governance (ESG) benefits is booming," BIS said.

It said the growth of the overall ESG market was riding mostly on investors' focus on environmental considerations, particularly in fixed income markets.

However, "given the very fast growth of the new asset class, there are questions about the possibility that a bubble might develop unless market transparency can be ensured," the BIS said.

"Could a fundamentally welcome development -- helping to finance the transition to a low-carbon world -- generate significant financial imbalances?" BIS asked.

Historically, the investments that accompany major economic and social changes tend to undergo large price corrections after an initial investment boom, BIS recalled.

It cited the examples of the surge in investments in railway stocks in the mid-1800s and internet stocks during the "dot-com" boom at the turn of the 2000s.

There are signs that ESG assets' valuations may be stretched, BIS said.

However, quantifying the expansion of these assets remains a complex task given the vagueness of the criteria used to define them.

Some estimates indicate that ESG assets rose by nearly one third between 2016 and 2020 to $35 trillion, or no less than 36 percent of total professionally managed assets.

In a narrower definition, including only mutual funds and exchange-traded funds (ETFs) that self-report as having ESG mandates, shows even faster growth but at lower levels.

The assets managed by these funds have soared over the past five years, more than tenfold, and now stand at approximately $2 trillion.

By this yardstick, these assets represent around three percent of mutual fund and ETF equity investments and one percent of their bond investments.

BIS said developments in the ESG market should be closely monitored.

Established in Basel in 1930, the BIS is owned by 62 central banks, representing countries that account for about 95 percent of global gross domestic product (GDP).

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