The Riksbank’s remit

The responsibility for combating and reducing CO₂ and other greenhouse gas emissions through policy measures lies with the world’s governments. But that does not mean that other authorities can ignore the issue. The Riksbank has several reasons to monitor, understand and take account of climate change because it may affect the conditions for the Riksbank to fulfil its mandate.

According to the Sveriges Riksbank Act, the Riksbank is to maintain price stability and promote a safe and efficient payment system. This means that the Riksbank shall maintain price stability, promote the stability of the financial system and ensure that payments can be made safely and efficiently. According to the preparatory works for the current Sveriges Riksbank Act, the Riksbank shall support the objectives of general economic policy, whose aim is to achieve sustainable growth and high employment. Consequently, in its policy work too, the Riksbank shall promote sustainable development in line with the ambitions of the Riksdag and Government, subject to the condition that this does not override the price stability objective and is compatible with the Riksbank’s overall policy remit. The Riksbank’s remit also includes using public finances prudently and taking account of the state’s core values, which are based on democratic principles, in its work.^[2], The state’s core values are based on the Instrument of Government’s fundamental requirements and consist of the six principles of democracy, legality, objectivity, free formation of opinion, respect, and efficiency and service. ^[3] On 28 October 2021, the Government submitted a proposal for a new Sveriges Riksbank Act (Government Bill 2021/22:41). The main objective of the Riksbank’s activities will remain maintaining price stability. Without neglecting this objective, the Riksbank shall also consider the real economy by contributing to a balanced development of output and employment. The new Act is intended to enter into force on 1 January 2023. In view of the priorities of the Government and Riksdag regarding sustainability and climate change adaptation in the Swedish economy, the new Act explicitly supports taking sustainability considerations into account in the Riksbank's monetary policy, provided that this does not override the price stability objective. The proposal for a new Sveriges Riksbank Act also states that the Riksbank, as part of its monitoring of general economic developments, should identify threats to sustainable development.

Climate change affects the Riksbank’s responsibilities

The Riksbank’s remit provides several reasons for the Riksbank to consider climate change.

• Climate change and the measures taken to counter it will have an impact on economic developments, perhaps mainly in the longer term but also in the short term. Monetary policy is guided by forecasts of how inflation and the economy in general will evolve. This analysis will therefore need to be developed in order to better incorporate climate change.
• The risks arising from climate change – which are usually divided into physical risks and transition risks – are a source of financial risk. In its asset management, that is, in the management of the foreign exchanges and the assets that the Riksbank buys as part of monetary policy, the Riksbank considers financial risks.
• The Riksbank needs to analyse and monitor climate-related risks and vulnerabilities in the financial system as these can create financial risks such as liquidity, credit and market risks.

In other words, to fulfil its remit, the Riksbank must consider climate change in monetary policy, asset management and its work of promoting financial stability and safe and efficient payments, as well as in its internal activities. In line with its mandate, the Riksbank supports Sweden’s economic policy and promotes sustainable economic development. The Riksbank does this without disregarding the primary objective of maintaining price stability and its other policy tasks. The Riksbank shall not counteract initiatives from other policy areas either. The measures taken by the Riksbank to take account of climate change complement, rather than substitute, the measures required. The next chapter in this report describes how the Riksbank works with climate-related risks in practice.