Both climate change itself, and the measures taken to counteract it and to promote the transition to a sustainable economy, can bring about structural changes in different parts of the economy. This can contribute to instability in financial markets and the wider economy, for example more variable inflation. The Bank for International Settlements (BIS) estimates that climate change could cause a major financial crisis. See P. Bolton, et al. (2020) The green swan - Central banking and financial stability in the age of climate change, Bank for International Settlements. Chapter 2 presents the Riksbank’s analysis and work in this area.
One way to assess climate risks is to test the resilience of banks in scenarios where the risks materialise. The Riksbank is therefore working to develop a climate stress test for Swedish banks. This is discussed in more detail in chapter three.
Since the Riksbank published its previous climate report in December 2021, a new Sveriges Riksbank Act has come into force. As before, the Riksbank’s primary objective is to maintain price stability. In addition, the Riksbank is legally required to take real economic considerations into account by contributing to a balanced development of production and employment.
The new Act also establishes the Riksbank’s tasks with regard to financial stability. The Riksbank is to identify risks of serious disturbances or significant efficiency losses and assess whether the financial system is stable and efficient, including reporting on these assessments.
Climate change and climate transition affect the Riksbank’s ability to perform all of these tasks. It will therefore continue to be an important area for the Riksbank to monitor.
According to the new Sveriges Riksbank Act, the Riksbank is also to conduct an external analysis to identify threats to sustainable development that affect the conditions for fulfilling its tasks and to take sustainability into account in its asset management. Chapter 4 discusses what the new Riksbank Act says about climate and sustainability.