The purpose of this Commentary is to calculate and account for the carbon footprint of the bonds in the Riksbank’s foreign exchange reserves that are issued by countries and regions. On 31 March 2022, the carbon footprint of the foreign exchange reserves amounted to 298,000 tonnes of carbon dioxide per billion dollars of GDP. Seen over the last five years, the carbon footprint of the bonds in the foreign exchange reserves has decreased.

In this Commentary, we would also like to describe the method for calculating the carbon footprint for portfolios consisting of bonds issued by countries and regions. Calculation of the footprint is in line with the recommendation for central banks developed by the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), which, in turn, is based on recommendations from the Task Force on Climate-related Financial Disclosures (TCFD). The Riksbank uses a calculation method in which emissions of greenhouse gases from each country or region for all goods and services produced within the country/region are set in relation to the value of this output. The result is expressed using the measure carbon intensity.

In this Commentary, we start by describing the composition of the foreign exchange reserves and the Riksbank’s work so far on applying sustainability considerations to the management of the reserves. We then describe and analyse the carbon footprint calculation method followed by reporting the carbon footprint of the foreign exchange reserves and analysing the results. Alternative ways of calculating the footprint are also discussed. In the concluding part, we discuss the challenges inherent in the measure and how the measure can be developed and complemented by other forward-looking measures to provide a better indication of climate-related financial risks.

Authors: Emma Brattström and Ruzica Gajic^[1] Emma Brattström was working in the Markets Department when she contributed to this Commentary. She has now left the Riksbank. The authors would like to thank Magnus Andersson, Dag Edvardsson, Alma Frödén, Lina Jacobson, Johan Linder, Marianne Nessén, Tommy Persson, Albina Soultanaeva, Mikael Stenström and Lena Strömberg for his/her/their valuable comments. The views presented in this Commentary are the authors’ personal opinions and are not to be regarded as an expression of the Riksbank’s view on these issues. , work at the Markets Department.