Flodén: Riksbank selling bonds for climate reasons
Climate change is one of the greatest challenges of our time. It affects how the economy functions and creates new risks on the financial markets. “The Riksbank needs to analyse and manage the economic consequences of climate change. Although it is the Government and the Riksdag who should formulate climate policy, we can contribute to the climate work to some extent by giving consideration to sustainability aspects when investing in the foreign exchange reserves. We are now doing this by rejecting issuers who have a large climate footprint.” These comments were made by Martin Flodén in his speech in Örebro today.
Date: 13/11/2019 11:00
Speaker: Deputy Governor Martin Flodén
Place: Örebro University and Kommuninvest, Örebro
The Riksbank's foreign exchange reserves will become a little more sustainable
Last year the Executive Board decided that sustainability aspects will be given consideration in investment decisions. This can mean investing some of the foreign exchange reserves in particularly climate-friendly assets, such as green bonds. “However, I have doubts about this type of strategy, partly because our investments are largely in bonds issued by central and federal governments,” explained Mr Flodén. It is difficult to earmark money for special projects in government budgets.
On the other hand, the Riksbank can make an overall assessment of how the states work to achieve a sustainable climate and can reject issuers with a large climate impact. “We have therefore recently sold holdings of bonds issued by the Canadian province of Alberta and the Australian states of Queensland and Western Australia,” said Mr Flodén.
Fiscal policy has scope to manage an economic slowdown
Mr Flodén also took up the Riksbank's possibilities to make monetary policy even more expansionary if economic activity going forward is weaker than the Riksbank's forecasts. He sees the possibilities as fairly limited. Although there is an abundance of suggestions as to how monetary policy could use unconventional measures to be made more expansionary, Mr Flodén says these suggestions actually concern fiscal policy disguised as monetary policy.
“There are good possibilities to make fiscal policy in Sweden more expansionary if necessary, but it is the Government and the Riksdag who decide on how both climate and fiscal policy should be formulated in Sweden,” concluded Mr Flodén.