SPEECH
SVERIGES RIKSBANK
DATE:
2020-03-03
SE-103 37 Stockholm
SPEAKER: (Brunkebergstorg 11)
Deputy Governor Anna Breman
VENUE: Royal Swedish Academy of Engineering Sciences, Stockholm
Tel +46 8 787 00 00
Fax +46 8 21 05 31
registratorn@riksbank.se
www.riksbank.se
How the Riksbank can contribute to
climate policy1
I would like to start by extending a warm thank-you to Stockholm Resilience
Centre, Stockholm Environment Institute, Kungliga Vetenskapsakademien, och Misum
for arranging this seminar.
Perhaps you recognise the expression Hinc robur et securitas. It is Latin for From
here, strength and security. It is the Riksbank's motto. It is on the Riksbank's
emblem and it has also be seen on some of our banknotes. I learnt this when I
arrived at the Riksbank as a new Deputy Governor a few months ago and it stuck -
from here, strength and security.
As a new Deputy Governor, I feel a responsibility for preserving the Riksbank's
role as a guarantor of strength and security when the world around us is fraught
with unease - unease over trade wars, unease over the coronavirus, and unease
over climate change, to give a few examples. For a new Deputy Governor, it also
becomes evident that those of us in the Executive Board make decisions that
affect economic development for households and companies for several years to
come. But the statistics we require to fully understand developments can
sometimes be incomplete and forecasts are always very uncertain. Uncertainty also
characterises the subject I am going to focus on today - the effects of climate
change on the Swedish and the global economy.2
We know that greenhouse gas emissions cause global warming, but we do not
know how much and how rapidly the global temperature will increase. We know
that climate change affects growth, inflation and productivity, but we don't know
how much and how quickly. We know that global warming can cause irreversible
threshold effects, but we don't know how close we already are to such threshold
effects.
The Riksbank needs to respond to climate change. There are three reasons for
this. First, because climate change affects the Swedish and the global economy -
and may therefore threaten both price stability and financial stability.3 Second,
because it is important to discuss what tools the Riksbank has to combat such
threats. This is especially important just now as there is very considerable
uncertainty about the future and the Riksbank's toolbox is perceived to be limited or
even exhausted. Third, because it is important to analyse and discuss whether and
if so what central banks, including the Riksbank, can and should do to combat
climate change.
I will argue that the Riksbank can act with strength and security in an economic
crisis, and I will exemplify this in the form of a financial crisis triggered by
climaterelated events. The Riksbank's toolbox has changed but it is not empty. But in
order for our measures to have a profound impact, we need to work together with
other authorities.
Good cooperation with other authorities and in international networks is also key
when it comes to the Riksbank's scope for contributing to climate adaptation. The
Riksbank can contribute to a more sustainable future, but only as a complement
to other effective climate policy. The Riksbank and other central banks will not be
able to replace the need for an effective climate policy that should be focused on
setting a price on carbon emissions.
Let me begin by focusing on the issue of how the Swedish economy is affected by
climate change.
The climate and its effect on the economy
and the financial system
The climate is a particularly complicated system. This means that the economic
consequences of climate change are difficult to predict. Allow me to illustrate this
in a figure showing what we know and what we don't know about the effects of
climate change, see Figure 1.
First, there is scientific consensus on the fundamental connection between rising
greenhouse gas emissions and rising temperatures. But there is considerable
uncertainty surrounding the extent of the effects on temperature, precipitation and
sea levels. The IPCC - Intergovernmental Panel of Climate Change4 - has
calculated how concentrations of greenhouse gases in the atmosphere will increase in
two scenarios; one in which emissions continue at their present rate, and one in
which emissions decrease, see the red and yellow lines respectively in Figure 1.
Figure 1 also shows the estimated effects of the two scenarios on the
temperature, precipitation and sea level in Sweden. If emissions continue at their current
rate (red figures), we can expect the temperature to rise by between 4 and 7.9
degrees, precipitation by between 17 and 41.4 per cent and the sea level by
between 21.4 and 66.4 centimetres. If, on the other hand, we manage to reduce
emissions in the second scenario (yellow figures), the effects will be less, but far
from negligible. In this scenario, the temperature is expected to rise by between
2.3 and 3.8 degrees, precipitation by between 8.2 and 39.1 per cent and the sea
level by between 4.4 and 39.4 centimetres. There is considerable uncertainty, but
the direction is clear and very worrying.
Figure 1. Increase in temperature, precipitation and sea level in Sweden in two
scenarios for global warming.
1 400
1 200
TEMPERATURE PRECIPITATION SEA LEVEL
1 000
800
Change in relation to the Change in relation to the Change in relation to the
600
mean value (1961-1990), mean value mean value (1986-2005),
degrees C (1961-1990), % cm
400
+7.9 +41.4 +66.4
200
+5.9 +27.1 +42.4
+4 +17
+21.4
0
1950 1970 1990 2010 2030 2050 2070 2090
+3.8 +39.1 +39.4
Historical emissions
+3.1 +18.5 +21.4
Continued emissions (RCP 8.5)
+2.3 +8.2 +4.4
Reduced emissions (RCP 4.5)
Note. The left-hand diagram shows the concentration of carbon-equivalent greenhouse gases in the atmosphere
in hundreds of ppm in two of the IPCC's scenarios; RCP 8.5 (continued carbon emissions) and RCP 4.5 (reduced
emissions). The right-hand figure shows the change in temperature, precipitation and sea level in Sweden in the
two IPCC scenarios. The numbers show the maximum, minimum and mean values. There are substantial regional
differences in the effects on the sea level and the table shows the mean value for the regions for each respective
scenario and percentile.
Sources: RCP Database (Version 2.0.5), SMHI scenario data and SMHI Klimatologi [Climatology] report series, no.
41
Second, we know that climate change has economic consequences, but their
magnitude is uncertain. Climate change affects the economy via physical risks and
transition risks. This is illustrated in Figure 2.
The physical risks include different types of extreme weather and gradual
warming. Storms, heatwaves and cloudbursts will probably become both more common
and more serious in a warmer climate. The gradual warming will lead to smaller
harvests, changes in ecosystems, melting glaciers and rising sea levels. Such things
affect both households and companies. We have already seen serious examples of
how the economy can be affected in connection with the drought in Sweden in
2018, the forest fires in California in 2019 and the bushfires in Australia at the
beginning of this year.
Transition risks are linked to the effects that arise when adapting the economic
system to a less fossil-based economy. The effects may be gradual in that policy
instruments, such as carbon taxes, lead to structural transformation when
carbonintensive sectors lose competitiveness to greener sectors. The effects can also be
more abrupt and create unexpectedly rapid movements in asset prices, such as in
the value of coal and oil deposits.
To limit global warming to 2 degrees, the IPCC estimates that only around 20-35
per cent of the world's known reserves of oil, gas and coal can be utilised. If this
estimate is correct, it would mean that the majority of today's reserves are
unusable and thus have no economic value. The assets have, in other words, become
"stranded". Oil and gas companies are major borrowers on international bond
markets and a rapid transition may therefore create financial risks and instability.
For banks, the value of collateral can fall and credit losses can rise, which could
reduce their capital, impair liquidity and thus weaken the banking system.
The insurance sector is related part of the economy that may be hit hard by a
rapid transition. Tighter insurance requirements and increased liability could have
a very adverse effect on the insurance sector. We can already see that it has
become more common for insurance companies not to insure certain climate risks.
Figure 2 also provides a description of how the effects of transition risks may
spread to the financial sector and threaten financial stability.5
Figure 2. Physical risks and transition risks affect financial institutions and hence
financial stability.
PHYSICAL RISK
COMPANIES, FINANCIAL
 Gradual global warming
AGRICULTURE AND INSTITUTIONS

Extreme weather events
HOUSEHOLDS
Lower
TRANSITION RISK
productivity

Tighter insurance
requirements
 Adaptation to less fossil-
Falling asset
based economy
prices

Investment losses
 Climate taxes
 Tougher regulation
Lower profits
 Credit losses
 Changed consumption
patterns
 Increased risk weights
Source: Danmarks Nationalbank (2019)
Third, I would like to highlight the risk of extreme outcomes, so-called threshold
effects. This is the starkest example of fundamental uncertainty - science cannot
say that this will happen, but neither can it completely rule out disastrous
outcomes. Threshold effects occur when climate change reaches a tipping point and
cannot be reversed, but instead speeds up further change. There are several
examples: melting icecaps, thawing permafrost, forest fires that can devastate areas
of the Amazon rain forest.
Considering uncertainty is a natural part of all decision-making. In the monetary
policy process, for example, there is uncertainty about underlying economic
correlations, about data, about forecasts, etc. In this process, it is common to
formulate decisions so that outcomes are as good as possible on average.
When it comes to decision-making in the climate area, Martin Weitzman's
research has had a substantial impact.6 In his view, decisions should be formulated
in order to avoid the worst outcomes. This is easy to understand from an
insurance perspective. When we take out a fire insurance policy, for example, we give
higher weight to the worst outcome (the house burning down) in our risk
assessment than the most likely outcome (the house not burning down). If we had not
done this, we probably would not have taken out fire insurance. We should use
the same thinking regarding climate policy. When we are exposed to serious
threats at the same time as there is considerable uncertainty, we should insure
ourselves so that we avoid and reduce the consequences of the worst outcomes.
Climate change affects economic development via physical risks, transition risks
and the risk of irreversible threshold effects. All this is negative risk. It is therefore
important to point out that the effects of a transition to more sustainable
development do not need to be negative - an effective climate policy that contributes
to more rapid technological development in green energy and sustainable
infrastructure could, on the contrary, lead to productivity growth, new jobs and higher
living standards.
So far I have focused on how the Swedish and global economy are affected by
climate change. The next step is to consider how the Riksbank can act when price
stability and financial stability are threatened by global warming. Here, I would
like to start with current monetary policy and highlight a few scenarios that reflect
how climate change may affect monetary policy going forward.
Climate-related risks can affect monetary
policy
At the most recent monetary policy meeting in February, the Riksbank left the
policy rate unchanged at zero per cent. The policy-rate path was also left
unchanged and indicates that the rate will remain at zero per cent for the whole of
2020 and 2021. Bond purchases also continue as planned without any changes
during the year. However, I mentioned at the meeting that we risk
underestimating the possibility whereby so much happens over the next two to three years that
monetary policy needs to change direction.
As monetary policy-makers, my colleagues and I must weigh together the effects
from short-term cyclical developments with long-term structural phenomena.
Effects from climate change are examples of phenomena that have an impact in
both the short and the long term, which can be a challenge for monetary policy.
Today, I would like to show three examples of how climate-related risks might
lead to monetary policy needing to become more or less expansionary and at the
same time involve difficult monetary policy considerations:

A temporary supply shock
 A slow structural change
 A severe economic crisis
It is important to point out, however, that there are many other
non-climate-related events that could trigger similar scenarios. Before I go on, I would also like to
say that the potential measures I refer to in different scenarios can obviously not
be seen as a promise to use them in the event of a shock or a crisis, as every
situation will be unique and the circumstances will vary.
A temporary supply shock
First, imagine a scenario in which a period of extreme weather, for example an
unusually warm winter after an uncommonly rainy and windy autumn, leads to
falling energy prices. This is the situation in which we currently find ourselves. It is
also a situation expected to be increasingly common in Sweden in the years ahead
due to climate change. It is an example of a temporary supply shock that can push
down inflation well below two per cent even if growth is healthy and inflationary
pressures in the rest of the economy are in line with expectations. Monetary
policy regularly manages these types of temporary shocks, and they are not normally
a reason to make monetary policy more expansionary.
What can be problematic is if inflation expectations are affected. They sometimes
have the tendency to be backward-looking and react strongly to fluctuations in,
for example, energy prices.7 I think it is particularly important to keep a cool head
in this situation and keep a careful eye on how underlying inflation, which
excludes energy prices, develops. The economic outlook in the medium term is also
important, as it says more about the conditions for inflation a couple of years
ahead.
A slow structural change
The other scenario occurs if the climate transition gives rise to a slow structural
change, which might, for example, affect inflation for a longer period, the
longterm sustainable level of resource utilisation and the long-run real interest rate.8
In contrast to other structural changes in the economy, such as demography and
digitalisation, which are considered by many to dampen inflationary pressures,
the effect of climate change on inflation is more uncertain. This also applies to the
effect on resource utilisation and the long-run real interest rate. Here, we need
both more data and more analysis in the coming years to gain a better
understanding of these mechanisms and of how monetary policy can and should react
to this type of slow structural change in the economy.9
Central banks strive to stabilise resource utilisation around a long-term
sustainable level. We know at the same time that climate risks and other environmental
problems are mispriced, and I will come back to why this is so later in my speech.
How we, as a central bank, should consider this and other market failures is far
from obvious. Bearing in mind the potentially serious consequences of mispriced
climate risks, I would welcome a debate on the various benefits and drawbacks of
taking this market failure into account.10
A severe economic crisis
The final and third scenario is the most serious - a severe economic crisis. The
transition to more sustainable development could trigger dramatic and rapid
changes in financial markets, and in the worst case a financial crisis.11 What starts
with financial instability tends to generate serious effects in the real economy
with falling growth, rising unemployment and lower inflation.
There is a certain unease in Sweden and in many other countries that central
banks will have difficulty combatting a new economic crisis. Policy rates are
already low in many countries, and several central banks have already made
substantial bond purchases to support economic development. I think it is important
to tackle this unease.
The Riksbank still has a very good level of preparedness and plenty of scope to
take decisive action in the event of financial instability, for instance, by providing
liquidity support to financial institutions. In addition, the Riksbank has four main
monetary policy tools at its disposal in the event of a sharp decline in the Swedish
economy: a lower policy rate, bond purchases, loans to companies via banks and
currency interventions. In addition, communication on forward guidance can be
used, potentially in combination with other measures.
If we were to be affected by a serious economic crisis, an expansion of our
balance sheet would, in my view, be closer to hand than the introduction of an even
more negative policy rate than the one we have had in recent years. To cut the
policy rate below zero again is entirely possible - it is important that zero is not
regarded as a lower bound. That said, however, there is a functional lower limit as
to how negative the policy rate can be before the transmission mechanism
deteriorates.12 I therefore consider that we should exercise caution with regard to
reintroducing a negative policy rate, and that the effects of this should be weighed
against the advantages and disadvantages of extended bond purchases and other
monetary policy tools.
To add some context to the option of bond purchases, it is important to note that
the Swedish central government debt is small in relation to GDP, compared with,
for example, the euro area and the United States. This sets a limit as to what is an
appropriate amount of government bond purchases for monetary policy
purposes. The Riksbank's bond purchases for monetary policy purposes corresponds
to about 7 per cent of Swedish GDP, while the ECB's and Fed's programmes
correspond to more than 20 per cent of GDP.
The Riksbank, like the ECB, has the opportunity to broaden its asset purchases to
include other types of bonds. The stock of Swedish covered bonds (housing
bonds) issued in Swedish kronor (SEK) is just under SEK 2,000 billion. This is more
than double the size of the outstanding volume of government bonds in the same
currency. The stock of corporate bonds issued in SEK corresponds to almost 700
billion, while the stock of municipal bonds issued in SEK by municipalities and
Kommuninvest is just over 400 billion. All in all, this means that the Riksbank has
the possibility to increase its bond purchases.
However, the fact that the possibility exists does not make it an appropriate
measure. There are several aspects to consider; for example, how it affects
resource distribution in the economy and the risks for to the Riksbank's balance
sheet. Another issue is whether the Riksbank should consider sustainability
aspects in its bond purchases. I will come back to this at the end of my speech.
Allow me to summarise what I have discussed so far. I feel confident that the
Riksbank can act with strength and security if a crisis threatens to destabilise the
Swedish economy. However, we should be humble when it comes to the difficult
considerations that may then be required in monetary policy. The scope for
combatting a severe downturn in the Swedish economy is improved substantially if other
policy areas also contribute, in particular fiscal policy.13 The remaining issue is the
most difficult - should central banks just try to combat the potential negative
effects of climate change or should they also act to combat climate change itself?
The global climate crisis - a challenge that
requires cooperation
To be able to answer the question of whether the Riksbank can and should have
an active role in combatting climate change, we must first answer two other
questions. First, what is effective climate policy? And second, what lies within the
Riksbank's mandate?
One of the fundamental causes of the climate crisis is the fact that, in the absence
of climate policy, greenhouse gases can be released free of charge, despite the
damage such emissions cause. Economists tend to call the negative effects for
which the individual emitter does not need to pay negative "external" effects.
Neither does it matter where on Earth the greenhouse gases are emitted.
Emissions have the same effect on global warming regardless of whether they occur in
China, the United States or Sweden. Climate change is, in other words, a global
challenge that is best met through global cooperation.
A price on carbon is the highest priority
To tackle the negative external effect of greenhouse gas emissions, a price on
carbon is required.14 The most effective solution would be a uniform price on carbon
emissions all over the world. This can be arranged through carbon taxes or
through trading in emission rights. Countries that choose not to put a price on
carbon could be subject to carbon tariffs that might indirectly increase their costs,
16
something which is moreover being considered by the European Commission.15
Such measures are adopted by national parliaments and negotiated in
international contexts by head of government and finance ministers.
In the current situation, there are only a few countries that have carbon taxes17
and global carbon taxes have yet to be discussed in international negotiations. As
policy-makers, we therefore need to be prepared for a global price on carbon not
becoming a reality in the short term. Implementing other measures is therefore a
matter of urgency.
For example, the Swedish Economic Research Council's Report 2020 highlights
"aggressive subsidies aimed at the production of alternative energy sources" as a
possibility.18 International research indicates that energy transition takes a long
time and that other measures, such as subsidies to the development of new,
green technology, can be effective.19
The Riksbank has a role to play
An effective climate policy, i.e. taxes, emissions trading, tariffs and subsidies, falls
within the framework of fiscal policy. Central banks cannot replace these types of
measures, but that does not mean, in my opinion, that central banks do not have
a role to play. On the contrary, several risks are created if central banks do not use
the tools within their mandate to contribute to climate adaptation.
First, if central banks ignore the climate issue, their own operations risk
counteracting other climate policy. A minimum requirement for central banks is that they
don't contribute themselves to exacerbating global warming. Instead, it is
reasonable to expect that the activities of central banks are gradually adapted in line
with international treaties such as the Paris Agreement.20 Second, central banks
14
This section is based on Olovsson (2020).
15
See also Buchanan (1965), Böhringer et al. (2012) and Nordhaus (2015), who also advocate carbon tariffs.
16
An advantage of carbon taxes is their relative simplicity. If set at an appropriate level, the tax will cause
individuals and companies to consider or internalise the cost of additional carbon emissions when they take economic
decisions. Emission trading is the measure that has so far been implemented on a global level to reduce carbon
emissions. It is currently applied within the EU's Emissions Trading System. The basic idea is to limit total
emissions by auctioning off emission rights to companies and other players. These rights can then be bought and sold
by various market participants. It is important that measures to reduce carbon emissions are introduced at the
global level. Otherwise, ambitious measures in one region only risk leading to companies moving production to
other less ambitious regions and thus no effect on emissions materialising. One way of reducing this risk is to
introduce carbon tariffs on imported goods.
17
In the early-1990s, Sweden introduced a carbon tax that has formed the basis of Swedish climate policy. A
recently published study shows that the tax has worked and actually reduced emissions in Sweden, see Andersson
(2019).
18
See Swedish Economic Research Council (2020)
19
See Wagner (2020).
20
In November 2016, the global climate agreement from Paris entered into force. One of its goals is to keep the
global temperature increase below 2 degrees and then limit it even further to 1.5 degrees.
need to work to ensure that international financial market regulation mitigates
the risks of climate-related financial instability, in the same way as central banks
have worked to combat other systemically important risks in the financial
system.21
What does all this mean for the Riksbank? To answer this, we should start by
looking at how the Riksbank's mandate and activities relate to it. The Riksbank's
mandate is to promote price stability and an efficient and safe payment system. I
believe that the different measures the Riksbank can implement fall into three main
categories:

Research and analysis

Regulation of the financial system

Management of the bank's own balance sheet
Let me now discuss the options available to the Riksbank to contribute to climate
adaptation within these three areas.
Strengthen research focusing on economic sustainability
To prepare for the effects of climate change, it is important for central banks to
support and contribute themselves to research that sheds light on the economic
consequences of global warming. This is particularly important as it may take
some time before research findings relevant from a central bank perspective are
produced and published by university researchers. Contributing to data collection
is also an important piece of the puzzle when building preparedness and resilience
to combat climate-related risks.
Chart 1. Loss of consumption relative to an optimum policy
Per cent
25 25
20 20
15 15
10 10
5 5
0 0
2010 2050 2090 2130 2170
High tax when a low tax is correct Low tax when a high tax is correct
Today, the Riksbank, together with other institutions, contributes actively to
research into climate change and has done so since 2013. The research has received
international attention and been published in several of the best scientific
journals. Findings show, for example, that an effective climate policy need not be
expensive and that allowing for extreme events is inexpensive insurance against
substantial but uncertain future climate costs, see Chart 1.22 The blue line
indicates that the costs of overestimating the effects of climate change are not
particularly prohibitive. This is because the carbon tax is an effective tool to reduce
climate change at a low cost. The red line indicates, on the other hand, that the cost
of underestimating climate change can be very substantial.
Chart 2. Global warming for various carbon taxes.
Degrees Celsius
9 9
8 8
7 7
6 6
5 5
4 4
3 3
2 2
1 1
0 0
2020 2060 2100 2140 2180
Temperature without a tax Carbon tax in the EU (200 SEK/ton)
Global carbon tax (200 SEK/ton) Global "swedish" carbon tax (1100 SEK/ton)
Source: Hassler et al. (2020)
Chart 2 shows estimates of the global temperature increase in four different
scenarios. The first scenario (blue line) indicates what happens if we don't implement
any political measures. The temperature will then have increased by almost 3O C
by 2100, and by around 9O C by 2200. The red line show that a carbon tax only
within the EU has a very small effect on global warming. A global tax, on the other
hand, has a significantly larger effect. With a global carbon tax, warming would be
limited to 3O C by 2200, see the turquoise line. A global tax in line with the
Swedish level is sufficient to keep the temperature increase around 2O C by 220023.
The Network for Greening the Financial System (NGFS)24 has been in existence
since 2017 for central banks and supervisory authorities and has grown from eight
members when it was founded to 55 members and 12 observers in February
2020. Its aim is to develop and highlight best practice in environment- and
climate-related risk management for the financial sector. The Riksbank has been a
member of NGFS since 2018. As I have already mentioned, it is important that
central banks do not ignore the role of the financial system in the transition to a
sustainable economy and integrate financial risk into the climate models.25
In the years ahead, the Riksbank will continue to take an active role in NGFS. We
will also analyse how climate-related risks affect the Swedish economy in more
detail and examine the link to the financial sector more closely.
Regulations - cooperation with other authorities
The Riksbank's work to promote financial stability includes the consideration of
climate-related risks.26 The Riksbank also participates via international
organisations, including NGFS, the Basel Committee, EFC and others, in the drafting of
recommendations on a well-balanced policy. I would like to comment on three areas
where work is already under way: stress testing, the reporting of climate-related
risks and banks' capital requirements.
Stress testing is an important tool for assessing banks' resilience to financial and
economic unease. Stress testing is normally based on scenarios that reflect a
severe economic recession or a financial crisis. However, climate-related risks are
not captured by traditional stress tests and risk models. The Riksbank cooperates
with NGFS to develop stress tests that include forward-looking scenarios with
different rates of transition and different climate outcomes.
Better reporting of companies' climate-related risks is needed in order to develop
successful forward-looking stress tests of the financial sector. Banks' stress tests
require greater disclosure and better access to data. Finansinspektionen recently
announced that it intends to examine the scope on both the national and
international level for urging companies to report an internal price for carbon emissions
to a greater extent.27 Such reporting can pinpoint transition risks in their business
models, which in turn can increase the scope for companies to consider such risks
and the scope of investors for assessing them.28
On the European level, the European Commission has presented an action plan
for the funding of sustainable growth. The plan includes the development of a
classification system for green investments. At the end of last year, the
Commission communicated its "Green Deal", which puts sustainability high up on the
agenda.29 The Commission also intends to look more closely at how
climate-related risks should be integrated into the financial system. This includes discussing
banks' capital requirements and the suitability of considering green asset types
within the framework of the current capital requirements.
To direct funding to sustainable loans and investments, supervisory authorities
could be given powers to lower banks' capital requirements for the funding of
"green" assets. The opposite - that is punishing banks that fund unsustainable
"brown" assets - is also a possible policy lever. The Riksbank's view is that capital
requirements should be set based on financial risks and not used as an instrument
to distribute capital. Watered-down requirements risk undermining financial
stability. The discussion on capital requirements should instead take its starting-point
in risk - do brown assets imply higher financial risk than green ones? Another
issue is how to handle companies with high carbon emissions who are actively
aiming to transition towards lower emissions. These are questions that have begun to
be analysed and where the Riksbank can contribute knowledge and analysis.
The Riksbank's balance sheet
The assets on the Riksbank's balance sheet are valued at around SEK 900 billion.
The two largest items on the asset side are the foreign exchange reserves, which
total around SEK 420 billion, and the policy portfolio, which contains Swedish
government bonds totalling almost SEK 380 billion.30
It is here, with regard to the balance sheet, where we have to ask the really
difficult questions about the role of central banks in climate adaptation. Should green
bonds be included when the Riksbank buys bonds for monetary policy purp