Chart: Prices for European CO2 emission allowances Climate policy measures, such as higher carbon taxes, will also affect price and demand developments. Prices for European CO2 emission allowances have increased by close to 500 percent over the past two years. This has pulled up coal and gas prices in Europe and has also contributed to higher electricity prices in Norway. Even though the impact of climate change on aggregated economic variables will not necessarily be substantial in the next few years, the situation for individual businesses might be different. Norwegian firms will have to be prepared for the introduction of new climate mitigation measures and new, more environmentally friendly technology. Public attitudes and consumer demand patterns are also changing. Many of Norges Bank’s Regional Network contacts report that they are being affected by the increased focus on climate and sustainability.2 Statutory emission limits and customer demands are steering investment and production methods in a greener direction. A number of retail trade contacts reported that sales are declining because customers are increasingly focused on sustainability. The trend towards lower meat consumption has, on the other hand, given a boost to aquaculture and fish farming. Chart: Carbon pricing in Norway A number of industries are likely to have to comply with a stricter climate policy, particularly industries with low or zero carbon prices today. Stricter climate policy requirements may also speed up the introduction of new technologies. Some firms will have to undergo major changes, while others may gain competitive advantages.

Against this background, Norges Bank defined company behaviour towards the authorities regarding environmental and climate issues as a focus area for active ownership as early as in 2006. In recent years, interest in responsible investment, and not least climate risk management, has increased among investors. Investor activity can be divided into two main categories: working with the companies in the investment portfolio or changing the composition of the portfolio. The GPFG does both. We draw up expectations for portfolio companies, engage them in dialogue and exercise our voting rights. The composition of our investment portfolio also differs somewhat from the broad market index. The Bank’s responsible investment work is concentrated on three pillars. The first pillar, which we like to refer to as "setting standards", consists of our support for 5/7  BIS central bankers' speeches  common international standards and the published expectations drawn up for all the companies in the portfolio. The Bank’s expectations with regard to companies' climate change-related work were first published in 2009. If we and other investors are to understand our own exposure to climate risk, we will need adequate company reporting. To quote Bank of England Governor Mark Carney: "In order to watch we must be able to see".4 To ensure consistency across markets, disclosures should comply with a common international standard. This would also contribute to raising the bar for all companies. I have already mentioned the TCFD recommendations. The GPFG supports this work. The second pillar of the GPFG’s responsible investment management is exercising ownership.