For example, its efforts over the past two years to promote market functioning and minimize contagion were critical in preventing the strains in our financial markets from resulting in even more severe damage to the economy. These “lender of last resort” interventions on the part of the Fed, including facilities such as the Term Securities Lending Facility (TSLF) and the Primary Dealer Credit Facility (PDCF), as well as programs such as the foreign exchange reciprocal currency agreements, are examples of the rapid and responsive application of basic central bank tenants to the unique challenges we faced as this crisis evolved. Indeed, in many ways, the crisis has underscored why the Federal Reserve was created almost a century ago: to provide a backstop for a banking system prone to runs and financial panics. BIS Review 6/2010  1  Where it proved necessary and feasible to do so, the Fed also used its emergency lending authority to forestall the disorderly failure of systemically important institutions. These actions truly were extraordinary – well outside the scope of our normal operations, but our judgment was that not taking those actions would have risked a broader collapse of the financial system and a significantly deeper and more protracted recession. Faced with the choice between these otherwise unpalatable actions and a broader systemic collapse, the Fed, with the full support of the Treasury, invoked its emergency lending authority and prevented the collapse of certain institutions previously considered to have been outside the safety net.

As such, the focus is on material ESG issues that impact the fund’s long-term performance. These issues are captured in three responsible investment pillars. First, establishing principles: A set of international principles and standards from the UN and the OECD provides a framework for the Bank’s work with companies and other stakeholders. Priorities are based on the mandate and are characterised by formulating expectations of companies, guidelines for voting, and positions on governance issues. Documents communicate the Bank’s priorities and ensure predictability. Second, active ownership: Voting at annual general meetings is the most important tool for active ownership. Through its voting, the Bank seeks to strengthen governance, improve financial performance and promote responsible investment practices. The voting guidelines provide a principled basis for voting decisions, but also take account of company-specific factors. In the Bank’s dialogue with the largest companies, governance and sustainability topics relevant to long-term return are raised. This includes risks and opportunities associated with climate change, and the Bank expects companies to integrate material climate risks into their strategies, risk management and reporting. Third, investing sustainably: The Ministry of Finance has given us dedicated environment-related mandates. Going forward, these mandates will include investments in unlisted infrastructure for renewable energy. Next, in certain cases we divest from companies that impose substantial costs on other agents, with the aim of reducing the fund’s exposure to unacceptable risks. Finally, our political authorities provide guidelines that specifies that certain investments should be excluded from the fund due to ethical concerns.