Excluding entire sectors could mean missing out on opportunities to facilitate transition. It could also reduce portfolio diversification benefits. MAS will exclude from its reserves portfolio those companies most at risk from the economy’s transition towards lower carbon intensity. For example, companies that derive a substantial part of their revenues from thermal coal mining and have no credible transition plan. MAS is allocating $ billion of OFR to climate-related investment opportunities. Five asset managers have been appointed under MAS’ Green Investment Programme (GIP) to manage new equity and fixed income mandates focused on climate change and the environment. The GIP will help to: enhance the climate resilience of the OFR; attract sustainability-focused asset managers to Singapore; and catalyse funding towards environmentally sustainable projects in Asia and beyond. The asset management firms appointed under the GIP will establish their Asia Pacific sustainability hubs in Singapore and launch new ESG thematic funds for the Asia Pacific region. MAS will expect its external fund managers to be more active stewards of the companies they invest in, particularly on climate-related matters. By exercising their shareholder rights through voting, engagement, and escalation, our external managers can influence their investee companies to address climate risks and shift towards more sustainable practices. MAS will report every year its progress in strengthening the climate resilience of the OFR. 6/9  BIS central bankers' speeches  We are developing analytics that will enable us to continuously assess the climate risk exposures of the OFR.

That is hardly the case today, as the Trade Union Confederation, for example, has acknowledged. Their wage negotiations in 1997 started, in fact, from the 2 per cent inflation target. In the assessment of future inflationary pressure, monetary policy in turn must take the labour market situation into account. Wages are of major economic importance: in that the wage bill accounts for almost 70 per cent of value added, the development of wages has a large impact on costs and thus on price formation. Moreover, wage settlements are liable to influence inflation expectations. Wage tendencies are therefore one of the principal variables in any assessment of inflation. However, the difficulties in forecasting wage trends are considerable. The Riksbank does, of course, follow data on wages and unit labour costs; other important indicators include labour shortages in particular industries, wage drift, registered and total unemployment in relation to job vacancies. A central concept in this context is equilibrium unemployment, often referred to by the English acronym NAIRU—the level of unemployment that can be combined with stable inflation. Attempts to push unemployment down below the NAIRU with monetary stimuli are liable to have the sole effect  BIS Review 77/1999  4  of boosting inflation. In other words, the NAIRU is not responsive to an expansionary stabilisation policy. It depends instead on the workings of the labour market, together with demographic changes and technology. Thus, lastingly higher employment cannot be generated by continuously implementing an expansionary monetary policy.