’ 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. 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. 3 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

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 purposes? how sustainable are the bonds in central bank fx reserves? can the riksbank consider climate - related risks in the collateral it requires from counterparties in monetary policy transactions? 31 sustainability perspective in management of the fx reserves since 1 january 2019, the riksbank has had a new financial risk and investment policy. the policy states, among other things, that consideration shall be given to sustainability in the choice of assets in the fx reserves, in addition to other requirements laid down in the riksbank ’ s mandate. the riksbank ’ s gold and fx reserves are managed so that there is preparedness to supply the financial system with liquidity in foreign currency and to intervene on the fx market for monetary and foreign exchange policy purposes. management of the gold and fx reserves shall also help to safeguard the riksbank ’ s financial independence, which means rates of return must be healthy. the riksbank has decided to consider how much the assets contribute to the fx reserves ’ overall climate footprint. 32 this follows the view of the ngfs on climate risks as a source of financial risk. in our most recent analysis of the fx reserves ’ composition, the greenhouse gas intensity of the assets was, for the first time, a factor in the calculations together with rates of return and risk. chart 3 shows how greenhouse gas emissions vary in different countries. the riksbank has elected to only invest in australian states and canadian provinces with the same or lower greenhouse gas intensities than the respective country as a whole. for this reason, bonds issued by certain australian states and canadian provinces were sold off in 2019, see chart 4. this is the market valuation as of 31 december 2019, see the riksbank ( 2020 ).