is a positive development. by spreading and diversifying risk, financial markets have become more efficient and stable. deeper and more mature markets tend to be better equipped to deal with uncertainty and distress. we have also witnessed the forging of new and ever more complex financial instruments. increasing the set of available financial instruments creates more complete markets. it enhances the opportunities for households and enterprises to decouple consumption and investment from current income. investors can take on or load off risks in a more tailored fashion than before and actively manage their exposures and relocate risks to those best equipped to bear them. yet, the flip side of increased financial integration and diversification is the potential for more widespread contagion if something goes wrong. furthermore, rapid innovation and increased complexity can make it difficult to assess the real underlying risks of the new instruments. it takes time for borrowers and lenders to learn the true characteristics of new instruments. this increases the possibility that some investors – and issuers, for that matter – misunderstand the riskiness of an instrument. as a consequence, expected return may not appropriately reflect the true risk. when the true risk of an instrument starts to reveal itself, sharp corrections in the market may follow. the recent subprime crisis is one example of how new and complex instruments can give rise to global financial turmoil. problems stemming from over - optimistic price expectations for the us housing market have spread to investors and financial institutions all over the world. the wide dispersion of the financial turmoil took many of us by surprise. not to mention where problems turned up ; in german landesbanken, in large investment banks and in norwegian hydro - electricity - rich municipalities, to name but a few. ben s. bernanke ( 2006 ) : ” opening remarks ” at ” the new economic geography : effects and policy implications ”, a symposium sponsored by the federal reserve bank of kansas city, jackson hole, wyoming. alan greenspan ( 2007 ) : ” the age of turbulence ”, the penguin press, new york. one lesson from the current financial turmoil is that the expected advantages of securitisation have been somewhat exaggerated. securitisation was believed to make markets deeper and more liquid and – most importantly – to provide continuous pricing. recent events have shown that this is not necessarily true for all markets at all times. in times of distress and uncertainty, some financial market segments can cease to function. when no trading takes place, no updated prices are quoted. this represents

and around 1990, when levels of domestic spending, private and public, far exceeded our economic limits. it was not until 30 years after oil had been discovered off our shores that norway was in a position to put some money aside. we are nonetheless frequently reminded that petroleum production has reached a plateau and will begin to decline in a few years ’ time. our welfare system, including old - age pensions, is basically financed by current income. it is not fundbased, as pensions are in a number of other countries. even though it is likely that the pension fund will grow considerably in the years ahead, estimates show that the capital in the fund will only cover some 60 per cent of public pension expenditure in the future. it cannot therefore be argued that the government ’ s savings are large relative to its obligations. the fund and its investments in international capital markets greatly enhance our welfare and they do it in two ways : first, they give us the freedom to consume and invest oil revenues independently of the actual time profile of oil production. second, they give us the freedom to diversify by converting oil in the ground into ownership stakes in businesses around the world, increasing expected returns and reducing risk. i hope those of us gathered here tonight – guests from far away and close by, and many who work with this fund every day – will see a growing consensus around standards and norms for ethical investment. as a representative of norges bank, i am happy that you wish to be part of the process. as i ’ m confident our owner the ministry of finance, and our colleagues at the council on ethics would agree, we welcome input, ideas, and challenges. i wish you every success with your discussions. thank you for your attention.