Riksbanken Blacklists Canadian and Australian Bonds on Climate Footprint

    Stockholm (NordSIP) – “The Riksbank needs to analyse and manage the economic consequences of climate change,” said Martin Flodén, Deputy Governor of Sweden’s Riksbank, in a speech in Örebro in the middle of November. “Although it is the Government and the Riksdag who should formulate climate policy, we can contribute to the climate work to some extent by giving consideration to sustainability aspects when investing our foreign exchange reserves. We are now doing this by rejecting issuers who have a large climate footprint.”

    Martin Flodén, Deputy Governor of Sweden’s Riksbank

    To pursue this goal, Riksbanken has made an overall assessment of how the states work to achieve a sustainable climate and has decided to reject issuers with a sizeable negative climate impact. “We have therefore recently sold holdings of bonds issued by the Canadian province of Alberta and the Australian states of Queensland and Western Australia,” Flodén clarified. Alberta’s fossil-fuel-based energy industry represented over a quarter of the province’s GDP, in 2016, while Queensland and Western Australia are home to some of the world’s largest coal, bauxite and aluminium extraction operation.

    The alternative for Riksbanken would have been to target specific green bonds, but Flodén argues against it. “I have doubts about this type of strategy, partly because our investments are largely in bonds issued by central and federal governments,” the deputy governor explains.

    This step by Riksbanken is the latest in a series of moves by European monetary authorities to attempt to move the needle on climate change. In March of this year, the Banque de France decided to include ESG criteria in its asset management while also aligning its investments with the 2°C goal of the Paris Agreement. During the same month, the Dutch central bank became the first central bank to be a signatory of the UN PRI. Most recently, the Christine Lagarde, the incoming president of the ECB’s governing council has made a push to increase the ECB’s climate credentials and explore further ways in which the central bank might be able to invest in green projects. Lagarde’s hopes have not been without their opponents. Recently, two top German central bankers expressed concern that the ECB might over-reach in what should otherwise be a fiscal matter.

    Image courtesy of Riksbanken

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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