Increasingly, we are seeing pressure from stakeholders, pushing banks to become more engaged with the issue. And financial institutions have responded by paying more attention to their own exposure to climate risk, developing communication and business strategy that incorporates climate change, and engaging bank management and employees on the issue as part of the corporate social responsibility. Up to now, globally, evidence of the financial system’s response to climate change is positive, but still very much in an early stage. On lending, for example, fifty-four internationally-based banks have signed the Equator Principles which integrates environmental considerations into project finance. Banks like Citi, Merrill Lynch, Credit Agricole and HSBC have developed specific climate considerations on lending. But for developing and emerging market economies, evidence on environmental lending by domestic banks and by micro-finance institutions is more limited compared to international development banks and subsidiaries of international banks. 2  BIS Review 97/2008  On market development, Clean Development Mechanism (CDM) market growth is impressive and this has been the key driver of growth in primary and secondary trading in carbon market. On the issue of CSR, banks have done relatively less to elevate climate change as a governance priority. For example, only twelve out of forty of the world largest banks have board-level involvement in climate change initiatives. But in terms of banking operation, a growing number of banks are calculating carbon risk in their loan portfolios, with twenty-four banks having set greenhouse gas reduction targets for their internal operations.
The analysis in the June Inflation Report showed that a reduction in the sight deposit rate towards 3 per cent, combined with some depreciation of the krone, 2 could bring inflation up towards the target two years ahead. More moderate wage settlements in the 3 future would provide a basis for even further monetary policy easing and a weaker krone. Without considerable monetary policy easing, inflation might have remained too low for an extensive period. The short-term nominal interest rate in Norway has now reached a historically very low level. Interest rates have not been lower since the first nine to ten years following the Second World War. The real interest rate is also low, although by no means as low as it was when inflation plagued Norwegian savers in the 1970s and 1980s. The low interest rate must be viewed against the risk of persistently low inflation both in Norway and in other countries. So far, indicators of inflation expectations do not point to any substantial deviation from the inflation target of 2½ per cent. However, if inflation should remain too low for an extensive period, there is a risk that expectations of continued very low inflation will be generated. It may then prove difficult to fuel economic activity by stimulating demand. A marked easing of monetary policy has therefore been appropriate. The inflation target is symmetrical. It is equally important to avoid an inflation rate that is too low as it is to avoid an inflation rate that is too high.