As global liquidity conditions are normalised – following the unprecedented easing of interest rates by major central banks – financial markets could experience bouts of volatility as a range of asset classes are repriced and this could impact negatively on various interest-sensitive industries. 5. In addition, the reform of the global financial system has to be carefully thought through, calibrated and sequenced. It is important that regulatory reforms do not become politicised, with a rush to adopt simple rules that seem to solve the problems. Specific measures, each of which is sensible, may collectively create unintended outcomes and stymie the nascent economic recovery. In this regard, the Basel Committee’s Quantitative Impact Studies will provide an important basis for us to take a more holistic view of the required changes. 6. So far, most of the discussions have been framed around the theme of “how do we prevent a similar crisis from happening again.” Clearly, we must look back and learn from the crisis. But we must not fight the last war. We must also look forward. In the years ahead, significant restructuring of the global economy is necessary. Hence, I believe a more fundamental question to frame the discussion is: “Given the economic changes and challenges ahead, how do we make the global financial system more resilient and at the same time supports economic restructuring and sustainable global growth?” 7. It is therefore critical to get the nexus between the financial system and the real economy right.
The Bank is already doing a great deal to address climate risk, and we outline even more ambitious plans for the future. As a long-term and global investor with holdings in thousands of companies, we have a financial interest in companies adapting well to the risks and opportunities presented by climate change. Norges Bank intends to be a driver for change, pushing companies to make the transition to net zero emissions. The companies we invest in reflect the transition that the whole world needs to undergo. The fund as an investor Our characteristics as an investor The climate risk in the fund reflects who we are as an investor and our overall investment strategy. In a nutshell: the fund is large, broadly diversified, long-term and index-based. Chart: Large, broadly diversified, long-term and index-based 70 percent of the more than 12 trillion kroner in the fund is invested in equities, making us one of the world’s largest shareholders. We have holdings in 9,000 companies in 70 countries. And we are a long-term investor. Since only the real return can be spent by the government, the fund could, in principle, last forever. 1/6  BIS central bankers' speeches  Put simply, the strategy for the fund is to strike the best balance between expected return and risk by spreading our investments far and wide and owning a little of everything in the market. There is a solid body of research to support such an approach.