It seems to me  8  BIS Review 133/2010  the natural way to do that is to make sure they can withstand falls in asset values by having sufficient loss-absorbing capital rather than to expect monetary policy – moves in interest rates – to substantially reduce asset price variability, much of which might be warranted. The short-term nominal interest rate is a very blunt instrument to use to try to limit gearing of financial institutions. Capital requirements, and explicit limits on gearing, are more direct means to control leverage. This is why I think the direction of the policy emerging from the Basel III process – which will put in place higher capital requirements on banks – is right. It is also why time-varying limits on gearing of financial firms – limits that might vary with asset prices and with the economic cycle – are likely to be useful in helping maintain financial stability. I believe that is a much more fruitful way forward than abandoning inflation targeting. But while I think this is plausible, the case is not proved. Simply because they are a more direct means to control leverage does not prove that capital requirements or limits to gearing are a far more effective tool to preserve financial stability than changing interest rates.
At the GPFG’s current value, this is equivalent to NOK 100 billion. Renewable energy infrastructure investments will reduce equity and bond investments by an equivalent amount. Therefore, the risk-adjusted return on the infrastructure investments should be at least as high as the return on the securities that we could otherwise have had. Our managers have assessed the risk associated with governance and sustainability in some companies as so high that we have divested. Most often, these have been companies with business models that are not sustainable in the long term. This group also includes companies that emit particularly large amounts of greenhouse gases or engage in activities that contribute to deforestation. In addition to such risk-based divestments, we sometimes exclude companies on the basis of ethical guidelines. These guidelines are set by the Ministry of Finance and serve as the basis for the Council on Ethics’ advice and our decisions on exclusions. Ethical exclusions are not based on financial risk considerations, but on whether a company’s operations or behaviour is in violation of fundamental ethical norms. Two of the criteria for exclusion are related to greenhouse gas emissions. One of the criteria applies to mining companies or power producers with substantial emissions from coal, in either 6/7  BIS central bankers' speeches  absolute terms or as a relative share of their operations. In all, 82 companies have been excluded from the GPFG’s investment universe based on the coal criterion.