For me the main headlines from the results publication are: The stylised scenarios used in this exercise are illustrations of possible paths for climate policy and global warming, not forecasts. The projections made by banks and insurers are uncertain, but suggest that overall costs will be lowest with early, well-managed action to reduce greenhouse gas emissions and so limit climate change. UK banks’ and insurers’ projections suggest that they are likely to be able to bear the costs of transition that fall on them. In part, that is because a significant portion of these costs may ultimately be passed on to their customers. In the No Additional Action scenario, households and businesses vulnerable to physical risks would be particularly hard hit, as general insurers would pass on the cost of higher claims into premiums, or otherwise refuse to renew insurance for some customers. Governments set public climate policy, which will be a key determinant of the speed and shape of changes in the global economy. Banks and insurers have a collective interest in managing climate-related financial risks in a way that supports that transition over time. They will need to improve their management of these risks in order to be able to do so. Within this, I wanted to pick out a few particularly interesting lessons. The first key lesson from this exercise is that over time climate risks will become a persistent drag on banks’ and insurers’ profitability – particularly if they don’t manage them effectively.
Norwegian companies have also been able to be considerably bolder in undertaking new assignments and investments knowing that they can procure labour throughout Europe. In addition to increased labour inflows from Poland, Lithuania and other central European countries, we have long benefited from inflows of labour from Sweden. Many workers are on temporary assignment and their consumption is primarily concentrated in their home country. The Norwegian economy has seen a net capacity increase. Third, the Norwegian business sector has been quick to integrate information technology. This applies both to companies competing on international markets and those supplying goods and services to the domestic market. In comparison with other countries, it is particularly productivity gains in banks and other service sectors that stand out. Examples are automated processes and swifter payments in the financial industry and improved inventory and management systems in commerce and transport. In Norway, monetary policy is oriented towards low and stable inflation. The operational target is consumer price inflation of close to 2.5 per cent over time. We operate a flexible inflation targeting regime. Both variability in output and inflation are given weight in interest-rate setting. BIS Review 15/2007  3  A decline in import prices, ample supply of labour and high productivity growth have boosted the growth potential of the Norwegian economy and led to very low inflation. Against this background, it has been appropriate to stimulate demand for goods and services. We consider a normal real interest rate to be in the order 2½ to 3½ per cent.