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Navigating Climate Risk

Keynote Address at this year's Ny-Ålesund Symposium focused on climate and climate change.

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Thank you, and thank you all for travelling all the way up here, to Svalbard and Ny-Ålesund. I would also like to thank Cicero - Kristin and her staff - for all the work they have done to prepare this year’s symposium.

While you are here, I hope you will find time to explore this rather special place. And I hope we will all find inspiration from this beautiful landscape as we gather to discuss how we can navigate climate risk in the future.

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Temperatures are rising across the globe. But the Arctic is the canary in the coal mine.

This region is warming twice as fast as the rest of the planet. Even here, in this remote corner of wilderness and pristine nature, the effects of climate change (such as melting ice) are easy to see.

In my view, few places better illustrate the global nature of climate change. Not only are the changes here dramatic and visible. They are also mainly the result of human activities outside the region. This is a truly global problem that calls for global solutions.

Governments around the world are working to improve domestic climate policies and create better frameworks for international cooperation.

The agreement we reached in Paris almost three years ago was a milestone. It provides a clear framework for combating climate change at the global level. And it sets ambitious targets: to strive to limit global warming to 1.5 degrees Celsius, or – as a maximum – 2 degrees. We cannot realise such bold ambitions unless we work together in new and innovative ways.

But Paris was only the beginning. And we already know that, collectively, the current targets are not enough.

Further action is needed. And businesses, civil society and individuals must all do their part. Climate change is a problem that governments cannot fix alone.

We need to transform the energy sector and traditional industries, and we need to mobilise financing from all possible sources, including private capital markets. In fact, massive private investments will be necessary in the years ahead to build up the extensive low-carbon and climate-resilient infrastructure that is needed.

Meanwhile, the impacts of climate change are already putting pressure on the economic, social, and political systems of many countries. If governments fail to tackle these challenges and fail to absorb the shocks of a changing climate, we will have to prepare for even greater instability in the future.

This is why we often talk about climate change as the ultimate threat multiplier. It can aggravate already fragile situations and fuel further social and political tension.

It can also negatively affect traditional hard security areas, such as military readiness, logistics, operations and strategy.

Indeed, for some time, the national security communities in most countries have been aware of the national security risks posed by climate change, and the need to be prepared. One study found that about 70 % of governments have factored in climate change in their national security policies in various ways. According to the World Economic Forum, four of the top five global risks relate to climate change.

I am concerned about the international security and stability risks posed by climate change. About the fact that climate change can make a complex security environment even more challenging.

In the years to come, many countries will probably have to mainstream climate concerns into a broad range of foreign policy areas, such as conflict prevention and management, development cooperation and humanitarian action, and – not least – disaster risk reduction and management.

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According to the European Commission, global financial losses due to extreme weather rose by 86 % over the last 10 years (source: European Commission).

Managing financial risk in this context is not just a matter of preventing physical losses. It also involves adapting to policy changes and technological shifts in connection with the transition to low-emission economies.

Major shifts give rise to new challenges. They can lead to significant structural changes, including the loss of jobs. They can create uncertainty and fuel anti-establishment sentiments, not unlike what we have seen in the wake of globalisation.

But major shifts can also give rise to numerous new opportunities. History provides many examples of this, such as the transition from steam to diesel and electricity in the transport sector, or the more recent transition from electronic to digital technology.

I am hopeful that the transition to a greener economy will give rise to similar opportunities – in Norway too.

The financial sector knows how to price risks. Better understanding of climate science will help us to price climate risks.

We can see the beginnings of this already. More and more investors attach importance to environmental concerns and sustainability. A promising example is the skyrocketing green bond market. Green bonds have been issued in 37 countries all over the world – from Europe, to North America, to China and elsewhere (source: CBI).

I am hopeful that policy-makers and investors will work towards a common understanding of what sustainable finance is, and how we can achieve it. This is one of the areas that you will be discussing in the coming days.

Earlier this year, the European Commission launched its action plan on sustainable finance. This plan will also benefit the planet and support the EU's climate and sustainable development agenda. We have distinguished speakers here today who can elaborate on this later on.

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Norway plays a leading role in international climate finance. We are a front-runner in results-based financing of climate and forest programmes in developing countries. We are also encouraging international finance institutions, such as the multilateral development banks and the Green Climate Fund, to finance climate mitigation and adaptation activities in developing countries.

Over the years, the Government Pension Fund Global has worked to increase knowledge and reporting on the risks posed by climate change. Some of our major private pension funds (such as Storebrand) and commercial banks (such as DNB) are also considering how they can incorporate climate risk into their portfolios and decision-making processes.

I would also like to mention that the Government has appointed an expert commission to assess climate-related risk factors and their significance for the Norwegian economy. Some of the committee members are with us today (the chair, Martin Skancke, and Nalan Koc, Norsk Polarinstitutt). In addition, my own Ministry is supporting the work led by CICERO to develop a common understanding of climate risk and identify approaches and tools to incorporate climate risk into strategic decision-making.

Ladies and gentlemen,

Now is not the time for complacency. We must redouble our efforts to tackle climate change at the global level, and we must accelerate the transition to a low-carbon and climate-resilient future. And to do so, we will need the momentum that the financial sector is building.

This year’s Ny-Ålesund Symposium provides a unique opportunity to take a step forward in bridging the gap between climate science and political and financial decision-making. Let us make the most of this opportunity to advance our work together.

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