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"2022 marked the importance of sustainability issues at global level even more clearly. The spotlight was on social responsibility factors, for example, in relation to the humanitarian crisis, and environmental factors – climate change, the energy crisis and the ever-increasing need to rapidly reduce dependence on fossil resources – and governance factors, such as the impact of sanctions, the suspension of operations of international companies in Russia, etc."

2022 marked the importance of sustainability topics at global level even more clearly. Social responsibility factors, e.g. in relation to the humanitarian crisis;, environmental factors – including climate change, the energy crisis and the ever-growing need to rapidly reduce dependence on fossil resources; governance factors, such as the impact of sanctions, the suspension of operation of international companies in Russia, and other factors – all of them were in spotlight in 2022.

In 2022, Latvijas Banka continued to operate in all the directions set out in its Sustainability Strategy, specifically focusing on risk analysis, as well as analysis of various economic sectors from the sustainability perspective, preparing a series of publications (see, for example, here, here and here) to draw public attention to recent developments in the field of sustainability. The principles of sustainability are increasingly becoming a part of Latvijas Banka’s day-to-day work– both through including aspects of sustainability in our research and introducing the principles of sustainability in other areas of Latvijas Banka’s activities, which are described in more detail in the relevant sections of the report.

To highlight the challenges of the construction industry in terms of sustainability, Latvijas Banka organised a discussion “Will global warming heat up the construction sector in Latvia?” at the LAMPA conversation festival. Latvijas Banka’s experts have also shared their knowledge by participating at discussions held by other organisations, including a panel discussion “Does the economic crisis cancel the green deal?” organised by the European Climate Pact.

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Latvijas Banka’s tent “Tālskate” at the “Lampa” conversation festival

As part of Latvijas Banka’s 100th anniversary events, an international economic conference “Sustainability and Money: Shaping the Economy of the Future” was held in November 2022. It focused on the shift towards a genuine green economy.

In the field of financial stability, exposure of businesses to physical risks and the trend in physical risks were examined. Also, research on adaptation to climate change and its impact on developments in the financial system has been carried out. Analytical work on financial stability was commenced, the results of which are expected in the future – for example, an analysis of climate stress test scenarios is being carried out, an investigation of biodiversity issues has been launched and various data sources are being combined to provide a comprehensive analysis, which will allow for an in-depth assessment of the impact resulting from materialisation of different types of floods and other physical risks, allowing to monitor building energy performance indicators of real estate that is pledged as collateral and see the progress of leased vehicle fleet’s transition towards carbon-free engines.

In 2022, attention was also increasingly focused on sustainability aspects in the field of reserve management. In 2022, the stock portfolio of developed markets was transformed in accordance with the sustainability strategy of Latvijas Banka, and its target indicators include: enhancement of carbon neutrality by 2050 at the latest, adaptation of the portfolio to the provisions set out in the Paris Agreement., prevention of environmental pollution, preservation of biological diversity and promotion of environmental, social and governance (ESG) factors. Description of the application of sustainability criteria and changes in investment portfolios is reflected in the report “Climate-related disclosures of Latvijas Banka’s non-monetary policy portfolios”.

The implementation of sustainability principles into our “in-house activities” is also ongoing – in 2022, like in previous years, information seminars on climate and sustainability topics were organised for employees of Latvijas Banka In addition, another solar PV unit was built, and an action plan was drawn up to optimise heating, ventilation and lighting in order to increase the energy efficiency of Latvijas Banka’s buildings and systems in the long term.

In 2022, the strategy of Latvijas Banka for 2023–2026 was developed, defining the sustainability of the financial system and the national economy as one of the five medium-term strategic priorities.

The objectives of this priority are to promote the implementation of sustainability principles in the financial sector and the economy, to participate in the creation of a regulatory environment promoting sustainability and to ensure sustainably in everyday work of the bank. These objectives will determine our future work in the field of sustainability as an integrated institution in charge of the functions of the central bank, the financial and capital market supervision and the financial sector resolution.