(Bloomberg) -- Sweden’s central bank will no longer hold bonds issued by local authorities in Canada and Australia with high carbon-dioxide emissions after yielding to critics who say it’s not doing enough to tackle climate change.

The Riksbank said on Wednesday it had sold its holdings of securities from the Canadian province of Alberta, where greenhouse gas emissions per capita are three times higher than in Ontario and Quebec. It also sold debt issued by the Australian states of Queensland and Western Australia.

The Riksbank has invested around 8% of its foreign exchange reserves in Australian and Canadian central and federal government bonds, “as they give a relatively high yield and a good diversification of risk, at the same time as being traded on a liquid market,” Deputy Governor Martin Floden said in a speech in Orebro, in central Sweden.

But, “the Riksbank needs to analyze and manage the economic consequences of climate change,” Floden said. “We can contribute to the climate work to some extent by giving consideration to sustainability aspects when investing in the foreign exchange reserves. We are now doing this by rejecting issuers who have a large climate footprint.”

Increasingly Concerned

The Riksbank’s initiative comes as central bankers around the world are becoming increasingly concerned with the threats posed by climate change.

In what is considered a landmark speech, Bank of England Governor Mark Carney warned in 2015 of an impending tragedy caused by climate change. Since then, central banks around the world have launched various initiatives to assess climate-related risks and review what role they themselves should play.

Floden echoed that speech on Wednesday by describing climate change as “one of the greatest challenges of our time,” one that creates new risks for financial markets.

While environmental issues have traditionally not been on the central banks’ agenda, the issue of carbon dioxide emissions has gained particular prominence in Sweden, the home of teenage environmental activist Greta Thunberg.

The Riksbank has been criticized for doing too little, too late when it comes to the environment. One of the critics was Anna Breman, then chief economist at Swedbank AB. In August, she penned an opinion piece calling for a “greener fiscal policy” and for the central bank to consider buying green bonds.

Breman now has a central position at the bank after being appointed Deputy Governor last week.

To contact the reporter on this story: Niclas Rolander in Stockholm at nrolander@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net, Nick Rigillo

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