Extreme Weather Scenario can lead to 420 billion USD loss | Norges Bank Investment Management

What would happen to the fund if extreme weather triggered a global food shock? In our latest stress test, we estimate it could wipe around 20% off the fund's value — roughly USD 420 billion. Here's how the scenario unfolds. Extreme weather hits two major food-producing regions at the same time, causing crop failures. Global food prices spike, and supply-chain disruptions slow growth while pushing inflation higher. Higher inflation feeds through to higher yields, which weigh on bonds — an estimated 10% fall in the fixed-income portfolio. Slower growth and higher yields then hit shares and dividends, an estimated 24% fall in the equity portfolio. Combined at the fund level, that adds up to a loss of around 20%, or about USD 420 billion (around NOK 4,250 billion). To build a scenario like this, we look first at past events with similar characteristics, then anchor on studies that model how such shocks move the key economic variables. We apply those shocks to the fund as it is invested today. These scenarios are entirely hypothetical — and far simpler than the real world, where shocks rarely happen in isolation. The point isn't to predict the future. It's to understand how different risks are connected, and to be prepared if severe but plausible events were to happen. This is one of four scenarios in our 2025 stress testing, alongside an AI correction, a fragmented world and a regional debt crisis. We publish these analyses every year. We manage the fund to safeguard and build financial wealth for current and future generations in Norway — and that means planning for the difficult years, not only the good ones. 📄 Read the full stress testing report: https://www.nbim.no/contentassets/c7d3b015300d48a1ac0136f069b9bed7/gpfg_stresstesting-2025.pdf 🌍 More about the fund: https://www.nbim.no — Norges Bank Investment Management manages the Government Pension Fund Global on behalf of the people of Norway. Follow us on LinkedIn, Instagram and YouTube. #oljefondet #NBIM #stresstest

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