Climate Change and Financial Instability: Risk Disclosure and the Problematics of Neoliberal Governance

Abstract

In recent years, climate change has increasingly come to be seen as one of the principal threats to future global financial stability. This article identifies and critiques the emerging consensus among international financial regulators as to how this threat—the key perceived components of which are also delineated—can best be managed. It shows that the preferred approach mirrors hegemonic postfinancial crisis regulatory practice vis-à-vis financial stability risk more generically: prioritization of market discipline underpinned by risk disclosure. The article characterizes this approach as a quintessentially neoliberal modality of governance. It also argues that insofar as this approach relies on financial market workings and financial institutional behaviors explicitly belied by the financial crisis, it risks precisely the type of “climate Minsky moment” regulators aim to avoid.