Climate Governors and Green Swans: The Limits of Central Banking in a world of Tail Risk, Uncertainty and Climate Change

Wednesday 13th October 2021 (14:00-15:00)
Please contact for the link

With John Morris, University of Nottingham.

This is an online seminar and all are welcome. Please contact for the link.

Part of the Economic Worlds Seminar Series.


In the decade that followed the 2008-2009 Global Financial Crisis, financial governance has been marked with narratives around ‘epistemological breaks’ from pre-crisis paradigms for the probabilistic calculation and management of financial risk. An important feature of this new ‘tail risk’ agenda is the way that the regulatory world has dramatically broadened the scope of what constitutes a threat to financial stability. This purported epistemological break seems to have both slotted into and emboldened the extensive and expensive interventions that have seen central banks cement a central position of global leadership that has led critical scholars to talk of ‘central-bank-led capitalism.’ Perhaps the most significant and controversial facet of this seemingly co-constitutive shift in risk imaginations and political authority has been the way in which climate change risks have been increasingly absorbed within the classification of threats to financial stability in ways that have seen central banks emerge as ‘climate governors of last resort.’  

The analysis offered in this paper is that it would be a mistake to conclude that the turn to tail risk involves either a purely technical advance in the calculation of the low probability- high impact events, or a straightforward and unmitigated power grab by unelected technocrats. Instead, ‘tail risk’ plays a critical and peculiar role in a post- 2010 global economy marked by the interrelated geographical phenomena of ubiquitous securitization processes that mobilize risk, the expansion of the regulatory space of central banks and the restructuring of the global financial system around shadow banking networks. 

The paper draws on a combination of research interviews, ethnographic fieldwork and document analysis to argue that the turn to ‘tail risk’ should be viewed as a socio-technical exercise undertaken by central bankers to demarcate the limits of the increased financial stability responsibilities that they themselves have taken following the 2008-2009 Global Financial Crisis. As such, the turn to tail risk is better conceptualized as a way of ascribing future liabilities, delegating responsibilities and prescribing solutions pertaining to complex global problems.  

Furthermore, the analysis offered here illustrates how the framing and management of events related to climate change as “Green Swan” events directly feed into the wider market logics and practices of using tradable risk-based securities as a ‘spatial fix’ to protect the value of assets and avoid liability for extreme losses. If purportedly ‘natural risks’ had previously been reconfigured into commodified financial risks, then the current governmental focus on tail risk and uncertainty constitutes a rewiring of these commodified financial risks in ways that foreground loss, depreciation and illiquidity. By rendering the uncertainties associated with climate change as a market problem, risk-based approaches to financial governance threaten to place climate change transitions at the mercy of market imperatives, volatilities and instability. 

School of Geography

Sir Clive Granger Building
University of Nottingham
University Park
Nottingham, NG7 2RD

Contact us