Walking a thin line: a reputational account of green central banking

ABSTRACT

In this article, we provide a comparative case study analysis of the differentiated climate change engagement of the Bank of England (BoE), European Central Bank (ECB) and Federal Reserve (Fed). Drawing on semi-structured interviews and a newly composed database of central banker speeches and legislative documents, we argue that climate (in)actions of these central banks are shaped by concerns over their reputation. A broad socio-political consensus on the need for climate change mitigation enabled the BoE and ECB to begin integrating CRFRs into their supervisory frameworks without affecting their socio-political reputation while the carbon bias in their own asset purchase programs compelled both central banks to also start greening their monetary policy to preserve their performative reputation. The Fed’s more cautious moves have been driven by a fear of loss of technical reputation in the face of a growing transnational consensus on the financial stability risks of climate change.

KEYWORDS:

• Climate change
• central banks
• financial supervision
• monetary policy

View correction statement:

Correction

Acknowledgement

This paper has been a long time in the making (since end 2020). For critical comments and suggestions we would like to thank the two anonymous reviewers and the editors of this journal. We are also very grateful for comments on earlier drafts by the participants of the Ghent Workshop “Beyond Central Banking” (25 May 2022), especially from Benjamin Braun, Daniela Gabor, Clément Fontan and Jens van ‘t Klooster. We would also like to thank the editors of three other journals for rejecting previous versions and pushing us to further strengthen our analysis. We are very happy that our article found an excellent home in this journal. Mathieu Blondeel’s contribution was partly funded by the UK Energy Research Centre (UKERC), under grant number EP/S029575/1.

CRediT Authorship Contribution

Mathieu Blondeel: Investigation; Methodology, Writing – original draft. Hielke Van Doorslaer: Conceptualization, Investigation, Methodology, Writing – original draft, Writing – review & editing. Mattias Vermeiren: Conceptualization, Investigation, Methodology, Supervision, Writing – original draft, Writing – review & editing.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Supplementary material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/09644016.2024.2305106

Correction Statement

This article was originally published with errors, which have now been corrected in the online version. Please see Correction (https://doi.org/10.1080/09644016.2024.2318922).

Notes

1. https://twitter.com/FrankElderson/status/1392381871028412417?s=20&t=Qbs4deaPXAF40FtULhjzEg.

2. As a large body of literature has shown (e.g. Guber et al. 2021), Republican and Democratic politicians (and the citizens they represent) hold widely differing views on climate change. The effect of political ideology and party identification in the Western European climate debate is much weaker (McCright et al. 2016).

3. In 2023 was only one query about climate change in the House of Common’s Treasury Committee when an MP asked a member of the MPC about the inflationary effects of net zero commitments (L.

4. Before 2019 such queries were less prevalent and hastily rebutted by Mario Draghi, who recalled MEPs that ‘the protection of the environment is not the only secondary objective assigned to the ECB’ and pondered ‘why the ECB should not promote industries that promise the strongest employment growth, such as carbon-intensive industries, irrespective of their ecological footprint?’ (L18).

5. Authors’ calculations from Eurosystem Collateral Data: https://www.ecb.europa.eu/paym/coll/charts/html/index.en.html.

6. Both governors, respectively Christopher Waller and Michelle Bowman, nevertheless voted in favor of the Fed’s new climate guidance as reflected in the Principles for Climate-Related Financial Risk Management for Large Financial Institutions (D94).