An unexpected climate activist: central banks and the politics of the climate-neutral economy

ABSTRACT

Recently, an unexpected public actor has joined climate activists’ forces: central banks increasingly care about and act on climate change. Their (potential) contribution to the climate-neutral economy is immense, as they possess vast institutional resources to influence investment in the economy. Central banks’ advocacy is puzzling, as they put their legitimacy at risk by stepping outside their mandates and area of expertise. To explore this puzzle, I study why and how climate change came on the agenda of the Dutch central bank, one of the first movers among central banks. By opening the black box of organizational politics within central banks and building on unique interview data, I show how the policy shift of the Dutch central bank can be traced back to a small group of policy-seeking staff. This process-tracing case study contributes to our understanding of transformative change in climate policy in particular and public policy more generally.

KEYWORDS:

• Central banks
• climate-neutral economy
• climate policy
• independent agencies
• sustainable finance

Acknowledgements

This paper has benefited greatly from comments by Elsa Massoc, Johannes Petry, Julian Garritzmann, Lukas Haffert, and the participants of the IMPRS First Doctoral Conference on the Social and Political Constitution of the Economy, the Comparative Politics Doctoral Colloquium at Goethe University Frankfurt, the Financial Stability Research Group, the 27th International Conference of Europeanists, the GSIPE Mini-Conference: Qualitative and Mixed Methods Research in IPE, and the Environmental Politics and Governance Online Seminar. The author is also grateful to the editors and anonymous reviewers for their helpful suggestions. Many thanks to the interviewees who participated in this research.

Disclosure statement

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

Notes

1 R10.

2 See for a more extensive overview of what central banks are doing or could do, also globally, Baer et al. (2021) and Dikau and Volz (2021).

3 As the issue diffused and started to appear on the agenda of more central banks, as well as the larger political and public agenda, potential reputation gains and career interests increased. Indeed, the incentives probably even swapped: not paying attention to climate change became a reputational risk.

4 See for a full overview of DNB’s tasks https://www.dnb.nl/en/about-us/mission-and-tasks/.

5 Banque de France: Art L. 141–1 Code Monetaire et Financier; Bank of England: Art. 11(b) Bank of England Act 1998.

6 For the first contact with DNB I was able to draw on my personal network, as I worked at DNB as trainee policy advisor in 2018–2020 before taking up employment at Goethe University Frankfurt. During my employment at DNB I was not directly involved in sustainability-related projects.

7 See for document (D) references Section 2 of the online appendix.

8 Elderson was officially a member in his role as member of the EU Single Resolution Board.

9 All quotes are translated from Dutch into English by the author.

Additional information

Notes on contributors

Katrijn Siderius

Katrijn Siderius is a doctoral researcher at Goethe University Frankfurt.