A decade after his bombshell speech, Mark Carney is still pushing for a climate fix

It’s been almost a decade since Mark Carney took the podium during a candlelit meal in the immense Underwriting Room at Lloyd's of London and threw a stink bomb at the black tied bigwigs of international finance.

“I’m going to give you a speech without a joke, I’m afraid,” Carney began. And then, after the requisite “grateful for the invitation” and up-buttering, Carney gave what’s been known ever since as the Tragedy of the Horizon speech.

It was 2015 and Carney was then Governor of the Bank of England. After a level-headed synopsis of climate science and current impacts, he put the issue bluntly: “The challenges currently posed by climate change pale in significance compared with what might come. The far-sighted amongst you are anticipating broader global impacts on property, migration and political stability, as well as food and water security. So why isn’t more being done to address it?”

Climate change was coming for us all, no one would be immune and, although the effects would  be “catastrophic,” neither the impacts nor the necessary actions fit within traditional financial or political planning cycles. 

“We don’t need an army of actuaries to tell us that the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors,” Carney said, “imposing a cost on future generations that the current generation has no direct incentive to fix.”

Carney’s prescriptions for reorienting the flows of global capital have been debated among climate advocates ever since. But most everyone in that debate agrees that his interventions on climate were extraordinarily bold from a staid central banker, and driven by a sophisticated understanding and sincere concern about climate change.

The speech wasn’t a one-off. Carney would go on to use his perch to set up a series of high-level networks aimed at orienting bank lending and other investments towards cutting carbon pollution and boosting clean energy. He joined with other central bankers, notably the governor of the Banque de France, in a Network for Greening the Financial System. 

After leaving the Bank of England, he was appointed United Nations special envoy for climate action and finance and was tapped by the Prime Minister of the U.K. to launch the Glasgow Financial Alliance for Net Zero (GFANZ) coming out of the UN climate summit held in Glasgow in 2021. He’s served on the board of Bloomberg Philanthropies — a major funder of climate initiatives and a prime backer behind the campaigns to shut down coal plants across the U.S.

Now he’s shaking up Canadian politics. There are new debates over Carney’s approach. But once again, you can’t help but notice that he’s the one person up there making a positive case for climate action. 

Carney’s current platform is not as vague as you might expect from a frontrunner in a leadership race. But to really understand his diagnosis of the problem you’ve got to go back to that no-joke speech.

The carbon bubble

One of the most thorny topics in Tragedy of the Horizon was Carney’s argument about “stranded” assets, a concept he adopted from Carbon Tracker, a U.K.-based non-profit that researches financial markets. The basic notion is that we can’t keep burning fossil fuels and stay within the limits of even a nominally “safe” climate. Carbon Tracker did the math and compared the shrinking carbon budget to industry’s fossil fuel reserves. The results were enormously influential — spanning the climate protest movement which kicked off campaigns for fossil fuel divestment to the Underwriting Room at Lloyd’s of London. As Carney put it: “If that estimate is even approximately correct it would render the vast majority of (fossil fuel) reserves ‘stranded.’” 

What did that mean in terms of potential impact on investors, insurance and companies? The crowd at Lloyd’s probably didn’t need it spelled out but Carney gave it to them in technical, financial lingo: “huge.” If a real estate bubble could decimate financial markets, just imagine what a fossil fuel bubble could do.

In later speeches, Carney began using the phrase “carbon bubble” to describe the risks. It’s another concept borrowed from Carbon Tracker and one that clearly resonated with Carney after navigating the financial crisis of 2008 as governor of the Bank of Canada. His management of the Canadian economy led to his appointment as chair of the Financial Stability Board — the global outfit that tries to avoid disastrous bubbles by coordinating international financial regulators.

I asked Mark Campanale, one of the Carbon Tracker’s founders, to assess Carney’s influence and the state of climate finance in the years since Tragedy of the Horizon. “Change isn’t linear, least of all in markets.  It can go up and down in leaps and starts and, like now, grind to a halt,” Campanale replied. “But I actually think Carney took a lot of really important people working in finance a long way forwards.” 

When markets crash, there’s typically a “Minsky moment” when investors suddenly realize they’ve been caught in unsustainable growth. The moments are named after the economist Hyman Minsky who warned that financial deregulation would lead to disastrous risk-taking.

“Carney pointed out that climate change has the ability to throw everything under the bus and it would be irreversible,” says Campanale. “And when markets react to this knowledge — the so-called ‘Minsky moment’ in his speeches — this would crash everything.”

Fossil Fuels

One of the criticisms often levelled at climate financiers is that they focus on driving investment into clean energy but ignore the power of the incumbent fossil fuel industry. Campanale says that Carney understands fossil-fuel supply is a problem, not just the demand. Campanale told me to go back and reread Tragedy of the Horizon and, sure enough, Carney reminded his audience of “a well known dictum of macroeconomics… Say’s Law: that supply creates demand.”

“He was basically saying that fossil fuel supply created the demand for the product, not fossil fuel demand that caused its supply,” explains Campanale. “Of course he is absolutely right!”

In Carney’s 2021 book Value(s), he is clear that tackling climate change “will require moving away from fossil fuels to renewables.” His current campaign platform offers no such sweeping goals for the country at large, but he does pledge to “phase out the use of fossil fuels in federal government buildings by 2030 to reduce government energy bills.”

Regulation or voluntary measures?

Carney has made headlines around the world warning about the “catastrophic impact” climate change could have for the financial system. But his go-to remedy has often been to advocate that companies do more to disclose their exposure and vulnerabilities. Under his leadership, the Bank of England stopped short of mandating such disclosures.

“His blind spot was in remedies to the problem,” says Campanale. “We needed proper regulation that made it super tough for fossil fuel companies to finance themselves using everyone’s savings. That couldn’t just be dealt with by voluntary disclosures.”

It’s a criticism echoed by others as well. “Carney has an overreliance on voluntary approaches,” says Richard Brooks, climate finance director at Stand.earth. Brooks notes that Carney may have recognized the need for some level of regulation because one of the most specific promises he’s now making in his bid for the Liberal leadership is to “mandate broad coverage of climate risk disclosure for companies across Canada.”

His platform also includes mandates for energy in industrial heat and a pledge to develop a Carbon Border Adjustment mechanism — not exactly heart-stirring pledges, but recognition of the need for mandatory measures in climate policy.

With Trump and his appointees rampaging across the landscape, it's a difficult moment to assess any global dynamics, let alone the last ten years of Carney’s climate advocacy. The prevailing sentiment in climate finance right now is, “fear,” says Campanale. “Most investors are smart — they know that climate catastrophe has to be avoided.  They also know the clean energy revolution is happening at scale and will drive out fossil fuels.  But to say so is career suicide at this juncture.”

Brooks argues that Carney’s big global networks are now in trouble because of his penchant for voluntary commitments. They tried to lure the maximum number of banks and other institutions to join, lowering standards to accommodate fossil-heavy financiers, rather than focusing on a smaller but committed group with higher standards.

But any fair assessment also depends on our yardstick. “Do you judge Carney solo or compare him to the alternatives?,” asks Brooks. Carney has spent the last decade pushing the levers he had his hands on. “Compared to the alternatives, it’s like comparing apples to rotten fruit.”