Governance of Climate Transition Risks in Financial Markets
A longitudinal analysis of how climate transition became a central financial governance concern.
1Shift in Financial Mandates
Ten years ago, climate transition issues remained entirely outside the formal mandates of central banks and accounting standard-setting bodies. Today, these concerns occupy a central position in financial market governance. This shift reflects a fundamental change in how regulators and market actors perceive their responsibility toward steering business conduct toward a low-carbon economy.
2Defining Transition Risk
The research utilizes a longitudinal study spanning from 2010 to 2021 to track this evolution. By applying Bruno Latour’s concept of a matter of concern, the study illustrates how climate transition was specifically constituted as transition risk. This framing allowed abstract environmental challenges to be translated into concrete financial governance categories for market participants.
3Role of Private Initiatives
The Task Force on Climate-related Financial Disclosures played a pivotal role in stabilizing these emerging concerns. By leading industry-focused efforts, this private initiative provided the necessary framework to standardize reporting. This stabilization process was essential for creating a shared language that allowed disparate financial actors to address climate risks within their existing operations.
4Three-Phase Process Model
The authors propose a three-phase model of issue-centric orchestration: issue emergence, stabilization, and translation. This framework unpacks how governance authority is progressively assembled over time. Each phase represents a critical step in moving from an unaddressed concern to a formalized governance structure that influences decision-making across various interconnected financial and regulatory sites.
5Public and Private Synergy
The study challenges the assumption that private governance initiatives necessarily displace public authority. Instead, the findings suggest that private efforts often reshape and extend public mandates. By working in tandem, these sectors create a more robust governance environment that addresses complex sustainability issues that neither could effectively manage on their own during the last decade.
6Interdependent Governance Arrangements
Governance authority is not static but is assembled through the trajectory of transition risk across multiple jurisdictions. The research demonstrates how interdependent arrangements form around shared concerns. These networks bridge different governance domains, ensuring that climate-related financial disclosures become a consistent requirement rather than a fragmented or voluntary practice among global market participants.
7Orchestration Research Advancements
This analysis advances orchestration research by mapping how governance sites become interconnected through shared climate concerns. It highlights the mechanism of translation, where risk definitions move across institutional boundaries. This movement ensures that climate transition is not treated as an isolated environmental issue but as a core component of modern financial market stability.
8Implications for Future Governance
The findings suggest that future regulatory efforts will likely continue to rely on this issue-centric orchestration model. As sustainability concerns evolve, the ability to assemble authority through private-public collaboration will remain vital. Market actors must monitor these governance sites closely, as they define the standards for future capital allocation and corporate accountability.