Episode 3: The Minsky Moment

Part 1 – Sue’s Story

Laurie (Narration):
Derbyshire in England seems like the last place you’d expect to find a crucible of climate politics. It’s home to the luscious hills of the Peak District, to sleepy, picture-postcard villages. Mr. Darcy from Pride and Prejudice lived here. It’s also home to Sue Owen. Sue used to work in children’s care. And in 2011, she retired.

Sue Owen:
“I was basically just enjoying being retired and not having to work all the time.”

Laurie (Narration):
So far, so ordinary. But in the years that followed, Sue got herself involved in something extraordinary. And it led her to ask an important question — maybe one of the most important questions of our time: What do people in charge think is going to happen as the world overshoots 1.5°C? And when she asked that question, what Sue found stunned her.

Sue Owen:
“I thought it was ignorant and complacent... They can’t see that everything is going to change if we get to three degrees, let alone four degrees.”

Laurie (Narration):
Sue had stumbled on a vast complacency about what comes next — a complacency with profound implications. Because according to some very influential analyses, it’s actually best for climate change to overshoot well beyond 1.5°C. And that’s the analysis that many decision-makers have been relying on for years.

Sue Owen:
“I think most people would be really shocked, really shocked at that.”

Laurie (Narration):
But how could this have happened? I’m Laurie Laybourn. You’re listening to Overshoot. And this is Episode 3 — The Minsky Moment.

Part 2 – Sue’s Discovery

Laurie (Narration):
Like many people, Sue spent most of her life not really thinking about climate change.

Sue Owen:
“…you know, I was aware of it, but it all seemed a long way in the distance, and nothing that really we needed to focus on.”

Laurie (Narration):
But then, into her retirement, the effects of climate change were becoming more obvious.

Sue Owen:
“It was happening right now… I’d got grandchildren by then, and I was really concerned about what their futures were going to look like.”

Laurie (Narration):
As her climate concerns grew, Sue started to wonder if her pension savings might be part of the problem. Each month when she’d been working, some of her wages went into a pension fund. They’d invest it, earning returns for her retirement. It was those investments Sue was worried about. She joined a group of other concerned pensioners. After some digging, they were shocked to find their money was being invested in oil and gas companies — to the tune of millions of pounds.

Sue Owen:
“It’s being invested in companies that are going to cause huge destruction in the world, which are causing destruction. I think it’s scandalous.”

Laurie (Narration):
So Sue and her group started campaigning. Their goal was for the pension fund to pull those investments. This is called divestment — taking your money out of stocks in oil and gas companies. Sue and her group threw themselves into it — organising petitions, educating pensioners, attending public meetings to make their case.
And they had a flair for it.

Sue Owen:
“We’d got this amazing oil monster, which somebody very creative in the group had made, and then we did a whole lot of street theatre…”

Laurie (Narration):
But after years of trying, they were getting nowhere.

Sue Owen:
“No, no, they’ve never divested.”

Laurie (Narration):
This is a frustration shared by many people with a pension. Globally, pension funds remain heavily invested in fossil fuels. Sue’s pension fund was no exception. To her, it was sitting on its hands — refusing to do everything it could to help keep global temperature rise below 1.5°C. Which begged the question: If the pension fund seemed accepting of overshooting 1.5, then what did they think would happen? Sue wanted to know what due diligence they had done.

Sue Owen:
“That’s when I started to really look carefully at what our climate strategy was saying. And I was so shocked at what it said.”

Laurie (Narration):
Sue found that the pension fund had done a risk assessment — an analysis of what climate change could do to the pensions. It looked at the impact on the fund’s asset allocation — all the things it invested in, like stocks and real estate. The assessment included a few scenarios of how climate change might unfold. One of them showed global temperatures shooting far beyond 1.5, eventually reaching 4°C by the end of the century. In that scenario, the risk assessment said that…

Sue Owen:
“…in 15 years’ time, the asset allocation will go down by 0.6%, and in 40 years it will go down by 1% — basically, very little change.”

Laurie (Narration):
Sue was stunned.

Sue Owen:
“It’s unbelievably ridiculous that they could think that.”

Laurie (Narration):
The assessment was saying that, even if the world warmed by 4°C, the fund’s returns were expected to drop by just 1% a year over the next 40 years.

This was bad — but not that bad. In fact, it seemed to contradict everything Sue had read and heard from climate scientists. And here’s one of them — Tim Lenton, Professor of Climate Change and Earth System Science at the University of Exeter.

Tim Lenton:
“It’s an existential risk or crisis at four degrees C. It’s hard for me, hand on heart, to see any sense in which our current notion of societies remain viable.”

Laurie (Narration):
A 4°C world would be catastrophic — vast areas uninhabitable, billions displaced, entire systems collapsing. Even the pension fund’s own report admitted that 4°C was “beyond the realm of human experience.” So Sue took her concerns to the people managing the fund. Here’s the question she asked:

Sue Owen:
“Can you explain where this analysis has come from, and whether you think it represents a realistic analysis of the future?”

Laurie (Narration):
The managers said they didn’t have the in-house expertise to assess the risks themselves, so they’d brought in consultants to do the work. But they never said whether they thought it was realistic.

Sue Owen:
“I thought this was all very shocking. I thought it was ignorant and complacent and just doesn’t recognise the climate risks at all. They can’t see that everything is going to change if we get to four degrees. I mean, we’re not quite at 1.5 and the world’s burning.”

Laurie (Narration):
It was one thing that her pension was contributing to climate change — but the fund, and the consultants advising it, seemed to have a dangerously complacent view of what climate change would do to the pension in return. Something wasn’t adding up.

Part 3 – The Economists’ Blind Spot

Laurie (Narration):
Professor Steve Keen was finding the same thing. Steve’s one of the only economists who predicted the 2008 financial crisis.

Steve Keen:
“There was an article interviewing a conventional economist who was asked by a journalist about Keen’s opinions on the level of private debt causing a crisis in the near future. And the answer was, ‘Well, Keen’s in a minority of one.’ Well, the minority ended up being correct.”

Laurie (Narration):
That’s Steve. Yeah — he’s a bit of a renegade, and not very popular among mainstream economists. But as the financial crisis drifted into the past, Steve started thinking: If mainstream economists could make such a big mistake once, perhaps they could do it again.

Steve Keen:
“If economists tell you something doesn’t matter, watch out.”

Laurie (Narration):
He decided to look at climate change — and soon ended up working with a key ally: a financial insider.

Steve Keen:
“Looking at climate risk assessments from pension funds began when I was approached by an ex-member of the financial sector, Mark Campanale.”

Laurie (Narration):
Here’s Mark.

Mark Campanale:
“I spent 20 years in the fund management industry, on the fund management desk at a couple of big asset managers.”

Laurie (Narration):
Mark happened to meet Sue, and he shared her concerns about what climate change meant for pensions.

Mark Campanale:
“Can you fund and pay your liabilities in 45 years’ time, when the youngest member retires? Now, here we are today, 2025. Let’s say you had 40 years — so, 2065. The world’s going to be a very different place. There could be catastrophic climate events that change the economy in fundamental ways. Pension funds need to know today whether the world people retire in can actually fund those pensions.”

Laurie (Narration):
So, Mark got Steve to investigate the due diligence being done by a whole group of pension funds. And what Steve found shocked them both.

Mark Campanale:
“This was coming through not just Derbyshire but lots of other funds we were looking at.”

Laurie (Narration):
In the neighbouring county of Cheshire, one fund thought the impacts of 4°C would be even smaller than Sue’s — only reducing the pension pot by 0.7% a year to 2050. Steve found similar results all over the place. One fund in Shropshire thought there would be a 0.1% loss per year in a 4°C scenario.
In Cambridgeshire — 0.14%. And it wasn’t just England. Steve’s pension fund is in Australia.

Steve Keen:
“I got the annual report sent to me. And that, at four degrees of warming, concluded that the overall risk to our portfolio is acceptable.”

Laurie (Narration):
If you have a pension, there’s a good chance your fund’s climate risk assessment says something similar — that the impact of overshooting 1.5°C will be minimal.

Steve Keen:
“In other words, no big bickies.”

Laurie (Narration):
But it gets worse. Assessments that say similar things are being produced by central banks, governments, and other decision-making institutions all over the world.

Here’s an example. In 2025, the UK’s Office for Budget Responsibility — the body that provides forecasts to the government — assessed the climate risks to Britain’s economy. It concluded that a 3°C temperature rise would reduce GDP by about 8% by the 2070s. That would be hugely damaging. But for comparison — during the Covid pandemic, the UK’s GDP dropped by around 10% in a single year. Yet 3°C would mean global chaos — food shortages, water crises, mass migration, extinction, and deep geopolitical instability. And still, these analyses suggest it wouldn’t be that bad. But assessments like these shape how powerful people see the risk — and how slowly they act. For example, here’s one of the governors of the U.S. Federal Reserve, speaking in 2023.

Archival: Christopher Waller
“Climate change is real… but I do not believe it poses a serious risk to the safety and soundness of large banks, or the financial stability of the United States.”

Laurie (Narration):
Statements like this started to attract attention. And soon, it wasn’t just renegade economists or pensioners raising concerns. Some of the biggest names in economics were saying the same thing — including Professor Joseph Stiglitz, Nobel laureate and former chair of the U.S. government’s Council of Economic Advisers. He’d spotted something similar to what Steve, Mark, and Sue had found.

Joseph Stiglitz:
“They have made perspectives about what is acceptable climate change that are totally unreasonable.”

Laurie (Narration):
Stiglitz noticed that the common thread linking many of these risk assessments was their use of analytical tools developed by a handful of academic economists. Wherever those tools were used, they produced the same result — small economic impacts from huge temperature rises. But Stiglitz had also worked as a lead author for the IPCC — and he knew this directly contradicted climate science.

Joseph Stiglitz:
“The global scientific consensus has said that 1.5 degrees is the highest acceptable level. Between 1.5 and 2 degrees, the risks increase enormously. And when we go beyond 2 degrees, we are really going into uncharted territory where few reasonable people would want to venture.”

Laurie (Narration):
The problem began when economists first started thinking about the economic effects of climate change — decades ago.

No one had done this before, so they were starting from scratch.

Joseph Stiglitz:
“They were first developed 30, 40 years ago, when we were just beginning research in this area — and all research projects begin with simplifications.”

Laurie (Narration):
Simplifications are sometimes necessary — the task is immense. We don’t know exactly how climate change will hit, or how it will ripple through the global economy. So the economists made assumptions — like any good academics. But they didn’t involve a very important group of people.Here’s Tim Lenton again.

Tim Lenton:
“If the climate scientists didn’t have the opportunity to be part of the peer review of the economists’ assessment of the impacts of climate change, then big mistakes got made.”

Laurie (Narration):
That’s exactly what happened. And it led to some huge, unrealistic assumptions — ones that still dominate global policymaking today.

Part 4 – Flawed Assumptions

Laurie (Narration):
The flawed analyses that Sue, Steve, and others uncovered were based on a series of simplifications and assumptions. Each seemed reasonable at the time. But together, they built a fantasy — one that’s now steering the world’s financial systems. One of the biggest assumptions? That climate change would unfold smoothly and predictably.

Tim Lenton:
“It doesn’t unfold like that. It’s given us some fairly strong wake-up calls in the last decade or so… things can go nonlinear.”

Laurie (Narration):
If you think climate change evolves smoothly — or ‘linearly’ — then you probably weren’t expecting the abrupt destruction of entire neighbourhoods of Los Angeles by wildfires. Or the long-running drought in Zambia — the worst in four decades — which destroyed half its crops. And you certainly wouldn’t be expecting tipping points: those sudden shifts in the Earth system that cause chaos — like the collapse of the Atlantic circulation that keeps Europe from freezing. So if you don’t include those surprises in your analysis, you massively underestimate the risk. And that brings us to another simplification. Many economists focused only on the immediate effects of climate change — like heatwaves that damage crops or storms that smash infrastructure. But that’s only a small part of the overall picture. Here’s Kathryn Brown, Director of Climate Change and Evidence at the UK Wildlife Trusts.

Kathryn Brown:
“What we really see happening in reality is that impacts don’t happen on their own. They happen in sequences, and often those sequences occur across different sectors.”

Laurie (Narration):
These sequences — or domino effects — cause enormous damage. Take food. Between 2022 and 2023, the world saw a chain of droughts and floods that wrecked harvests. At the same time, the war in Ukraine disrupted fertiliser supplies and sent energy prices soaring, making farming even more expensive. Together, these domino effects pushed up food prices, drove inflation, and sparked cost-of-living crises around the world.

Kathryn Brown:
“You then get impacts again on health and wellbeing. You get wider economic impacts.”

Laurie (Narration):
So not including domino effects means dramatically underestimating how climate change hits societies and economies. Here’s another flawed assumption: that countries can just repair the damage. In many economic models, if a hurricane destroys a factory or floods a city, the economy is assumed to rebuild quickly — as if nothing happened. But tell that to the people still recovering years later from disasters around the world. Because the truth is: climate shocks leave scars that last generations.

Mark Campanale:
“Call me a fool, but when London’s a couple of metres underwater and the world’s experiencing extreme climate events, and you’ve got a dieback of the Northern Hemisphere’s ability to grow key crops like wheat — now, the idea that the economy continues as normal doesn’t make any sense.”

Laurie (Narration):
And yet, that’s exactly what most models assume — that the global economy keeps growing, no matter what happens.

Steve Keen:
“Not one of them includes a fall in the rate of growth — not one shows economic growth turning negative. All of them give positive results.”

Laurie (Narration):
Think about what that means. Let’s say you estimate that 4°C of global heating will damage your country’s GDP by 5%. But at the same time, you assume the economy will be far wealthier in that future.

Steve Keen:
“That’s going to be 5% of a much larger pie than we have right now. So therefore, losing 5% is something you won’t even notice.”

Laurie (Narration):
So, it’s not just that 5% is an underestimate — it’s that, even if it were true, it sounds painless. A small slice of a bigger pie. So why worry? And why act urgently, especially if you also think acting will be expensive? Here’s Joseph Stiglitz.

Joseph Stiglitz:
“They underestimated the benefits of taking action and overestimated the costs.”

Laurie (Narration):
Many of these analyses assume that acting on climate change is far more expensive than it’s turned out to be. For example, when these models were built, solar power was still costly — now it’s the cheapest electricity in human history. And replacing fossil fuels doesn’t just reduce carbon; it saves millions of lives from air pollution. But the models didn’t include those benefits. Instead, they compared a narrow definition of “costs” with their already lowball estimates of damages — and the result was predictable.

Joseph Stiglitz:
“It was optimal for the world to accept an increase in temperature of three, three and a half, maybe even four degrees.”

Laurie (Narration):
So that’s the logic Sue’s pension fund — and countless others — inherited. A fantasy where overshooting 1.5°C, even heading toward 4°C, was somehow manageable.

Sue Owen:
“The people that are investing this money are basically taking really bad advice.”

Laurie (Narration):
And one of the biggest consequences of this bad advice — this fantasy that overshoot won’t be that disruptive — is that it justifies the status quo.

Steve Keen:
“If you’ve been told by pension funds that four degrees of warming is going to reduce your returns by 0.06% per annum, you’re not going to worry about climate change.”

Joseph Stiglitz:
“You’re going to say, we don’t need to do very much.”

Mark Campanale:
“You don’t need to do much today because even at two or three degrees of warming, the pension fund isn’t going to lose much money. So don’t run ahead and fund the creation of a clean energy system — just stick with the pack.”

Laurie (Narration):
That’s why some parts of society are perfectly happy with these poor risk assessments. They’re not being used to warn — they’re being used to reassure.

Joseph Stiglitz:
“So it’s not a surprise that the fossil fuel industry wants to discount the importance of climate change. Profits depend very much on going slowly.”

Laurie (Narration):
And those reassurances feed a huge complacency — especially among decision-makers.

Mark Campanale:
“And so when people you trust, like investment consultants and your finance officer, come along and go, ‘Don’t worry, we’ve got the climate risk covered,’ you tend to defer to them. It leads to consensus — business-as-usual thinking.”

Laurie (Narration):
It’s like a ship in a storm again — the story we keep coming back to. If no one’s watching the radar properly, if everyone assumes someone else has it handled, complacency sets in. No one means harm; everyone’s acting in good faith. But misconception by misconception, it adds up — until disaster becomes inevitable.

Steve Keen:
“Everybody is trusting that the work done by economists has been based on the work done by scientists.”

Laurie (Narration):
But it wasn’t. And like so many times in history, misplaced trust can create the perfect conditions for collapse. When that illusion finally breaks — when investors realise that climate change is far more destructive than they’d been told — it could trigger what financial experts call a Minsky Moment. It’s named after the economist Hyman Minsky, who studied financial panics. A Minsky Moment is when it dawns on investors that things are worth far less than they thought. Like when they realise that the destruction of Mar-a-Lago wasn’t a one-off — and that climate change is unravelling the global economy itself.

Mark Campanale:
“All of a sudden the market will reprice climate catastrophe and sell risky assets and create a contagion which destroys the value of people’s pensions.”

Laurie (Narration):
That’s exactly what Sue saw coming when she first read her pension fund’s risk assessment.

Sue Owen:

“And so it’s probably going to be another financial meltdown.”

Part 5 – The Wake-Up Call

Laurie (Narration):
In the summer of 2022, the Minsky Moment almost arrived. That’s when floods devastated Pakistan — one of the clearest examples yet of how climate shocks can cascade through the world. It was an extraordinary disaster. At one point, a third of the country was under water. Hundreds of rivers burst their banks. Thousands of kilometres of roads and railways were destroyed. Millions of homes washed away. More than 1,700 people were killed. Around eight million were displaced. At its peak, one in seven Pakistanis was affected.

Archival voice:
“These are scenes of desperation. Entire villages have been swept away.”
“More than 30 million people are in need of shelter, food, and medical aid.”

“The floods have been described as apocalyptic.”

Laurie (Narration):
The cost was staggering — over thirty billion U.S. dollars. And the floods didn’t just devastate Pakistan. They sent shockwaves through the world economy. Cotton — one of Pakistan’s biggest exports — was wiped out. That pushed up clothing prices globally. Food shortages rippled through international markets. Pakistan’s debt burden, already crushing, became unbearable — forcing it to plead for help from the IMF. And all of that came from a single year’s climate event — in just one country.

Seemab Gul:
“I went to Sindh Province. We saw schools filled with displaced families — children, women, the elderly. The water was contaminated. The smell of sewage was unbearable.”

Laurie (Narration):
That’s Seemab Gul — a Pakistani filmmaker who documented the aftermath.

Seemab Gul:
“I remember this woman who said, ‘My house, my land, my animals — everything is gone. I don’t have anything left.’”

Laurie (Narration):
The Pakistan floods were a tragedy — but also a preview. Because in a hotter world, these events won’t be rare. They’ll be constant, overlapping — and mutually reinforcing. Each will drain resources needed to respond to the next. Each will expose the myth that our economies, pensions, and institutions can somehow carry on as normal.

Steve Keen:
“It’s going to dawn on them that the system they’ve built depends upon the planet being stable — and the planet isn’t stable anymore.”

Laurie (Narration):
And so far, there’s been little serious effort to understand what a world of multiple, overlapping crises would do to finance — and to the societies that depend on it.

Mark Campanale:
“You’ve got this widening gulf between the financial system, where everyone’s got their head down chasing short-term returns, and the reality of the biosphere, which is collapsing. Those two worlds will collide.”

Laurie (Narration):
But amid all this, there are signs that things are starting to change. The Bank of England, the European Central Bank, and the Network for Greening the Financial System are beginning to challenge old assumptions.

Joseph Stiglitz:
“I think there is a growing recognition that the models that have been used are deeply flawed. The scientific community has been making the case that the climate crisis is far more serious than economists’ models suggested.”

Laurie (Narration):
New models are being developed — ones that incorporate tipping points, cascading risks, and feedback loops between nature and finance.

Tim Lenton:
“I think we’ve got to radically overhaul the way we think about economic modelling — to accept that the economy depends on the biosphere, and that we can’t have infinite growth on a finite planet.”

Laurie (Narration):
That’s the heart of it. The old assumptions are breaking. The question is whether we’ll realise it before the shock hits. And this isn’t just about the distant future. The early signs are already here — in the markets, in the weather, in the institutions that still believe business as usual will somehow survive.

Steve Keen:
“It’ll be another Minsky Moment — except this time, it won’t just be about property prices or debt levels. It’ll be about the foundations of civilisation itself.”

Laurie (Narration):
Sue’s story began with her pension. But in trying to protect her savings, she discovered something far bigger — a flaw at the heart of how we think about the future.

Sue Owen:
“I just want people to realise that if they’ve got a pension, it’s not safe unless we deal with the climate crisis.”

Laurie (Narration):
Sue’s right. If our economic systems depend on stability — on predictability — then overshoot is their undoing. And yet, those same systems keep pretending it isn’t happening. The longer that denial lasts, the bigger the reckoning will be when the truth arrives. It will look, sound, and feel like any other financial crash — but this time, it won’t stop. Because we can’t bail out the planet.

Joseph Stiglitz:
“The financial system is supposed to allocate capital to where it’s most needed for the future. And if it’s not doing that — if it’s instead financing destruction — then it’s not just failing the economy. It’s failing humanity.”

Laurie (Narration):
That’s the reality of overshoot. It’s not just a story about science or policy — it’s a story about money, risk, and denial. And when that denial finally breaks, it will be our Minsky Moment.

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