Finance

Climate change

Business

Political science

Divestment

Ecology

Equity (law)

Institutional investor

Climate risk

Portfolio

Risk management

Corporate governance

Biology

Review of Financial Studies

According to our survey about climate risk perceptions, institutional investors believe climate risks have financial implications for their portfolio firms and that these risks, particularly regulatory risks, already have begun to materialize. Many of the investors, especially the long-term, larger, and ESG-oriented ones, consider risk management and engagement, rather than divestment, to be the better approach for addressing climate risks. Although surveyed investors believe that some equity valuations do not fully reflect climate risks, their perceived overvaluations are not large.

The Importance of Climate Risks for Institutional Investors