“Why the popularity of passive investing is making it harder for the market to price in climate risk/opportunity.”
[COMMENTARY] Years ago long-term investors bought stocks directly according to what they thought were the stocks’ profit potential. Now they mostly invest in long-term passive funds. That difference means appropriate stock pricing doesn’t happen. Hence, pricing gaps occur. Incidentally, see “How to find stocks and construct a stock portfolio reflecting your values with good potential returns.” It’s a tutorial I created some years ago that’s still relevant today.
The Climate Pricing Gap, by Zach Stein, August/September 2023, GreenMoney, USA.