(Mark Hulbert, an author and longtime investment columnist, is the founder of the Hulbert Financial Digest; his Hulbert Ratings audits investment newsletter returns.)
CHAPEL HILL, N.C. (Callaway Climate Insights) — The financial markets may be doing a better job than previously thought when accounting for the long-term risks of climate change, according to a recent study.
This is encouraging, since many previous studies had concluded that the markets are too obsessed with near-term results to play a helpful role in mitigating climate change. As I wrote in this space a couple of years ago, a major 2007 study in the American Economic Review found that the markets are “short-sighted and neglect information beyond a horizon of four to eight years.”
Though climate researchers tell us that we’re already dealing with climate-change-related disasters, most everyone would agree that the greatest climate-change risks won’t manifest themselves until several decades into the future at a minimum. Normal year-to-year variability in the weather plays a much larger role over the near term. If the markets neglect risks beyond an eight-year horizon, then those markets will largely fail to steer capital away from the most climate-destructive companies and towards those that will help cool the planet.
This new study that reaches a more hopeful conclusion about the markets is titled “Sea Level Rise Exposure and Municipal Bond Yields.” It recently began circulating as a working paper from the National Bureau of Economic Research. Its authors are Paul Goldsmith-Pinkham of Yale University, Matthew Gustafson of Penn State, Ryan Lewis of the University of Colorado Boulder, and Michael Schwert of the Wharton School.
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