Climate Change vs. The Stock Market (EP.156)

The looming issue of climate change has far-reaching implications, not least of which are relevant to the financial and investment world. Today we spend some time considering these impacts, with a focus on the question of whether climate risk is a priced investment. The short answer, conferred by the numerous academic explorations into the subject, is yes. This answer, however, still leaves investors with many options and contrasting possible approaches as to how to act. We get into some of the different avenues to explore when considering your best route, taking into account both ethical constraints and returns, as well as a long-term vision of sustainability. We also talk about why big companies with less of a focus on ethics may be tempted to go green for financial reasons, how investors might enact a moral stance by investing in fewer green companies, and many more surprising possibilities that arise out of the current findings. Rounding out all this serious discussion, we squeeze in an interesting book review from Hans Rosling, some Talking Sense questions, and of course, bad advice of the week, all of which you are not going to want to miss.

Key Points From This Episode:

• This week's book review, looking at Hans Rosling's Factfulness. [0:08:09.2]
• Recent financial and investment news; penalties, TFSAs, and a big shift from Wealthfront. [0:14:36.7]
• The question of climate change and markets connected to the use of fossil fuels. [0:19:04.5]
• Expected rate of returns in relation to the costs of capital, and the idea of climate hedging. [0:26:46.2]
• Looking at empirical evidence on the pricing of climate risk. [0:28:40.1]
• Recent scholarly findings on the subject of whether climate risk is priced. [0:31:50.3]
• Summing up the academic arguments for why and how pricing of climate risks operates. [0:38:35.7]
• The cost of capital incentives for companies to reduce their exposure to climate risk. [0:40:19.3]
• Participating in the transition of companies to greener and more sustainable practices by investing in them. [0:45:12.9]
• Financial needs for different age groups, at the beginning and the end of a lifetime. [0:48:17.6]
• Personal savings goals versus generosity towards loved ones. [0:51:47.2]
• This week's Bad Advice of the Week: making inflation trades in cryptocurrencies and gold. [0:53:27.1]