Climate change poses many risks. For companies, besides the physical impact of climate change itself, this risk is often embodied by regulatory pressure imposed by government agencies or other entities exercising oversight over economic activities. In short, divestment means the directing of financial resources away from sectors perceived to be contributing to climate change--e.g., fracking, or the fossil fuel industry generally--and thus exerting financial pressure on companies to change their behavior. The clearest example of this sort of activity is public pressure through the media and other channels to discourage private sector investment in the securities of fossil fuel companies. When evaluating the risks posed by climate change, it is important to bear in mind these secondary impacts, in addition to direct exposures to climate change, as organizations navigate these issues.

Source: New York Times October 28, 2021 20:01 UTC