One of them might be that ﬁnancial markets are not expecting climate policy to be as strict as it should be. According to the eﬃcient market hypothesis, prices in ﬁnancial markets should reﬂect all available information. So it could also be the case that investors are lacking important information.
While advances have been made in the disclosure of greenhouse gas emissions by a number of companies, especially large ones, ﬁnancial markets are still lacking timely information on the carbon footprint of many issuers of securities. [9] Academic evidence suggests that disclosure of corporate greenhouse gas emissions reduces investor uncertainty, which is rewarded in the form of a lower cost of capital. [10] This underscores how transparency is key for ﬁnancial markets to fulﬁl their role and channel funds towards climate-friendly investments.