How Professional Money Managers Can Assess Climate Risk More Judiciously
Featuring Shashwat Alok
Money managers in disaster zones reduce investments in affected stocks more than those farther away do.
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Shashwat Alok
Associate Professor of Finance. His work explores how laws, government policies, and institutions influence the financial behaviour of firms and individuals, especially in emerging markets. His recent work focuses on how fintech and alternative data can support financial inclusion, and how climate change affects firms and capital allocation.
Key Takeaways
- Fund managers near disaster zones tend to underweight affected stocks because they overestimate future risks.
- The underweighted stocks later outperform those overweighted, suggesting a temporary “price pressure” effect.
- Managers with prior exposure to disasters react less strongly, showing that experience helps them stay more objective.