Climate Polarization and Green Investment

We study how political polarization influences individual responses to climate change and their subsequent financial decisions. Using a nationally representative panel of Swedish working-age adults, we link survey data on climate beliefs with retirement savings administrative records. Exploiting the 2018 heatwave and associated forest fires as a natural experiment, we show that fire-affected individuals become more concerned about climate change. However, this effect is moderated by political polarization: respondents in politically polarized communities exhibit diverging belief updates. Linking these belief changes to financial decisions, we find that heightened climate concerns predict increased adoption of fossil fuel exclusion funds, particularly among financially sophisticated individuals. Conversely, downward belief revisions do not translate into significant shifts away from green investments. Our findings reveal how political and demographic factors mediate the relationship between environmental salience and green portfolio choices, with implications for aggregate holdings of climate-friendly investment portfolios.